#14 Retail Traders vs. Wall Street : Round 1

Friday, January 29th Closing Price


TABLE OF CONTENTS

  1. DISCORD RECAP
  2. MERCHANDISE
  3. EDUCATIONAL LEARNING SEGMENT
  4. MONDAY
  5. WEDNESDAY
  6. THURSDAY
  7. FRIDAY
  8. STOCKS ON OUR RADAR
  9. LAST WEEK’S EARNINGS
  10. VIDEO OF THE WEEK
  11. UPCOMING EARNINGS
“May we think of freedom, not as the right to do as we please, but as the opportunity to do what is right” –Peter Marshall
DISCORD RECAP

Solid trading week.

Much volatility due to short squeezes on GameStop, AMC, and other names.

The FOMC meeting last week allowed us to short the market by buying $SPY puts and $VXX calls.

As a trader, volatility can be your best friend. The only way for this to be a great friendship is by understanding it and not trying to undermine it.

DISCORD
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MERCHANDISE

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EDUCATIONAL LEARNING SEGMENT

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MARKET LAST WEEK (1/25 – 1/29)
Wall Street GIF by Bitcoin & Crypto Creative Marketing

MONDAY (1/25)

GameStop reached record highs today, the latest development in what has been a fascinating struggle between retail, specifically Reddit driven options traders and institutional investors. GameStop’s stock doubled at one point, managing to trade as high as $159.18 a share despite being halted six times by the New York Stock Exchange. This is all despite the fact that GameStop is currently poised to lose money this year and the following, due to their lack of significant online presence and a large decline in sales growth. Citron research and their founder Andrew Left issued a report indicating their less than favorable outlook regarding GameStop’s future before being forced to retract after experiencing a short squeeze driven by retail investors.

Today’s frenzy was a turning point, or at the very least a demonstration of the power that retail investors have in the market. Mad Money host and former hedge fund manager, Jim Cramer, shared his shock with the world going on to state that the “mechanics of the market are breaking down. Arguably, “these people are one group.” This group is none other than the popular Reddit message board “Wall Street Bets.” Their ability to engineer the market since the start of the pandemic supposedly has many scared that we are currently in a bubble. Many institutional investors are looking to keep retail investors out of the market because of it.

TUESDAY (1/26)
In massive news Leon Black, the CEO of Apollo Global Management following a review of his ties to the convicted sex offender Jeffrey Epstein. Apollo is one of the largest private equity groups and is now changing its corporate governance structure. They are removing special voting rights for exclusive partners, and the directors are going to be acting independently.

PepsiCo and Beyond Meat formed a joint venture to promote the plant-based protein and sustainable food system’s growth. Beyond Meat is an innovator in a rapidly growing market segment, and Pepsi wants to jump on the rocket ship. They formed “The Planet Partnership” and will begin to develop innovative snacks, drinks, and new products with global/human health in mind.

WEDNESDAY (1/27)

Jack Ma’s Ant Group has planned a significant restructuring in response to the pressure they have received from Chinese regulators. Ant Group will become a financial holding company overseen by China’s central bank to ensure compliance at officials’ urging. This is a significant development from the payment processor company to avoid sanctions and other headlines that have had investors wary. Ant Group has made an immense effort to brand themselves as an internet technology company, and this revamp will affect their growth and profitability.

Ant Group is also planning to sell their prized US asset EyeVerify. This is due to the tension between the US and China over Chinese technological growth and data access. While this will help them generate necessary funds to cover fines and restructuring costs, it is a blow to their plans as EyeVerify was their first investment in a US company.

THURSDAY (1/28)

A week dominated by Wall Street Bets continued into Thursday with one of the most unprecedented events to ever happen in American Financial Market history. The American Free market, one of our country’s backbones, was tested, and it failed. Robinhood, one of the largest brokers in the United States whose mission is to “Democratize finance for all,” did everything besides that. They had removed 13 of the most volatile stocks on the market and only allowed shareholders to sell their position. This had never happened before as Robinhood strong-armed users forcing the price of Gamestop to go down. There are several theories as to what caused Robinhood and several other brokers to do this. Robinhood makes money on the order flow from retail traders to banks, and as we know, these banks had just been exposed by retail traders from the short squeeze. Some people believe that Robinhood had stopped trading to allow for the Banks they are associated with to recover from their short positions and reposition themselves for future growth. The other theory is that as the stock price of $GME rises, users scooped up deep OTM call options, and Robinhood needed to buy equities to cover themselves. When retail traders were buying up all the shares, and the stock price kept rising, Robinhood wouldn’t be able to cover the derivative positions. Aftermarket close on Thursday, Robinhood had to draw hundreds of millions on their credit lines.

FRIDAY (1/29)
This has been a crazy week in the market from start to finish. The world saw Reddit users inflate multiple stocks’ prices and then get pushback from trading apps. In particular, Robinhood has enforced new rules of buying and selling stocks like GME and now crypto due to the push behind Dogecoin. The situation reached peak insanity when we saw Dave Portnoy, Senator Alexandria Cortez (AOC), and Senator Ted Cruz in agreement that trading apps should not control the free market. With partisanship at all-time highs, seeing politicians from both sides of the aisle speaking up for traders who are not billionaire wall-street firms may lead to consequences for apps like Robinhood or Tasty, where the former is already subject to a class-action lawsuit.

