Bezos in aisle five
Quote of the Day
We discount what he says pretty substantially.”
Who is this mysterious person analyst Colin Rusch is alluding to? Well, his name rhymes with Delon Rusk, and he’s the CEO of Tesla.
Market Snapshot
- U.S. indexes were routed.
- Nvidia jumped more than 12% on an earnings beat.
- Oil dropped to a five-week low.
- Expedia missed profit estimates for the 6th straight quarter, and shares dropped 19% after hours.
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Twitter’s First Profit Is Something to RT About
#tbt: @jack, @biz, @ev and @noah launched their 140-character side hustle, twttr, in July 2006. And then spent the next few years pushing each other out instead of nurturing their product. It’s been a wild timeline for Twitter (+12.15%). But, current CEO @jack Dorsey returned—for the second time—in 2015 to get down to business.
#finally: Twitter posted its first-ever profit ($91 million) in the almost five years since it went public.
The micro-messaging giant returned to revenue growth driven by strong ad sales in Q4, after declining for three straight quarters. And now those 280 characters say: It looks like Dorsey and COO (and financial disciplinarian) Anthony Noto may have hashtag-cracked the code to profitability.
Give advertisers something to invest in and they will come
The social media company focused on building its core product: its platform. It improved video capabilities—led by outgoing Noto— with live-streaming for sports and news. It also doubled the tweet character limit from 140 to 280. More sponsored tweet for your buck.
Invest in your users’ experience and they will stay
Sure, monthly active users only rose 4% YoY to 330 million (vs. projected 332.5 million), but daily active users jumped 12%. Translation: the same amount of people are spending more time using Twitter. Why? Better content.
The new software algorithm shows users tweets more relevant to their interests. Also worth noting is the company’s crackdown on disinformation and fake accounts, which may contribute to the seemingly stagnant growth numbers.
But growth doesn’t seem to be Twitter’s strategy, anyway. It’s monetizing its current user base. Something it’ll have to do to compete with Facebook, Google, and Snapchat (which it's now worth more than) for ad dollars.
Long story, short: turning a profit also turns Twitter into a more attractive acquisition target. Add in its data goldmine and direct pipeline to consumers and that’s a recipe for #M&Amotivation.
The Market Continues Its Roller Coaster Act With a Sharp Drop
Just as we thought things were calming down after Monday’s big sell-off, stocks took another major tumble yesterday. Buckle your seatbelts—we’re in for a bumpy ride.
What happened: the Dow dropped more than 1,000 points and the S&P (a far more accurate indicator of the market) fell 3.75%. The VIX, a measure of market volatility, shot up 20%. It’s a green island in a sea of red.
The blame game: there’s plenty to go around. At a high level, investors worry about central banks (aka the Fed) raising interest rates to keep inflation from devaluing everyone’s money. And yesterday, the Bank of England hinted it would hike rates faster and higher than expected.
Meanwhile, bond yields continued their rise, making them an even more attractive investment than equities.
Heard on the Street: with this latest drop, we’re closing in on market “correction” territory. This means the markets dropped 10% from a recent high.
PepsiCo Gets Fizzy With New Product, Bubly
When we say “fun, playful, and relevant” what do you think of?
Canned water? Good. That’s what PepsiCo (-1.45%) is hoping by announcing a new sparkling water product, Bubly. And yes, that’s how water chief Todd Kaplan described the fizzy water, which will arrive later this month in eight flavors and colorful packaging.
We saw this coming: because soft drinks are out, and water is in. For the first time, bottled water overtook carbonated soda in sales by volume in 2016. That’s partly due to carbonated soft drink sales declining for 13 straight years.
And no one has capitalized on this trend better than sparkling water brand LaCroix, which owns 36% of a rapidly growing $1.2 billion sparkling water market.
So it’s up to the beverage Goliaths to see if they can overwhelm LaCroix's David with new products and unrivaled marketing budgets.
First up for Bubly? Two ad spots during the Oscars.
