November 2, 2021

Coke puts on its BodyArmor

Good morning traders,

Welcome back to The Daily Setup. The Dow Jones topped 36k yesterday for the first time ever, while the S&P and Nasdaq also enjoyed good starts to the week. Here’s what’s on the docket today:

  • Novavax’s ‘vid vaccine is approved for distribution in Indonesia
  • Avis reports record quarterly earnings
  • Coke buys BodyArmor (the sports drink, not for battle)

So have a cup of coffee, read through the newsletter, and let’s make today a good one.



Zillow falls and Avis gains


Room for one more?
-Novavax to Moderna and Pfizer

Novavax (NVAX) closed up 15.9% yesterday on news that the company’s highly anticipated vaccine was authorized for emergency use in Indonesia. The company also said that the vaccine is “on the road to authorization in Canada and the European Union.”

  • Stanley C. Erck, Novavax’s president and CEO, said their vaccine “will fill a vital need for Indonesia, which despite being the fourth most populous nation on earth, continues to work to procure sufficient vaccines for its population.” I think the biggest surprise of that statement is finding out Indonesia is the 4th most populous nation in the world?
  • The NVAX ‘vid vax is protein-based, compared to those of Moderna, Pfizer, Astrazeneca, and Johnson&Johnson, which are either messenger RNA or carrier vaccines.
  • The company’s shot demonstrated an efficacy of over 90% against variants in late stage trials.

Novavax is up 25% in just the last 5 days. In comparison, Moderna (MRNA), which was informed Friday evening by the FDA that they need more time to evaluate potential risks of myocarditis associated with their Covid-19 vaccine in adolescent males, is down 5% over the same time period. As is the case with all covid-related news, I plan to keep not only NVAX, but MRNA, PFE, and BTNX on my watchlist as well. One such piece of news to be on the lookout for is the CDC’s approval for Pfizer’s vaccine for kids aged 5-11 years old, which is expected to be announced by tomorrow.

Look Out Below

Zillow had quite a Monday

Zillow (Z) had a case of the Mondays, watching its stock dive 6.2% after an analyst pointed out that the majority of the houses the company had purchased to flip were underwater (not literally, unless the properties were in Atlantis).

  • KeyBanc’s Edward Yruma looked at about 650 Zillow owned homes and estimated that 66% of them were worth an average of 4.5% less than when purchased.
  • The 650 home sample represents about 20% of the company’s inventory, so Zillow probably should get a hold of somebody at HGTV to get the renovation wheels turning.
  • Z is looking to sell 7k homes for roughly $2.8B to institutional investors, likely packaging homes together instead of selling them one by one.
  • Back in October the company announced that they would be pausing home buying, even as other iBuyers such as Redfin (RDFN) and OfferPad (OPAD) were in expansion mode.

Zillow has had a rough 2021 and is down about 25% on the year. It’s odd that a real estate services company is struggling during a property market that has been hotter than Squid Game inspired Halloween costumes. The Internet, Media, & Technology (IMT) segment should be crushing it since everybody has been obsessively stalking houses during the past 18 months, but the Homes & Mortgages segment appears to be an albatross. I guess it’s time for Zillow to pivot from Love It to List It.

Pedal to the (rented) metal

Season 1 GIF by Twin Peaks on Showtime - Find & Share on GIPHY

Auto rental companies have been sitting pretty for the past few months, but none are on a tear like Avis. $CAR hit a record high on Friday with shares closing at $138.20, up 50% since Sept 15. You read that right- and that was before they dropped unbelievable Q3 earnings after yesterday’s close, almost doubling their revenue from Q3 2020. The car-rental company gained 5.30% after hours.

  • CAR netted their highest-ever EBITDA this quarter- a whopping $1.057B. At the same time, they were able to purchase 11.6M shares, lowering their outstanding share count by 16% from June 2021.
  • They attribute their stellar numbers not only to sky-high demand and the semiconductor shortage, but also “strong cost discipline,” which may or may not be a shot at Hertz, who went bankrupt last May before coming back from the dead this summer.
  • But Hertz probably couldn’t care less, because the rising tide has lifted all auto rental boats. They’re up 35% since emerging from bankruptcy, and are looking to re-IPO before the year’s end with better prospects and ex-Ford Motor CEO Mark Fields at the helm.