While in the automotive world, another favorite of WallStreetBets Reddit has some bad news for their fans. Tesla announced that the long-awaited Founders Roadster had been delayed again until 2022. Even with a high retail price of over $250,000, it is expected to be too high in demand, mainly as it will rival supercar performance in an EV package with top speeds around 220 mph. This announcement followed Tesla’s previous press release where they had to disclose another Cybertruck delay as well. With a continued shortage of processing chips, Tesla has had to delay production for their first truck yet again. Although long-time followers of the brand know production delays have plagued every model release so far, as Tesla continues to push the envelope for the EV sector. However, consumers may begin to hold them accountable for consistent delays in product delivery with mounting competition in the market at some point. Ford’s new Mache E mustang for the first 200,000 units is eligible for the $7,500 federal tax credit and may provide an attractive alternative to the model 3 and model Y, as it has the comparable range to the long range tesla model at a lower price point.

STOCKS ON OUR RADAR (2/1 – 2/5)

Zoom logo - YouTube

Zoom Video Communications

We are looking to see if $ ZM can stay above the $370 / 372 level.

If we can stay above this, we believe $ ZM will begin to push higher into 375 / 399 / 438.

$ ZM tends to be a quick mover, so be ready to take the opportunity and lock in profits.

REVIEW OF LAST WEEK’S EARNINGS (1/25 – 1/29)
Tuesday (1/26)
(Before Market Open)
3M

The 3M company had a solid quarter to finish off what can undoubtedly be deemed a successful year. Due to their position as an industry leader in worker safety, healthcare, and industry, they reaped the rewards of providing necessary services through the height of the pandemic. They produced and delivered over 2 billion respirators, and that alone accounted for just shy of 4% of total company sales growth.

3M reported the following:

  • $8.6 Billions in net sales, up 5.8% YoY

  • 1.4 Billion in adjusted net income, up 22.4% YoY

  • EPS at $2.38, up 22.1% YoY

  • 21.5% adjusting operating margin

Takeaway:

The 3M company had broad-based growth, improved margins, and robust cash flow in 2020 and is predicting even more success this year, which is significant as many companies have declined to issue guidance, citing the pandemic’s uncertainty. They are forecasting organic sales growth of 3 to 6 percent, improvement in margins and earnings, and strong cash flow generation. 3M company is poised to see continued success especially considering its practically essential status.

General Electric 

General Electric shares jumped more than 2% during trading Tuesday following its earnings report, likely due to their industrial cash flow that far exceeded their projections. Strong free cash flow helped tie up a challenging year, and they are already predicting as much as $4.5 Billion in industrial free cash flow dependent on a recovery in aviation.

General Electric reported the following:

  • $21.9 Billion in revenue

  • $4.4 Billion in free cash flow

  • GAAP – continue EPS of $0.27

  • Adjusted EPD of $0.08

Takeaways:

General Electric reaffirmed its commitment to delivering value for the long term. Their adjusted EPS for the past quarter was low, but they have already projected an adjusted EPS of $0.15-$0.25 for 2021. Although some analysts are far from convinced, citing strong free cash flow for almost all industrial companies has released working capital due to weak sales.

Johnson & Johnson 

Johnson & Johnson released their Q4 earnings and looked very strong moving into the new year. Before releasing their COVID-19 vaccine data to the FDA, they reported $22.5 billion in sales or 8.3% growth in Q4. With the pandemic still in full swing across the country, Johnson & Johnson’s one dose vaccine can prove to be a game-changer as the other two leading vaccines both require two doses to be effective.

Johnson and Johnson reported the following.

  • Adjusted operational growth of 7.3%

  • 2020 Full-Year Sales of $82.6 Billion reflecting growth of 0.6%

  • The company provides 2021 guidance of adjusted operational sales growth of 8.8%* and adjusted active EPS growth of 16.4%

Takeaways: With President Biden’s new administration goal of 150 million vaccinations in 100 days, if Johnson & Johnson can follow through with an effective vaccine proposal to the FDA next month, they can see sales explode going into Q1. In Florida, governor Desantis has publicly stated that if their vaccine can be shown to be effective and approved in February, they will be requesting upwards of 1 million doses to make it the primary vaccine for Florida’s workforce. With that in mind, if they can deliver as promised, we can see Johnson & Johnson make a strong push as they are the leading vaccine in the country with a sharp uptick in quarterly sales.

