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November 3, 2021

Avis does it’s best GameStop impression

Good morning traders,

Welcome back to The Daily Setup. The three major US indexes closed at record highs, with the Dow closing above 36k for the first time in history.Break out the hats. Here’s what’s on the docket today:

  • Zillow misses big on earnings and cancels its home-buying program
  • Avis gains over 100% on the day
  • Pzifer reports an earnings beat

So give us a read and let’s get to work.

Jeff

 

Avis, Zillow, and Under Armor Biggest Mover

BIGGEST MOVER

Still some gas left in the tank

Avis Budget Group (CAR) did its best impression of Gamestop and AMC during Tuesday’s trading session. In what many suspect is a short squeeze, the rental car company was up over 200% at one point before closing the day up a still astounding 108%. As we wrote about in yesterday’s edition of the Daily Setup, the company released its earnings Monday and to say they destroyed analysts’ estimates is a severe understatement. Trading of the stock was halted multiple times Tuesday due to an immense increase in price volatility.

  • Bloomberg noted that about 37% of the stock is borrowed and sold short.
  • Exchange data estimates had short interest around 20%, which is still 18% higher than meme favorite AMC had before their short squeeze.
  • The easiest and simplest way to think about a short squeeze is that investors that short the stock rush to buy the stock back in droves in order to cover their short position and reduce any future losses. This in turn drives the price of the stock even higher.
  • Elsewhere, Elon tweeted that there’s no signed contract with Hertz, while Hertz reports that deliveries from Tesla have already started.

Meme stocks and short squeezes, while all the rage in 2021, are an inherently dangerous proposition and can lead to financial ruin if the risks are not well understood. The investors that gain the most from these rare events are the ones that have owned the stock before the squeeze takes place. Avis is up over 857% year-to-date. GME and AMC are up 997% and 1,725% respectively. For every story you hear of young traders making millions during one of these historic events, there are countless others that have blown up their accounts (and not in a good way). Tread carefully my friends.

 

Flip or Flop

^ a live look at Zillow HQ

Zillow announced its Q3 earnings yesterday, which turned out to be worse than some of its home listings. In addition to missing out on most financial estimates for the quarter, the company announced that it will cancel its home buying program, resulting in the layoff of 25% of its staff, or roughly 2k workers.

  • As noted in yesterday’s edition of The Daily Setup, about 66% of the homes that Zillow had bought were relisted for less than the purchase price.
  • Zillow reported a loss per share of 95 cents adjusted, with $1.74B in revenue, compared to the forecasted EPS of $0.16 on $2.01B in revenue.
  • $Z dropped 11.52% during trading and fell an additional 10.55% afterhours

To say Zillow’s had a no-good, very bad week would be an understatement. You have to admit, it’s somewhat impressive that even though the real-estate market is hotter than Phoenix in the summertime, Zillow has managed to fumble the bag this badly and has to cancel its home buying program.

Good job team

Shares of athletic-wear and sports equipment company Under Armour (UAA) moved sharply higher Tuesday following a blow-out earnings report for fiscal Q3 2021. The company also increased their full-year guidance for the rest of the year, driving the stock up 16.5% on the day. UAA had an adjusted EPS of $0.31/share on $1.55B in revenue vs. analysts’ expectations of $0.15/share on $1.48B in revenue.

  • The company also said that revenue growth for full-year 2021 is expected to increase to 25% vs. previous guidance in the low-20%’s.
  • The improved outlook for the rest of the year is dependent on no additional shutdowns of manufacturing partners or other disruptions to the retail industry. Not exactly a safe assumption.

Under Armour is up 49% year-to-date compared to other industry giants like Nike (NKE) and Lululemon (LULU), which are up 19% and 33% respectively. While shares of UAA have a ways to go before even sniffing their all-time high of $52.57 achieved in September of 2015, they are within striking distance of their multi-year high of $27.72 which was put in on July 22, 2019. Keep UAA in your watchlist to see if these levels hold as resistance or become support after a potential breakout. Now if only the company will reduce the size of their logo on all of their products. I mean, blind people are even taken aback by the print size…I’m assuming.

Pzifer, Facebook, and Rivian Other News

Other News

Tag, no one’s it

Facebook has decided to scrap its decade-old facial recognition program in response to allegations that the technology allows Facebook to perpetrate a mass invasion of users’ privacy and enables other companies to do the same. (And because they were fined $650M for “stealing facial geometry.”) The program identified people who appeared in users’ photos and allowed users to tag people in all their photos with a single click.

  • The ‘book’ will delete the face scan data of 1B users – but not the facial recognition software itself, known as DeepFace. And while their upcoming RayBan AR glasses won’t have facial recog, they do allow the user to take surreptitious photos and record voice memos, so it’s not like Meta’s done a full 180 on the privacy-invasion front. Expect more facials, err, more facial recog issues soon.
  • Most people aren’t complaining about this technology just because it’s creepy. China has notoriously used it to profile and punish the Uigher population, and companies like Clearview AI use it to scrape media sites like Facebook and Instagram in order to help law enforcement identify unknown suspects. You should probably stop shoplifting at that 7-Eleven.

This is My Shocked Face

Pfizer (PFE) reported an earnings beat yesterday, thanks in large part to a couple pricks (of the vaccine). EPS was $1.34 vs. expectations of $1.03 on revenues of $24.1B vs. estimates of $21.9B. When governments across the globe buy $13B worth of vaccines, monster quarters are inevitable. Now we’re seeing the mandates in several industries, because Uncle Sam has product to move.

  • Vaccine sales made up more than half of PFE’s quarterly revenue, and a cynical person might infer that boosters are sure to be on the horizon because Pfizer execs like making money and would enjoy continuing to do so.
  • Shares were up more than 4% on the day and are up 32.2% on the year, which surprisingly lags the S&P 500 YTD return of 39.4%.
  • PFE momentum is likely to remain strong now that a CDC panel has recommended the company’s vaccine for use in children 5 to 11 years old. Expect school board meetings across the country to resemble the Octagon following this news, let’s get ready to rumble.

Electric Avenue

Electric Truck maker Rivian is going public and is seeking a $60B valuation. The roadshow is scheduled for this week and the company is planning to IPO next week. As with all things Rivian (and every EV maker not named Tesla) the keyword is planning. As in planning to actually build and deliver electric vehicles. Nikola had a plan, but we all see how that turned out. According to the prospectus, the company has delivered a whopping 156 R1T trucks through the end of October and aims for 1,000 by year-end.

  • Rivian is backed by Amazon and Ford, and has ambitions to have 10k Amazon delivery vans on the road by 2022.
  • The electric vehicle startup space has become increasingly crowded, with the likes of Lordstown Motors, Lucid, and Fisker.
  • The company plans to trade on the Nasdaq under the ticker symbol RIVN.

Author:
Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

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