Amazon Offers Whole Foods Delivery, Grocers Lament
When he’s not reading the Brew, Jeff Bezos enjoys slow dancing with Alexa and disrupting the grocery industry. He indulged in the latter yesterday, when Amazon (-4.68%) announced Whole Foods two-hour delivery via Prime Now—the company’s first major Amazon-Whole Foods integration since its $13.7 billion acquisition last summer.
What’s in stock?
* Delivery will start in Austin, Cincinnati, Dallas, and Virginia Beach before rolling out to other states.
* You must have a Prime membership.
* Two-hour delivery is free (minimum order $35)—one-hour delivery will cost $7.99 extra.
* You can order produce, dairy, meat, seafood, everyday staples...and “select alcohol.”
Let’s rewind: Amazon sent the grocery industry into a frenzy last year as six Whole Foods competitors lost ~$12 billion in market cap post-acquisition announcement. It then came in and slashed prices.
What’s at stake: grocers are scrambling to offer delivery and compete. Target purchased grocery delivery startup Shipt, and Costco is rethinking its traditional in-store model by offering delivery.
What Else Is Happening…
- “Pod Save America” is coming to HBO just in time for the midterm elections.
- CVS (-5.11%) is raising the starting wage for its hourly employees from $9/hr to $11.
- Qualcomm turned down Broadcom's $121 billion bid.
- Chinese conglomerate HNA is selling $4 billion-worth of U.S. real estate to offset its debt.
- The New York Times (+9.91%) added 157,000 digital subscribers this past quarter, and its total subscription revenue exceeded $1 billion.
- U.S. jobless claims hit their lowest level since March 1973.
- GrubHub shares soared up to 29% on a strong earnings beat, while it also announced a partnership with Yum Brands.
- Reuters: The gunmaker Remington has reached out to banks to secure financing for a possible bankruptcy.
Economic Calendar
- Monday Earnings: Booz Allen (+), Sysco (+)
- Tuesday Earnings: BP (+), Chipotle (+), Dunkin’ Brands (+), GM (+), Disney (+)
- Wednesday Earnings: Hasbro (+), 21st Century Fox (+)
- Thursday Earnings: GrubHub (+), Yum!(+)
- Friday Earnings: No Events
Economic Events: ISM Non-Mfg Index (+)
Economic Events: International Trade (-)
Economic Events: Consumer Credit (+)
Economic Events: No Events
Economic Events: Wholesale Trade
Taking Inventory: Podcasts
You emailed, and we read—all 1,000+ responses. But we came out with a pretty good list of podcast recommendations (thank you!). In descending order of popularity, here’s what Brew readers are listening to:
1. How I Built This by NPR
2. Planet Money by NPR
3. Revisionist History by Malcolm Gladwell/Panoply
4. Freakonomics by WNYC Studios
5. Pardon My Take by Barstool Sports
6. Radiolab Presents: More Perfect by WNYC Studios
7. BiggerPockets Podcast by BiggerPockets.com
8. Stuff You Should Know by HowStuffWorks
9. The Tim Ferriss Show by Tim Ferriss
10. The Joe Rogan Experience by Joe Rogan
Honorable mentions: Masters of Scale, The Ezra Klein Show, Dissect, Hidden Brain, The Investors Podcast, The Twenty Minute VC, The Daily, 99% Invisible, TED Radio Hour, Reply All.
The Breakroom
Question of the Day
Candy Barr has five bags of candies to give to her nieces. Four of the bags have a total of 84 candies. The fifth contains four less than the average of the five bags . How many candies are in the fifth bag?
(Answer located at the bottom of newsletter)
Business Trivia
Appearing on the $2, $5, $10, $20, $50, and $1,000 notes at different times, who has been depicted on more denominations of U.S. currency than anyone else since the beginning of the Civil War?
(Answer located at the bottom of newsletter)
Good Looking Stat of the Day
75%—How much more female fashion models earn than their male model counterparts. According to a new study, women make up 9 of the top 10 highest paid models in Britain.
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Breakroom Answers
Question of the Day: 16 (Explannation)
Business Trivia: Alexander Hamilton
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