Verizon

Verizon released earnings pre-market on Tuesday. Verizon ended the year on a strong note, with their top and bottom lines beating analyst expectations. Verizon reported the following:

  • $1.11 in earnings per share (EPS), compared with $1.23 in 4Q 2019

  • Operating revenue decline of 0.2 percent from fourth-quarter 2019

  • Net income of $4.7 billion, a decline of 9.6 percent from fourth-quarter 2019, and adjusted EBITDA (non-GAAP) of $11.7 billion, an increase of 5.3 percent from fourth-quarter 2019

  • Total revenue of $23.9 billion, a decrease of 1.2 percent year over year

  • Total revenue of $8.1 billion decreased by 0.3 percent year over year

  • Total wireless service revenue of $16.7 billion, a 2.2 percent increase year over year

Takeaway: Verizon had strong Q4 results for 2020 and headed into 2021 with even higher expectations. With the strong consumer momentum due to 5G, backed by the company’s diligent execution of operational plans, it appears that Verizon is positioned to do very well in Q1.

Lockheed Martin

Lockheed Martin failed to beat analysts’ expectations in their earnings call Tuesday, resulting in shares closing down just shy of 3% on the day. Lockheed Martin did manage to beat its sales forecast. Luckily, strong operating performance and lower overhead helped offset some of the pandemic’s economic effects.

Lockheed Martin reported the following:

  • Net income of $1.79 Billion

  • EPS of $6.38

  • $8.2 Billion in cash generated from operations

  • Sales totaled $17.03 Billion, up 7.3% YoY

Takeaways: 

Lockheed Martin didn’t beat expectations, but they have a few promising aspects of their earnings call. Not only did they hit their sales forecast, but Aeronautics’ net sales also increased 5%, with operating profit up 7%. Leadership was not deterred by their earnings miss as they issued guidance for an EPS of $26.30

(After Market Close)

Advanced Micro Devices

AMD posted full-year earnings along with Q4 earnings Tuesday. With the amount of data continually growing larger, AMD’s semiconductor products’ demand will increase. Along with data increasing, video game systems’ growth reaches astronomical levels, and AMD products are at the helm.

  • Record Revenue of $9.76B up 45% YoY

  • Net Income and EPS doubled from the year prior

  • Operating income of $1.37B, Operating Margin of 14%

  • Net Income $2.49B, and Diluted EPS of $2.06

  • $2.29B in cash, cash equivalents, and short-term investments

  • Quarterly revenue of $3.24B, up 53% YoY

  • Quarterly operating income of $570M, Net Income of $1.76B

$AMD is posting more substantial profits now than ever and decreasing costs simultaneously. This is an extremely healthy sign for a company that they can prosper and increase margins throughout a global pandemic.

Microsoft

After hours Tuesday, Microsoft reported record-breaking earnings and saw share prices rise as much as 4% after. Microsoft has seen its sales driven by success in Azure, their intelligent cloud service, due to the spike in demand for cloud technology throughout the pandemic.

Microsoft reported the following:

  • $43.08 Billion in revenue, for an EPS of $2.03

  • $16 Billion in commercial cloud revenue, up 34% YoY

  • Gaming surpassed $5 Billion in revenue for the first time.

  • Gaming revenue up 51%, beating 22% from the previous quarter.

  • PC revenue of $15.1 Billion$13 above guidance

Takeaways:

Microsoft had a solid quarter with significant growth across all business segments. They managed to beat earnings and remain positive outliers of the pandemic and are poised to continue doing so. They issue guidance higher than previous projections due to their unique position.

Starbucks

Global comparable store sales declined 5%

Opened 278 net new stores in the first quarter of fiscal 2021, yielding 4% year-over-year unit growth, ending the period with 32,938 stores globally

Consolidated net revenues of $6.7 billion declined 5% from the prior year primarily due to the impact of the COVID-19 pandemic

GAAP operating margin of 13.5%, down from 17.2% in the prior year primarily due to the COVID-19 pandemic, mainly sales deleverage, as well as growth in wages and benefits and Americas store portfolio optimization expenses, partially offset by labor efficiency and the impact of pricing in the Americas

Starbucks® Rewards loyalty program 90-day active members in the US increased to 21.8 million, up 15% year-over-year.

Wednesday (1/27)
(Before Market Open)
ATT

ATT hung in there this year, despite the pandemic. While they didn’t reach all of their financial goals and expectations, they weren’t too far off on some. With financial hardships facing many of their customers, they saw the effects as well.

ATT reported the following:

  • Revenue of $171.8 B for the year, -$9.4B YoY

  • Earnings per share were $3.18, adjusted from $3.57 the previous year

  • Revenue $45.7 B for the quarter, -$1.1B Yoy

  • Earnings per share for the quarter were $0.75, adjusted from $0.89 the previous year

Takeaways:

ATT had a great year given the circumstances thanks to three factors; a significant increase in postpaid phone additions, 1+million fiber broadband additions, and HBO Max subscriptions topping 41 million, a number they hadn’t expected to reach yet. However, they also experienced losses overall, not meeting yearly or quarterly goals.

Abbott 

Abbott experienced a year of growth due to its nature, with demand for COVID testing reaching a high Q4. Abbott has a comprehensive portfolio of rapid and lab-based tests that propelled their yearly growth into the triple digits.

