Newsletter 4:

Monday, November 9th

Canopy Growth Corporation – $CGC

The five states this election cycle with cannabis-related measures on the ballot all passed. This win is pivotal for the growth of companies like $CGC because it will aid in their legal expansion in other states. This specific quarter $CGC reported record net revenue. Partially, this may be due to growing sales in Canada during the pandemic period, but could also be the result of a more lean company. As noted below, $CGC has been able to cut legal expenses.

• Increase in net revenue over 135 million 

• Gross margin increased 19%

• Selling, General Administrative expenses down 19%

• Recreational net revenue business to business up 2%

• Recreational net sales business to consumer up 43%

• Canadian medical cannabis net sales up 7%

• International cannabis revenue down 8%

Takeaways: 

The current CEO of $CGC is not relying too heavily on federal cannabis legalization in the United States to grow $CGC. Instead, the company is focusing on a line of products that the CEO described as cannabis 2.0. One of the major products in this lineup is a THC infused soft drink that $CGC hoops can legally export to states like California for legal consumption.

BEYOND MEAT – $BYND

BYND had a less than inspiring earnings performance but is doing relatively well, sitting in a position to experience some continued success in the future. The plant-based meat market is up 41%, as well as the buyer rate, which increased by 13%. This indicates that despite the challenges seen with COVID, on average more households are buying BYND products more frequently, and spending more. BYND certainly has challenges operating in the coming future as there is a general decline in their product category, but their significant part of the market space demonstrates that if the plant-based meat market withstands COVID, Beyond will find success.

BYND reported the following:

• $94 million net revenue (Down from $113 Million in Q2)

• BYND meat products up 63% Y/Y

• Food service business declined 41% Y/Y

Takeaways:

Despite a bleak Q3, BYND has the potential to resume its halted success due to COVID in the future. While they neglected to issue Q4 guidance due to the volatile market space in this COVID environment, looking at their performance in context shows that they are still performing well overall. Their $19 million declines in revenue from Q2 to Q3, still represents a 2.7% increase in revenue for Q3 from the year-ago quarter.  The statement by their leadership to not misinterpret the near-term pandemic induced drop as weakening in their long term value holds weight and BYND will be an interesting stock in the coming future.

Norwegian Cruise Line Holdings – $NCLH

$NCLH, like many travel stocks, is trying to stay alive until a vaccine is widely available. Recent news specific to the cruise line industry stated that the CDC has recently permitted for crosses to resume sailing under the condition that social distancing guidelines are followed, but with the second wave of COVID likely, the question has yet to be answered. Will cruise-goers will have the same appetite as they did pre COVID-19? And if they do, at what price point will cruise lines like $NCLH be able to charge such cruise-goers?

• Loss of -2.35 earnings  per share (2020)

• Net of +2.23 earnings  per share (2019)

• Net income loss of 677.4 million

• revenue of 6.5 million

• 1.9 billion in revenue in 2019

• 2.4 billion in cash equivalents

Takeaways:

At this current moment in time, $NLCH revenue is at an all-time low. The silver lining in these earnings is that $NLCH still has 2.4b in cash equivalents and may sell bonds as needed to secure more debt to prevent a default. Similar to the profile of other travel-related companies, it will be vital for $NLCH to remain financially lean long enough to experience an inflow of returning patrons now comfortable with traveling again. The CDC allowance of cruises to resume sailing may provide hope to the industry that in the not so distant future, they may be able to sail with a significant number of passengers on board.

Tuesday, November 10th

Lyft – $LYFT

Lyft has been hit hard by the Coronavirus since March. They did not have an “Eats” delivery service, so they could not immediately offset the ride-sharing coming to an almost complete halt and have struggled to recover since then. Their pilot programs for delivery services have done well, and they will need to expand and take the market share from other services to stay competitive.