One person’s loss is another person’s gain, and the fact that the global supply chain snafu will last into early 2022 is actually great for Hertz and Avis. CAR has enjoyed higher numbers of rental days and higher revenue per rental day as a result of the bottleneck, and Hertz probably has, too. One potential area of concern for both companies is the recent spate of flight cancellations by airlines, which could deliver a gut shot to demand earlier than expected. Barring a major hitch like that, auto rental companies are likely to look healthy for a while.


Place Your Bets

Rumor Has It

Live look at The Athletic’s cash management strategy 

FanDuel (PDYPY) and DraftKings (DKNG) are rumored to be the bidders for sports news site The Athletic, which has been firing off drunken “U Up” texts for more than a year as it tries to find a partner. Same… Potential mergers with Axios and The New York Times have already fallen apart, making The Athletic about as successful at courtship as Taylor Swift.

  • The Athletic is hoping for a $750M valuation, which would get them laughed out of the room on Shark Tank since the site is unprofitable and burns cash like the Joker in one of the good Batman movies.
  • The Athletic is a sports subscription news company that spent lavishly on beat writers only to find that people had no interest in paying for sports news.

DraftKings and FanDuel have their own merger related baggage, as they tried to combine forces back in 2016 but were unsuccessful. The history of negotiation breakdowns with The Athletic is a cause for skepticism, but maybe focusing on gambling might be the smart pivot, since sports journalism apparently isn’t their thing.


Hogs, space, and electrolytes Other News

Other News

Hog Heaven

Shares of Harley Davidson (HOG) rose sharply in Monday’s trading session, closing up 9.1% following an announcement that the European Union (EU) was dropping retaliatory steel and aluminum tariffs on American companies. While the U.S. was busy increasing their obesity rate over the weekend via Snickers and Sour Patch Kids, our Commander in Chief was busy wheeling and dealing at the G-20 Summit in Rome.

  • The EU’s tariff was set to double if a resolution was not resolved by December 1st of this year, hence the Biden Administration’s announcement from Sunday.
  • U.S. Commerce Secretary, Gina Raimondo, said, “The new resolution keeps the tariffs in place but allows “limited” volumes of European imports to enter the U.S. tariff-free.”
  • The EU, in return, will drop its tariffs on imports from American brands like Harley Davidson.
  • Prior to the announcement, Harley Davidson was expecting tariff expenses in 2022 to run the company between $200M-$225M.

The revamped ‘space race’

Amazon (AMZN) is targeting Q4 2022 to launch the two first satellites into orbit as part of Project Kuiper, which is an ambitious attempt to build a space based high speed internet network consisting of 3,236 satellites. Project Kuiper is Amazon’s answer to SpaceX’s Starlink Network, which cranks the Bezos/Musk blood feud up to 11, even after Jeffry Starship has left the building.

  • Amazon will be partnering with Verizon (VZ) to use the network to deliver broadband service to rural areas (looking at you, Findlay Ohio).
  • The satellites are designed to completely burn up in the atmosphere when they reach their end of life to eliminate space debris and prevent Earth’s orbit from resembling the Devil’s Anus in Thor: Ragnarok.
  • This is probably the first step towards Amazon’s domination of space, so expect to see a distribution center on the moon before long.

Coke puts on its BodyArmor

In its largest brand acquisition in history, Coca-Cola has acquired sports-drink producer BodyArmor, buying the 85% of the company that they didn’t already own for $5.6B. The BodyArmor Superdrink, sponsored by athletes like James Harden and James Harden’s beard, is marketed as a healthier Gatorade in the sense that it contains electrolytes and vitamins, but no artificial flavors.

  • Even after combining the market shares of BodyArmor and Powerade, KO has a measly 23% share of the sports-drink market, compared to the 74% that PepsiCo controls with Gatorade.
  • Regardless, this is a step in the right direction. With brand recognition and a 10% pre-acquisition market share, BodyArmor is a much healthier contender than the absolute doormat Coke Energy turned out to be.

Coca-Cola shares dipped roughly 1% on the news but leveled out over the course of the day to close down 0.35%. KO has gained 2-3% YTD, which is pretty measly compared to the Dow Jones’ 17% rise.

Jeff Bishop

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  1. Una persona necesariamente ayudaría a hacer publicaciones serias, diría yo. ¿Esta es la primera vez que frecuenté la página de su sitio web y hasta este momento? Me asombró el análisis que hiciste para crear esta publicación en particular increíble. Excelente proceso!

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