Abbott reported the following:

  • Yearly global sales were $34.6B, a 9.8% increase

  • Earnings per share for the year were $3.65, on the upper end of the initial projection

  • Q4 sales were reported at $10.7B, a 28.7% increase

  • GAAP diluted EPS was $1.20, reflecting 103.4% operations growth

  • Q4 global COVID-19 related sales were $2.4 billion, mostly from combined sales of Abbott’s BinaxNOW™, Panbio™, and ID NOW™ rapid testing platforms, totaling $1.9B

Takeaways:

With COVID still in full effect and a threat of a second strain lingering overhead, Abbott anticipates continued growth into 2021. Their sales across all four divisions of their products (diagnostics, medical devices, nutrition, and established pharmaceuticals) are impressive, exceeding $10B in the final quarter of 2020. With a global emphasis on health, moving forward, Abbott is in a prime position to reach its lofty 2021 financial goals.

Blackstone

The leading Private Equity firm has seen its fair share of struggles throughout the pandemic. Blackstone owns several Retail and Hospitality properties that have not seen a significant amount of cash flow since the pandemic began in March of last year.

  • Net Income for Q4 of $1.8B$1.13 EPS

  • Declared a dividend of $.97

  • Realized over $25B in the quarter, $25B into new investments

  • Record $619B AUM

  • The Fee Earning segment grew 15% in Q4, growing 33% for the full year

  • Management fees are up by 35%

  • Earnings grew for the full year by 16% to $3.3B

  • Fund appreciation increased by $31B

Blackstone has been able to position itself throughout the pandemic to have substantial gains and record AUM. This is telling for an extraordinarily profitable and healthy company moving forward.

Boeing

BA faces a swirl of problems throughout the last year, from Covid-19 travel restrictions, to FAA forced groundings of the 737 Max, and commercial airline issues. Boeing relies on demand from Commercial airlines to buy their planes, and for these airlines to purchase new planes, they need people on their aircraft to generate revenue. Boeing reported Q4 earnings and yearly earnings.

  • Revenue of $58.2B for the year, -24% YoY

  • They recorded a loss of -$20.88 per share

  • Operating losses for the year of -$12.7B, and operating margin of -22%

  • Net Loss of -$11.9B

  • Quarterly revenue of $15.3B decreasing YoY by -15%

  • Operating loss of -$8B, and operating margin -52%

  • Net loss of -$8.4B, and loss per share of -$14.65

These earnings are nothing short of atrocious, Boeing for the entirety of 2020, bled cash and lost billions of dollars. They will need several macroeconomic conditions to reverse or improve to stop seeing Net Losses.

(After Market Close)

Apple

A company with enough cash in reserves to have one of the world’s largest GDPs posted quarterly earnings. They continue to develop innovative improvements for their entire product line of iPhones, Macs, iPads, Apple Watches, and AirPods.

  • Quarterly revenues of $111.4B, a gain of 21% YoY

  • Quarterly diluted EPS of $1.68, a 35% increase

  • International sales accounted for 64%

  • Quarter business growth was driven by growth in every product category

  • Drove all-time revenue records in each geographic segment

  • Apple declared a dividend of $.205 per share

Apple is producing healthy growth throughout the Global pandemic, not just in the United States but also throughout the world. This is extremely important as they are growing their business segment larger in every way.

NASDAQ

Nasdaq released earnings post-market on Wednesday. The financial services provider beat earnings, with earnings per share and Q4 revenue topping analyst expectations. The company reported the following:

  • 2020 net revenues were $2,903 million, an increase of 15% over 2019.

  • Fourth-quarter 2020 net revenues were $788 million, an increase of 22% over the fourth quarter of 2019.

  • Annualized Recurring Revenue (ARR) was $1,577 million in the fourth quarter of 2020, an increase of 9% from the prior-year period, and the Solutions segments SaaS revenue increased 11% prior-year period.

  • GAAP earnings per share were $1.34, an increase of 11% compared to $1.21 in the fourth quarter of 2019.

  • Non-GAAP diluted earnings per share of $1.60 increased 24% from $1.29 in the fourth quarter of 2019.

Takeaway: With analysts giving Nasdaq a strong ‘buy’ rating going into 2021 plus Q1 EPS expectations being much higher than Q

Las Vegas Sands

Like many others in the hospitality industry, Las Vegas Sands had a challenging year, experiencing substantial losses across the board. They also faced the loss of their founder, Sheldon G. Adelson, this past month. The LVS team states his vision “will continue to make a positive impact far into the future.”

  • 2020 net loss attributable to Las Vegas Sands was $1.69B, compared to net income of $2.70B in 2019

  • $2.21 per diluted share, compared to $3.50 per diluted share in 2019

  • Q4 net revenue was $1.15 billion, a decrease of 67.3% from 2019 Q4

  • Q4 Operating loss was $211 million, compared to operating income of $934 million in Q4 2019

  • Q4 net loss of 2020 was $376 million, compared to net income of $783 million in Q4 2019

Takeaways:

The future for Las Vegas Sands is unclear. COVID restrictions remain a challenging obstacle for those in the travel and tourism industry. A widespread COVID vaccination could mean good news for the Las Vegas Sands, but as it stands now, vaccination is still in its early stages, and travel is dwindling. As far as large conventions go, it may be quite a time before a comeback is foreseeable.