• Non-GAAP sales & marketing expense as a percentage of revenue < 15%reflecting rider incentives near historical lows

• On track to realize annualized fixed cost savings of $300 million by Q4’20

• Expect to achieve Adjusted EBITDA profitability by Q4’21 even with a slower ride recovery

• Delivered Q3’20 Adjusted EBITDA loss of $240 million versus most recent outlook of $265 million

• Active Riders grew 44% to 12.5 versus 8.7 million Q2’20

• Revenue per Active Rider increased 2% versus Q2’20 reflecting an improvement in ride frequency

• Contribution Margin of 50% was 15 percentage points higher versus Q2’20 and exceeded outlook of 45%
• Revenue per Active Rider was $39.94 up $0.86 from Q2’20
• Ride-share recovery in 2020 has recovered more each month but is slowing down. Sep’20 it was at -48.1% Y/Y and Oct’20 it’s -47.4% Y/Y

Takeaways:

Lyft will not be able to recover its full riding revenue for the foreseeable future. Its partnership with Grubhub is a nice stopgap to fill lost revenue, but it’s too small and only available to Lyft Pink members. With multiple lockdowns being reinstated locally throughout the United States, this will only hamper ride-sharing recovery. Lyft has a long march ahead to maintain its place in the market.

Thursday, November 12th

Disney – $DIS

Disney has had a rough time with its parks, hemorrhaging the company’s cash from not operating during the pandemic. Disneyland, its largest park, has been closed since March due to the COVID restrictions in California. Disney World, however, has been able to come back into play as they’ve enacted safety measures to prevent the virus from spreading. Disney will be continuing dividends in the long term, but the short-term is reliant on the pandemic’s ending, and how much they want to fund Disney+ content.

• Parks, Experiences and Products: $2.58 billion, down 61% year over year

• Media Networks: $7.21 billion, up 11% year over year

• Studio Entertainment: $1.60 billion, down 52% year over year

• Direct-to-Consumer and International: $4.85 billion, up 41% year over year

• Disney estimated that pandemic related costs will total roughly $1 Billion in their fiscal year 2021 subject to small changes in local restrictions.

• Disney World capacity is increasing from 25% to 35% in Q4

• ESPN+ subscribers doubled to 10 million

• Hulu’s subscribers increased 28% to 36.6 million

• Disney+ subscribers rose to 73.7 million from 60.5 in August

Takeaways:

Disney’s expansion of its subscriber base across all three platforms (ESPN+, Hulu, and Disney+) is putting it in a prime position to catch up to Netflix. Disney is more diversified in streaming content from Disney+ movies and shows to sports on ESPN and all content on Hulu. Conversely, its direct competitor, Netflix, is only able to obtain old shows and movies and make new original content. Disney’s holding back of theatrical movie releases due to closures of theaters is hurting their bottom line currently however, a return can be seen in 2021 when the pandemic can be expected to subside.

Friday, November 12th

DraftKings – $DKNG

COVID-19 has created a unique challenge for companies in 2020; prominent among them is DraftKings. They rely heavily on a consistent sports schedule and a high level of fan interaction to see continued and significant success in their business model. Teams have had varying levels of success in containing outbreaks through team bubbles to be able to compete. Despite this hectic sports schedule and the pandemic, DraftKings has performed well and is poised to see continued success down the road with recent legal developments.

• Monthly unique players surpassed 1 million, a 64% increase Y/Y

• Loss per share: 57 cents, vs an expected loss of 61 cents

• Revenue: $133 million, vs $132 million expected

• The company also raised its fiscal year 2020 guidance to a range of $540 millionto $560 million, from a range of $500 million to $540 million.

• DraftKings said it expects $750 million to $850 million in revenue for 2021

• DraftKings paid out about $15 million extra in bets this quarter

• Total U.S. iGaming handle increased 335% Y/Y and represented around ½ of total online gambling revenue

• Multiple states’ voters passed gambling legislation on ballot initiatives

Takeaways:

DraftKings can expect continued expansion as more states pass positive gambling legislation. This will increase active users over the next few years as bills, regulations, and licenses are enacted. Revenue is steadily increasing and will only hasten as legalization spreads to the entire United States.