Read between JPows lines | The Daily Peel | 7/29/21

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Market Snapshot

 

Earnings szn continues in mid-season form, with some of the biggest of the big dogs reporting today and yesterday. The S&P traded sideways yesterday, finishing down .02%, while the Nasdaq ended up 0.7% on the day. Meanwhile, JPow and crew have a message for you. Let's get into it.

 

What's Ripe

Tilray ($TLRY) – As the marijuana industry moves closer to legalization, Tilray's sales and consumers are getting higher and higher. The largest (legal) cannabis company worldwide posted a surprise profit and much greater revenue than expected, boosting shares 25.8% yesterday. With pot sales rising 55%, overall revenue was up 27% YOY. As the merger with Aphria seems to be working out, more and more investors are saying "yo, let me get a hit."

Alphabet ($GOOGL) – Unlike some of its big tech buddies (see below), shares in Google's parent, Alphabet, actually went up following a stellar earnings report. 69% was the key number here for a few reasons, but mostly because that is how much advertising sales grew over the last year. Your late night binge of music videos and Filippino men building houses contributed to YouTube pulling in over $7bn in ad sales. GOOGL rose 3.3% yesterday as a result.

Advanced Micro Devices ($AMD) – CEO Lisa Su took one look at Street expectations for AMD's earnings and said "hold my beer." The firm reported EPS of $0.63 on $3.85bn in revenue, as opposed to expectations of $0.54 on $3.6bn, lifting the stock 7.5% on the day. Laughing in the face of the global chip shortage, AMD nearly doubled sales from a year ago and projects the third quarter to be even better.

 
 
 

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What's Rotten

Spotify Technology ($SPOT) – Joe Rogan, strong ad growth, and beating expectations on both the top and bottom line couldn't help Spotify overcome weak user growth on the quarter, sending shares down 5.7%. The music streaming and podcast platform has been busy lately, from beefing with Tim Cook to shelling out MLB-sized deals for podcasts. Stealing the limelight however, was the mention of pandemic-hampered user growth, as many listeners primarily used the service on their, now non-existent, commutes.

Apple ($AAPL) – Speaking of Tim Cook, America's largest company by market cap completely destroyed expectations, beating on revenue by almost $10bn to reach $81.4bn for the quarter (not a typo). Not a single product line grew less than 12%, and iPhone sales jumped 50% from a year earlier. But alas, shares fell 1.0% because Wall Street cares more about what you're going to do, not what's already done, and Apple's warning of a potential lack of chip supply dominated trader's minds.

Starbucks ($SBUX) – I will fight anyone who says Starbucks is better than Dunkin Donuts. It seems like Wall Street agrees with me as Starbucks closed down 2.8% yesterday after their earnings call. U.S. sales came in strong as the national addiction to cold brew grew stronger, but unfortunately, China doesn't share the same fandom. A poor outlook in the most populous country on Earth rattled investors, as uncertainty around China spreads even wider.

 

Macro Monkey Says

JPow's Kickback – JPow and the FOMC wrapped up their little get together yesterday, and even though you weren't invited, we're here to tell you all about it. In the Feds classic, mind-numbingly boring way, they decided to keep rates at the 0-0.25% range and maintain $120bn in monthly asset purchases, with 2/3rds going towards Treasuries and 1/3rd towards agency MBSs. Moreover, JPow and crew did address the continuous economic improvement despite the spread of the Delta Variant. Of note, the committee changed the language when referring to the hardest hit sectors of the economy from "remain weak" to "not fully recovered"...kind of like you progressing through the day after a night at the bar.

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Food for Thought:

DEX Leverage – Trivia question: What does the most volatile asset class in the world need more than anything else? That's right, leverage. But not just any leverage, absolutely ridiculous amounts of it. As founder of decentralized exchange, FTX, Sam Brankman-Fried was questioned by the NYT on why traders need so much leverage. Stunning the world, Fried said he agrees traders do not need 125x leverage and has decided to limit it to only 20x on FTX. I have no idea who these psychopathic masochists are that need to blow up 125x over, but I'm sure they're up in arms now that they can only lever up 20x. Thankfully, the average leverage used on these platforms hovers around 2x, but still, where can I go if I want to pass-on massive margin call debt to my great grandkids? Well, clearly not FTX.

 
 

Wise Investor Says

"The stock market is filled with individuals who know the price of everything, but the value of nothing."

 Philip Fisher

 

Happy Investing,

Patrick & The Daily Peel Team

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Comments (1)

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