Snap Crackled and Popped | The Daily Peel | 5/25/22

Market Snapshot

Futures yesterday morning indicated that Monday’s rally might have just been a fluke and that the sell-off would continue. Tuesday was a bit of a roller coaster of a day. The 10-yr closed at 2.765% after trading as low as 2.71%. BTC and ETH seem to be trapped below 30k and 2k, respectively. WTI Crude is still hovering at $110/barrel, and gold remained steady.

At the closing bell, the Dow was up slightly, a mere 0.15%. The S&P and Nasdaq both lost ground yesterday, down 0.81% and 2.35%.

For today’s BBT, we will make WSO's VC Course available for 100 ‘naners off the sticker price for the first 15 respondents with the correct answer.

Let’s get into it.

Banana Bits

Banana Brain Teaser

Macro Monkey Says

Train with the Pros

What's Ripe

Autoparts ($ORLY, $AZO) — Autozone reported earnings yesterday morning, and the Street generally liked what it heard. They beat net income estimates by almost 20%, posting solid earnings for their most recent quarter. At the end of the day, $AZO was up 5.82%.

Rumor has it that $ORLY is up based on insider buying activity, but I think that’s bull. Generally, these two names trade together. Good for them, on $AZO’s beat, shares of $ORLY moved higher by 5.02%.

Zoom ($ZM) — In all honesty, Zoom’s most recent quarter was good. Yesterday their share price experienced a strong pop on good numbers from their earnings call.

That being said, Zoom is now back to its pre-C-19 February 2020 levels. The stock is down 50% year-to-date, and it’s about $450 bucks off of its all-time high of $559. Here’s another irony: if you liked $ZM in the mid-500s, you might not like it much in the mid-90s.

After some decent earnings news, shares of $ZM closed up 5.61%.

What's Rotten

Snap Inc ($SNAP) — If you thought losing money in crypto was easy, try social media companies.

Shares of $SNAP, the company that brought you shame-free no-strings-attached photo sharing, lost 43.44% on Tuesday. Yesterday’s crash puts their share price below that of their IPO. Yikes!

The company gave a “macroeconomic warning,” something that we have been ringing the bell about here at the DP for at least three months. Snap’s leadership believes that it won’t be able to deliver even at the low end of its current guidance. This is intriguing because it uses adjusted EBITDA, an already made up metric, as its scorecard. If you liked Snap at like $60 a share, you’ve gotta love it at $12, right?

Cruises ($RCL, $CCL, $NCL) — Once dubbed floating petri dishes here at the Daily Peel, cruise ships are an interesting experience. If you enjoy being in a sort of geographic purgatory while seeing the same people every day, cruises are a good idea for your vacation habits.

If you’re not into cruises, kind of like Wall Street yesterday, you might short the cruise lines. If you did, you woulda been a big-time winner yesterday. Bank of America slashed their price targets for $CCL and $NCL Monday morning before opening, and I guess this is somewhat of a delayed reaction.

Yesterday these stonks got their noses bloodied. Carnival was down 10.30%, Norwegian shed 11.99%, and Royal Caribbean lost 10.20%.

Thought Banana

DCA — A few weeks ago, we ran a quote about investing in a bear market: You make most of your money in a bear market; you just don’t realize it at the time.

This tidbit of wisdom from Shelby M.C. Davis is categorically true, particularly during drawn-out periods of time when equities trade at a discount.

Buying stonks at all-time highs is not really something I’m into. Sure, my total portfolio value has taken a haircut this calendar year, but this is really an opportunity.

For those of us with a considerable time horizon, until we need to spend our hard-earned, smartly invested bananas, a sharp downturn in the stock market is basically a firesale. If you put your money into solid companies that will continue to put up strong revenues and earnings in the future, you’ll eventually generate some outsized returns.

These returns just don’t happen overnight.

Many of you are familiar with the term dollar-cost averaging. Purchasing shares of a particular asset or ticker symbol at a specified time increment can help limit the impact of short-term volatility on your purchase price and, in turn, your returns.

Think about it. When you’re purchasing shares of Amazon or Nvidia at a deep discount during a bear market, when their valuations eventually correct to some crazy forward P/E multiple, you’ve lowered your average cost per share by sticking with your convictions even in a down market.

Timing the market is really, really hard. Catching a falling knife without chopping off your little, er, fingies is also really, really hard. I don’t give financial advice - but we don’t recommend playing with sharp objects. You could get hurt.

A small fraction of Americans plans to increase their investment contributions this calendar year, less than a fifth. You could be a part of this portion of wise investors who are buying shares when they’re on sale.

Wise Investor Says