Facebook

  • Facebook daily active users (DAUs) – DAUs were 1.84 billion on average for December 2020, an increase of 11% year-over-year

  • Facebook monthly active users (MAUs) – MAUs were 2.80 billion as of December 31, 2020, an increase of 12% year-over-year

  • Headcount was 58,604 as of December 31, 2020, an increase of 30% year-over-year

  • Capital expenditures, including principal payments on finance leases, were $4.82 billion and $15.72 billion for the fourth quarter and full year of 2020, respectively

  • In January 2021, the Board of Directors authorized incremental share repurchases of up to an additional $25 billion of our shares of Class A common stock. This authorization is in addition to the previously authorized repurchases of up to $34 billion of our shares of Class A common stock

  • As of the end of 2020, $8.6 billion remained on the previous share repurchase authorization.

Takeaways:

We believe the Facebook business has benefited from two broad economic trends playing out during the pandemic. The first is the ongoing shift towards online commerce. The second is the shift in consumer demand towards products and away from services. We believe these shifts provided a tailwind to their advertising business in the second half of

2020 given our strength in product verticals sold via online commerce and our lower exposure to service verticals like travel. Looking forward, a moderation or reversal in one or both trends could serve as a headwind to advertising revenue growth.

Tesla

  • Total revenue grew 46% YoY in Q4. This was primarily achieved through substantial growth in vehicle deliveries and development in other business parts.

  • At the same time, vehicle average selling price (ASP) declined by 11% YoY as the product mix continued to shift from Model S & Model X to the more affordable Model 3 and Model Y.

  • Operating income improved in Q4 compared to the same period last year to $575M, resulting in a 5.4% operating margin.

  • Half a million vehicles produced and delivered in 2020. Total production grew 71% YoY in Q4, with full deliveries increased 54%.

Takeaways: 

This past year was transformative for Tesla. Despite unforeseen global challenges, they outpaced many trends seen elsewhere in the industry as they significantly increased volumes, profitability, and cash generation. Tesla achieved an industry-leading 6.3% operating margin (despite increased SBC to $1.7B). Teams across the organization, including supply chain, manufacturing, logistics, and delivery, rose to the occasion to ensure strong execution.

Thursday (1/28)
(Before Market Open)
Southwest Airlines (LUV)

Southwest Airlines reported earnings at noon on Thursday. On par with the rest of the travel industry, Q4 2020 was not great for Southwest. The call started with a statement from CEO Gary C. Kelly on their performance where he said: “The COVID-19 pandemic devastated the world, and our heart goes out to all those affected. The airline industry was hit especially hard in 2020, and we incurred our first annual net loss since 1972”.

Southwest reported the following:

  • Fourth-quarter net loss of $908 million, or $1.54 loss per diluted share

  • Excluding special items1, a fourth-quarter net loss of $761 million, or $1.29 loss per diluted share

  • Annual net loss of $3.1 billion, or $5.44 loss per diluted share

  • Excluding special items, an annual net loss of $3.5 billion, or $6.22 loss per diluted share

  • Ended 2020 with the liquidity of $14.3 billion, well more than debt outstanding

Takeaway: With the global pandemic leaving the return of everyday travel as an uncertainty, companies like Southwest are definitely in for an exciting Q1 in 2021. Southwest has had some good news recently, including the official launching of 6 new destinations in 2020, which may help the company bounce back as people can move around more freely again.

McDonalds

During their earnings call Thursday morning, McDonald’s fell short of the expected mark. With their sales increasing compared to 2019, they suffered like most restaurants during the lockdowns from COVID-19. The European market bore most of the brunt of strict lockdowns that contributed to them missing analysts’ earnings expectations in Q4.

With the world beginning the early stages of mass vaccination, McDonald’s is optimistic heading into Q1 of 2021, expecting other sales increases compared to 2020 with indoor dining returning across global markets.

McDonald’s reported the following.

  • Earnings per share: $1.70, adjusted, vs. $1.78 expected

  • fourth-quarter net income of $1.38 billion

  • $5.31 billion vs. $5.37 billion expected revenue for the year

  • US same-store sales jumped 5.5% in Q4

Takeaways: McDonald’s has been pushing promotions with different artists throughout Q4 to increase sales lost during the pandemic. With a 5.5% increase compared to the previous year, it’s safe to say their marketing strategy has worked. Going into Q1, Mcdonald’s expects to continue seeing an increase in their sales along the trend created in Q4 and regain lost revenue from their European markets. With that in mind, I expect them to meet or exceed the Q1 sales and revenue expectations.

American Airlines

Thursday earnings report: American Airlines reported their Q4 earnings on Thursday, and with all the travel restrictions that have continued to be enforced, we knew it was going to be an ugly earnings day. Even with the amount of bailout money they received, American Airlines reported to shareholders that 2020 was the “most challenging in company history,” and with a reported 64% revenue loss in Q4 compared to 2019, it’s not hard to imagine why.

 American Airlines reported the following.

