It’s Bad, and That’s All I Have to
Say About That
^ StoneCo’s earnings report and Stone Cold Steve Austin…probably
Shares in Stone Cold Steve Austin took a chair to the head yester… Wait, I’m being told that’s not what $STNE is. StoneCo (STNE) saw its shares plummet during Wednesday’s trading session following their Q3 earnings announcement. The company missed big on both top and bottom line earnings estimates and dropped 34.57% on the day.
- The Brazilian fintech reported adjusted Q3 EPS of $.08/share vs. analyst estimates of $.11/share, a decrease of 56% year-over-year.
- They also incurred a net loss of $229M vs. Q3 2020, which saw a net income of $45.3M.
- One of the main culprits for StoneCo’s disastrous, or as they say in Brazil, desastroso earnings report (look how much I’m teaching you), had to do with their new credit business.
- Apparently, having weak underwriting standards and “relying on Brazil’s faulty registry system for collateralized loans” is not a recipe for success. Shocking…to absolutely no one.
StoneCo’s stock is down 75% on the year following Wednesday’s bloodbath, but at these new levels, there may be reason to be optimistic moving forward. The company has had strong double digit growth over several years, and it’s acquisition of Linx, a leading provider of retail management software in Brazil, could provide additional revenue streams.
We’re Supposed to Sell Actual
^Shockingly, there hasn’t been a Spaceballs sequel
Rivian (RIVN) had been on a tear over the past week since its IPO, but investors pressed the brakes on its hot streak on Wednesday. After Rivian’s 15% drop yesterday, it closed at $146.07, still $40 higher than its IPO price. The runup has caused the company to have a larger market cap than Ford (F) and General Motors (GM) which in a contrasting model, do in fact manufacture and sell vehicles.
- Lack of a realistic model may finally be starting to spook investors, as Tuesday was RIVN’s first down day since the IPO.
- The EV market is about 1% of the total vehicles on global roads, yet EV stocks have a combined market cap $1.6T while traditional automakers have a slightly lower combined value of $1.5T.
- Tesla (TSLA) is still the big dog in the EV space with a market cap of $1T, despite Elon Musk’s penchant for announcing stock sales via Twitter.
Growth vs. Value is the metaphorical drag race here. EV growth proponents cite the low penetration into the overall automotive market coupled with industry commitments to shift more of the portfolio to electric. Traditional value types counter with the need to turn customer reservations into tangible vehicles that are built and then delivered to real drivers, like an actual business or something. EV valuations have gone stratospheric faster than a Tesla Model S’s Plaid setting, so proceed accordingly…but remember that the old adage “your mile may vary” may apply here as well.
Who’s holding all the cards here?
Amazon ramped up its efforts to eat Visa’s lunch on Wednesday with the announcement that, starting in January 2022, they’ll no longer accept Visa cards issued in Britain. We already kicked their a**es in WWII, cheerio, let’s do it again. AMZN claims that they’re punishing the credit card company for exorbitant–and rising–fees, especially considering that improved technology should be driving them down. Can’t really fault Amazon for hypocrisy on this one, since their improved employee oppression tech gave us some pretty sweet price cuts…
- This isn’t first blood. In mid-September Amazon added a 0.5% surcharge to all purchases made in Singapore with Visa cards, and had already started offering UK users 20 pounds ($27 in real currency) off their next purchase if they set a non-Visa card as their payment default.
- And Amazon’s got a point: in Britain, some fees paid to Mastercard and Visa doubled between 2014 and 2018 since Brexit cut the UK off from price-control protections enjoyed by the EU. Cross-border transaction fees cost UK retailers roughly $200M this year. Maybe it’s time to Breconsider?
- AMZN’s endgame isn’t just a sick thrill (in this case). Credit card companies are facing pressure from alternative payment methods that are faster and cheaper than any credit or debit card. See buy-now-pay-later apps that facilitate direct bank-to-bank transactions like Affirm and Klarna, just to name a couple (and let’s just not even talk about crypto). Amazon may well be leveraging this weakness to extract concessions from the credit card giants in the form of reduced fees.
This hurts. Visa shares were down 4.74% on Wednesday and down 5.83% YTD, which doesn’t look great considering the 29% rise in the S&P 500 Tech Index throughout 2021. But as long as Amazon doesn’t start chipping away at the U.S. market, Visa will probably get through it. I mean, they’ve already adapted to alternative payment options by rolling out their own buy-now-pay-later feature for their cards starting in 2022. For expert advice on how to get the most credit card points, just ask comedian Dan White.