Ghosted

MARKETS

• Trade: President Trump and European Commission President Jean-Claude Juncker reached an agreement to avoid a full-blown trade war during a meeting at the White House.
• The two agreed to expand European imports of U.S. liquefied natural gas and soybeans, and resolved to lower industrial tariffs on both sides. They'll "hold off on other tariffs" while the details get ironed out.

SOCIAL MEDIA

Facebook Earnings Show It’s All Relative

If Facebook's Q2 has taught us anything, it's that nothing is forever...maybe.

Take a look at the quarter Facebook reported, its first since the Cambridge Analytica drama forced FB to admit it failed to protect user data.

• $1.74 in Q2 earnings per share (up 32% YoY)
• $13.04 billion in advertising revenue (up 42%)
• 2.23 billion monthly active users (up 11%)

Sure, those numbers seem to paint a rosy picture for Zuck

But Facebook missed Wall Street's estimates on revenue and user growth for the first time in a long time (three years to be exact, for revenue). And Wall Street got whiplash—FB shares notched a record high during the day but tanked as much as 24% (!) after hours when earnings came out.

Why's that? Facebook said it expects this revenue slowdown to continue.

• "Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4," CFO David Wehner said. Plus, expenses are set to grow 50% to 60% from last year.
• Facebook's disappointing Q2 could show it isn't quite as bulletproof as many thought.

Wait a sec: Facebook still reported growth this quarter, right? Yeah...but it was just okay and definitely not on par with Facebook's past performance.

• Back in Q1, Facebook added more daily active users than in any of the previous three quarters. Revenue soared 49%, about a year after Facebook warned revenue growth could slow "meaningfully."

So what now?

• Possible upside: Advertisers are sticking with FB because, well, there's nowhere else to go. No competitors offer the kind of ad targeting, development, and reach Facebook does (Twitter w/ $575 million in ad revenue last quarter, Snap w/ $229 million, etc.).
• Moving on: This could put more pressure on Instagram, the FB-owned advertising cash cow with a serious hold on those pesky teens.

Quick sidebar: This isn't the only news out of Menlo Park this week...Facebook's top lawyer Colin Stretch is leaving the company at the end of this year. He's been with FB since 2010 and led the investigation into Russian election interference.

Timing is everything: Stretch announced his exit while Facebook is still fielding multiple probes into its mishandling of user data.

AUTO

GM Gets Stung by Tariffs

"Fairly significant headwinds."

If you're GM CFO Chuck Stevens, that's how you described the hurdles American carmakers face this year.

Those hurdles? Steel and aluminum tariffs, which just caused GM to lower its earnings forecast for 2018. Investors dropped the stock 4.62%.

Zoom out:

• Before the tariffs hit, GM was on a nice little run—it's seen profits increase for three straight years.
• As the U.S.' largest automaker, you might say GM is the highest-profile casualty of the trade war so far

Reality check: Tariffs weren't the only pain point this quarter. GM also described the "unfavorable foreign exchange impact of the Argentine peso and Brazilian real" (aka weakening currencies).

More from the auto industry:

• Following the death of its long-time CEO Sergio Marchionne, Fiat Chrysler (-11.83%) said it was struggling with weak demand in China.
• Ford's (-4.75% after hours) earnings dropped by ~50% from last year, and it lowered its full-year outlook. A fire at one of its suppliers forced it to pause production of the F-150 in May.

DEALS

Place Your Bets Now

Time to practice your handshake. Tons of deals are happening right now—don't get caught with a dead fish or a lobster claw in the boardroom.

1. Pharma company GlaxoSmithKline (-1.67%) forked over $300 million for a stake in Google-backed DNA testing service 23andMe. It'll also get exclusive access to 23andMe's wide-ranging DNA database.

• What's not working: GSK's (quite large) pharmaceuticals unit has struggled to gain momentum.
• What could work: 23andMe has a database of 5 million people, 80% of whom have OK'd the use of their genetic data for research. Hello, multimillion-dollar blockbuster drugs.

2. Subscription fitness platform ClassPass just closed an $85 million Series D.

• The who: Singapore-based Temasek led the round, which included investment from L Catterton (a PE shop that also invested in Peloton, Equinox, and Pure Barre).
• The why: After pivoting its business model in pursuit of healthier margins, ClassPass is breaking into a full, international-focused sprint.

3. Anything else?

• High-end speaker maker Sonos priced its IPO to raise ~$105 million (with shares set to open between $17 and $19).
• Guild Education, an employment technology firm, raised $40 million to help fund employees' schooling (quite the work perk).