  • Fourth-quarter net loss of $2.2 billion

  • Fourth-quarter revenue of $4.0 billion, down 64% year over year

  • Ended the fourth quarter with approximately $14.3 billion of total available liquidity

    •  The company expects to end the first quarter of 2021 with approximately $15.0 billion in total available liquidity

  • Full-year net loss of $8.9 billion

  • Incorporated more than $1.3 billion of permanent non-volume, non-fuel efficiency cost-saving measures into the 2021 operating plan.

Takeaways: American Airlines is facing an uphill battle in making Q1 profitable, let alone 2021.

Vaccine rollout has been slower than expected, with travel bans extended by the Biden administration. As we continue to navigate the pandemic, I can not see a sudden and sharp return to standard traveling patterns that would signal a quick recovery for American Airlines

Jetblue

Jetblue, like every major airline the past year, took a financial beating when COVID-19 shutdown non-essential travel. Although they stated that they beat their estimate of how large their losses would be, they came in at 67% Q4 losses compared to the estimation of 70%. The airline industry was expected to continue to report bleeding losses along with their proposed ideas on how to mitigate their liquid cash bleeds to survive into 2021.

Jetblue reported the following

  • Fourth-quarter 2020 revenue declined 67% year over year

  • Reduced fourth quarter 2020 capacity by 47% year over year

  • Adjusted loss per share was ($1.53)

  • GAAP pre-tax loss of ($512) million in the fourth quarter of 2020, compared to a pre-tax income of $220 million in the fourth quarter of 2019

Takeaways:
Jetblue is looking at another challenging year at the start of Q1 in 2021. We would need to see a drastic shift in public health policies that restrict travel and a surge in consumer confidence that travel is once again safe. Without it, we can expect airlines to continue their loss mitigation strategies well into the year with a potential turn around in late Q3 and Q4 with a possible expansion of the vaccinated population. Only then can we expect airlines to expand back towards full routes, and in Jetblue’s case, their push into the European market was delayed due to COVID-19 regulations.

(After Market Close)

VISA

Visa reported a mixed bag of earnings in their most recent report. They saw a surge in e-commerce transactions as the country transitioned to online shopping predominantly during the pandemic. While their data processing and services branches also saw revenue increases, they suffered losses in their international usage markets. Although in investors’ eyes, the good has outweighed the bad, as shares rose upon the earning release with strong growth trends taking precedence over potentially temporary overseas shortfalls.

Visa reported the following

  • Services revenue grew 5% to $2.68 billion

  • international transaction revenue dropped 28% to $1.45 billion

  • Total processed transactions grew 4% to 39.2 billion

  • Payments volume increased 5%

  • Visa’s board of directors recently approved an additional $8 billion in stock buybacks

Takeaway: Visa has shown signs of positive growth during a time of severe economic uncertainty around the globe. Although they have seen losses in some of their markets in the process, they believe this is a temporary blight that can be recouped when European markets become less depressed as the world handles the COVID-19 pandemic. Although they are optimistic about expanding e-commerce sales, a 22% reduction in the European market will take time to recover and begin to grow again. Moving forward, online shopping has become the primary way to shop for a large population, and that will continue to benefit Visa for the foreseeable future.

CAT

Caterpillar reported strong operational performance in their earnings calls pre-market on Friday. The report easily topped analyst expectations, which resulted in higher early stock market action and an aggressive entry point for the day.

  • Fourth-quarter 2020 profit per share of $1.42; adjusted profit per share of $2.12

  • Full-year operating profit margin percentage of 10.9%; adjusted operating profit margin of 11.8%, within 2019 Investor Day target range

  • Returned $3.4 billion to shareholders through dividends and share repurchases in 2020

Takeaway: Management cited lower tax rates as a significant reason for its avoidance of the 44.5% fall in earnings per share. This lower tax rate combined with the company’s expectations of the seasonal increase in dealer inventory and an improvement in operating-cost margin results in a positive outlook for 2021 Q1.

Chevron

Chevron reported a Q4 loss, which came as unexpected news considering the rebound in crude oil prices. Amid the pandemic, the energy sector struggled. They slashed capital spending by 35% compared to 2019 to mitigate the damages, and Chevron cut operating expenses by $1.4B to show capital commitment.

Chevron reported the following:

  • Full-year 2020 loss of $5.5 billion, compared with earnings of $2.9 billion in 2019

  • Full-year 2020 loss of -$2.96 per share – diluted, compared to +$1.54 per share – diluted in 2019.

  • Q4 loss of $665 million, compared with a loss of $6.6 billion in Q4 2019

  •  Q4 loss of $0.33 per share – diluted, compared with a loss of $3.51 per share – diluted in 2019

Takeaways:

Looking forward, Chevron presents an interesting case and far from a compelling argument for growth. There is no real metric for guidance moving forward with difficulty forecasting how the energy sector will rebound from the effects of the pandemic this year. While Chevron has shown commitment in lowering their operating expenses, it just won’t be enough to offset the losses they’re incurring currently.

Friday (1/28)
(Before Market Open)
CAT

Caterpillar reported strong operational performance in their earnings calls pre-market on Friday. The report easily topped analyst expectations, which resulted in higher early stock market action and an aggressive entry point for the day.

  • Fourth-quarter 2020 profit per share of $1.42; adjusted profit per share of $2.12

  • Full-year operating profit margin percentage of 10.9%; adjusted operating profit margin of 11.8%, within 2019 Investor Day target range

  • Returned $3.4 billion to shareholders through dividends and share repurchases in 2020

Takeaway: Management cited lower tax rates as a significant reason for its avoidance of the 44.5% fall in earnings per share. This lower tax rate combined with the company’s expectations of the seasonal increase in dealer inventory and an improvement in operating-cost margin results in a positive outlook for 2021 Q1.

Chevron

Chevron reported a Q4 loss, which came as unexpected news considering the rebound in crude oil prices. Amid the pandemic, the energy sector struggled. They slashed capital spending by 35% compared to 2019 to mitigate the damages, and Chevron cut operating expenses by $1.4B to show capital commitment.

Chevron reported the following:

  • Full-year 2020 loss of $5.5 billion, compared with earnings of $2.9 billion in 2019

  • Full-year 2020 loss of -$2.96 per share – diluted, compared to +$1.54 per share – diluted in 2019.

  • Q4 loss of $665 million, compared with a loss of $6.6 billion in Q4 2019

  •  Q4 loss of $0.33 per share – diluted, compared with a loss of $3.51 per share – diluted in 2019

Takeaways:

Looking forward, Chevron presents an interesting case and far from a compelling argument for growth. There is no real metric for guidance moving forward with difficulty forecasting how the energy sector will rebound from the effects of the pandemic this year. While Chevron has shown commitment in lowering their operating expenses, it just won’t be enough to offset the losses they’re incurring currently.

VIDEO OF THE WEEK
In this week’s video of the week, Dave Portnoy, founder of Barstool Sports, called one of his well-known and typically comedic emergency press conferences. This week’s video was far from light-hearted as he condemned popular brokerage and trading app Robinhood, Citadel, and Steve Cohen amongst others for their hand in delisting retail favorites GameStop, AMC, and Nokia. Dave Portnoy highlighted the disparity in how institutional investors can trade freely and over-leverage themselves. At the same time, brokerages block retail traders citing volatility and claiming that this was in the best interest of retail investors. Portnoy called these actions criminal. While it has become evident that Robinhood had the right to do so according to their signed user agreements, the issue’s morality still raises many questions. Ultimately this week, we saw that the powers that be were victims of their greed. We watched their friends come to their aid in a very questionable way, and we watched retail investors begin to understand the power they have on the market on a national level. Here at tiger-Wolf Capital, we can’t say for sure what we’ll experience next week, but we can be sure not to count out the little guy.
UPCOMING WEEK 1/25 – 01/29

EARNINGS

Tuesday, January 26th, 2021

Before Market Open : 

UPS – UPS has been one of the few companies that had great positioning pre-Covid19. Logistics and shipping companies have been heavily needed throughout the pandemic as we have had stay-at-home orders and online orders have spiked. They have an expected EPS of $2.10 and Revenue of $22.78B, with expected quarterly revenue to increase by 10.8%.

BABA- Alibaba had been heavily in the news cycle the last month, with its founder disappearing and reappearing several weeks later. Alibaba has online and mobile shopping with retail and wholesale trading. They also operate several other marketplaces and online businesses throughout China. Expected EPS of $3.51 and Revenue of $32B, with quarterly revenue expected to increase by 38%.

PFE- Pfizer, one of the leading global pharmaceutical companies, developed and produced one of the Covid-19 vaccines worldwide. Making a global vaccine is expensive, and then implementing it is relatively cheap. They have an expected EPS of $.56 and Revenue of $12.85B, with expected quarterly revenue to increase by 1%.

XOM – Exxon Mobil is the world’s largest energy company that uses crude oil, natural gas, and petroleum to ship, sell, and transport worldwide. Exxon holds the world-leading inventory of natural gas resources and petroleum products’ largest refiners. A large portion of the world isn’t traveling, and the need for Exxon products for the general consumer has decreased, which has a trickle down effect for several industries. Expected EPS of $.03, and Revenue of $48.59B, with expected quarterly revenue to decrease by -27.7%.

BP- In the same industry as Exxon, their main business segments are natural gas, crude oil, and refining petroleum products. They have been hurting right along with Exxon throughout the pandemic. Expected EPS of $.19 and Revenue of $45.31B, with expected revenue to decrease by -37%.

After Market Close

AMZN – Amazon is the premier shipping, online shopping, and logistics company. They have had as dominant a year as any. They work alongside vendors and small businesses to ship their products worldwide. They have an expected EPS of $10.45 and revenue of $120.36B, with expected quarterly revenue to increase by 37.7%.

Alphabet (Google) –  World-leading technology company, with web-based searches, advertisements, mobile operating systems, and software applications. They have an expected EPS of $17.05, with revenue of $44.09B, and expected quarterly revenue to decrease by 5%.

CMG – Chipotle is a fast-paced company that operates with a business plan to pick up and take out. They added a mobile application with delivery in partnership with doordash in a massive announcement. Adding this delivery option to their arsenal of revenue streams was extraordinarily successful and promoted additional growth. They have an expected EPS of $3.84 and Revenue of $1.6B, with expected quarterly revenue to increase by 11.8%.