TECH

China Ghosts Qualcomm

Qualcomm (+6.77%) is officially done chasing after NXP Semiconductors for $44 billion. The consolation prize for investors? Stock buybacks of up to $30 billion to "deliver significant value to our stockholders."

What's not a prize: Qualcomm will now have to pay NXP a $2 billion break-up fee.

What was the hold-up? Antitrust regulators from nine countries were reviewing the deal. Eight approved...but the last one dragged its feet with a decision. And that country, of course, was China.

• Qualcomm created a self-imposed deadline (yesterday at 11:59 pm ET) to hear back from Chinese regulators. They didn't make a call, so Qualcomm decided it was ready to move on.
• You can bet China's hesitation has everything to do with simmering U.S./China trade tensions.

What's next for Qualcomm: It's doing some soul-searching to find new avenues for growth. Qualcomm's a leader in selling components to smartphone makers, but that's not exactly a market on the rise anymore.

+ No, we didn't forget about Qualcomm's fiscal Q3 earnings: It grew revenue 4%, and beat on both earnings and revenue.

TRAVEL

You’ll Find It Difficult to Book a Flight to Taiwan

Another day, another American company bending over backwards to keep China happy.

Well, actually multiple companies, in this case. American Airlines, United Airlines, and Delta Air Lines are all wiping the name "Taiwan" off their websites in order to appease the Chinese government.

Okay, this one requires a little bit of background...

• China considers Taiwan, a neighboring island and self-governing democracy, a breakaway province. It's hoping to unify Taiwan with the mainland under its "One China" policy.
• In April, China ordered airlines to stop referring to Taiwan as a separate country, or risk punishments like fines and restrictions on market access.
• That put the U.S. airlines in a bind, considering China is about to leapfrog the U.S. as the largest aviation market. So on deadline day (yesterday), they complied. Did they even have a choice?

What the White House called the demands: "Orwellian nonsense" (George Orwell wrote the book 1984).

For you future diplomats: A solid breakdown of China-Taiwan relations.

FOOD TECH

Grubhub Levels Up

Literally. Grubhub (+23.56%) just acquired mobile tech firm LevelUp for $390 million.

Never heard of LevelUp? It helps develop digital payment services and customer loyalty products for 200+ restaurants, from Bareburger to Chop't to Potbelly.

So why's Grubhub, an online and mobile food ordering company (that also owns Seamless), so starved for a new deal in tech? "It's a product and strategic positioning acquisition," CEO Matt Maloney told TechCrunch.

• Translation: Grubhub wants to better integrate its point-of-sale tech at partner restaurants. LevelUp's digital ordering/payments know-how makes that easier.

Better point-of-sale systems = more delivery capacity, as far as Grubhub is concerned. And it looks like it'll need that...

...Grubhub grew total diners 70% annually in Q2 to 15.6 million, according to earnings released yesterday. Revenue jumped 51% and earnings more than doubled, too.

Meat & potatoes: The deal's part of Grubhub's bigger-picture strategy to gain market share with younger eaters—the same strategy that pushed it to start accepting Venmo earlier this year.

WHAT ELSE IS BREWING

• Coca-Cola (+1.87%) had itself a solid quarter, beating expectations. Coca-Cola Zero Sugar was a strong performer.
• Boeing (-0.66%) also beat on earnings, but investors are worried about the trade war and higher costs for its KC-46 aerial tanker
• PayPal (-3.96% after hours)...you guessed it, beat on earnings. But, its third-quarter revenue outlook fell short of forecasts.
• Mattel (-8.66% after hours) is cutting 2,200 jobs. That's 22% of its global non-manufacturing workforce.
• Mars (the planet, not the candy company) has an existing body of liquid water about 12 miles across sitting under its south polar ice cap, scientists discovered. That should energize the private space race.

BREAKROOM

CAREER TIP
This summer, consider asking your boss out for a coffee instead of waiting for him or her to come to you for the dreaded performance report. You could walk away with a mentor and show some initiative. Pro tip: Be mindful of the boss’s busy schedule and plan ahead to optimize outcomes.

WORD GAMES
Each of these descriptions will reveal an animal. Can you name them? (For example, "To run away or escape" could be a "flea")

1. Hair-control foam
2. Very exposed
3. Tellin' falsities
4. A lamenting cry
5. A dull person
6. A precious or loved one
7. First you get a parking ticket, then you get this
8. These make up a chain

(Answer located at bottom of newsletter)

Breakroom Answers

(via Braingle)