EA –  The leading interactive global software company, provides games, content, and online services for every gaming platform to use. They have an expected EPS of $3.06 and revenue of $2.37B, with an expected quarterly revenue increase of 48%.

Wednesday, January 20th, 2021

Before Market Open

SPOT- Spotify is a music streaming platform that offers free music and paid subscriptions for ad free music streaming. They have an expected EPS of -$.82 and Revenue of $2.55B, with an expected quarterly revenue increase of 24%.

SNE – Sony corporation develop and manufacture consumer and industrial electronic equipment. They provide audio, video, gaming, display, computer equipment, and they also work in the worldwide music and image-based software markets. They are releasing annual earnings on top of quarterly. They have an expected EPS of $.8 and revenue of $24.49B, with expected quarterly revenue to increase by 8% and annual revenue expected to increase by 1%.

EPD – Enterprise Product Partners is a leading integrated provider of processing and transportation services to producers of Natural Gas Liquids and natural gas liquids consumers. Expected EPS of $.53 and Revenue of $6.7B, with expected revenue to decrease by -16.3%.

After Market Close

PYPL – No longer are people giving each other cash or writing checks; the wave of online transfer payments has begun. Companies are continually using Paypal to send in payments along with outflow payments to their employees. They also own Venmo, which is the premier transfer payment company.

GRUB – Grubhub is one of the food delivery industry leaders, which has been overwhelmingly successful throughout the Global pandemic as more people have ordered in. They have an expected EPS of $.05 and revenue of $494.9M with an expected quarterly revenue increase of 45%.

Thursday, January 21st, 2021

CLX is one of the most used companies throughout the Global pandemic. They provide cleaning products that have been used worldwide for disinfecting various surfaces. Clorox has continued success throughout Covid-19, and market share has grown larger and larger. Expected EPS of $2.14, and Revenue of $1.76B, with expected quarterly revenue to increase by 21.5% and expected annual revenue to increase by 9%.

DGX – Quest Diagnostics leads the charge on fast-acting Covid-19 tests and other healthcare services. Quest was a pioneer in developing fast response and trust-worthy during the health crisis. They have an expected EPS of $4.31 and Revenue of $2.88B, with quarterly revenue expected to increase by 50%. 

PENN – A company we have done extensive research on who has had a rough time during the global pandemic with their Brick-and-Mortar casinos but has seen revenue growth the alternative streams with the Barstool Sportsbook. Who recently expanded from one state (Pennsylvania) to another (Michigan) and began to see larger revenue streams from the online sportsbook. They have an expected EPS of $.43 and Revenue of $1.1B for the quarter, with expected quarterly revenue to decrease by -17.2%. 

Thursday (After Market Close)

SNAP – A tech and social media company that generates revenue from users and ad-revenue. They have an expected EPS of $.09 and Revenue of $46M, with expected quarterly revenue to increase by 50%.

PTON – Peloton is another company positioned before the pandemic to strive ahead during Covid-19. Orders began to skyrocket due to stay-at-home orders and gyms being closed. Peloton has an expected EPS of $.21 and Revenue of $1.02B, with an expected quarterly revenue increase of 118%.

PINS – Pinterest is a user-driven visual discovery engine that allows users to discover ideas for daily activities. They generated revenue by Ads on their platform and continued user growth. They have an expected EPS of $.37 and $645.6M revenue, with an expected quarterly revenue increase of 61.4%.

ATVI – A standalone interactive entertainment company with some of the most successful franchises in their portfolio. Their entertainment network has nearly 500 million users across the globe. They have an expected EPS of $1.29 and Revenue of $2.82B, with expected quarterly revenue to increase by 42%.

GILD – Gilead is a pharmaceutical company, and Pfizer has produced one of the frontier Covid-19 vaccines and is being implemented across the world. Expected EPS of $2.14 and Revenue of $7B, with expected revenue to increase by 19%.

F – Ford is an American car manufacturer who has been designing cars since the beginning. Recently trends have exposed traditional car manufacturers that consumers are moving toward alternative energy and Electric Vehicles (EVs). Noticing this trend, Ford has begun to produce the Mach-E EV that will continue to sell larger into the future. Expected EPS of $.01 and Revenue of $32.89B, with expected revenue to decrease by -17.2%.

TMUS – T-Mobile is a communication services company that recently acquired Sprint to lateral its business strategy into a more cost-efficient method. T-Mobile currently has 44M users and has 70,000 distribution points. Expected EPS $.62 and Revenue of $19.95B, with expected quarterly revenue to increase by 68%.

EVENTS & TALKS

ECONOMIC CALENDAR

Monday 02/01/2021:

  • ISM Purchasing Managers Index – PMI

  • Construction Spending

  • United States Total Vehicle Sales

Tuesday 02/02/2021: 

  • United States ISM Non-Manufacturing PMI

Wednesday 02/03/2021:

  • United States ADP Employment Change

Thursday 02/04/2021: 

  • United States Jobless Claims 4-week Average

Friday 02/05/2021: 

  • Non-farm payroll

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