October 28, 2021

It’s going down, I’m yelling Twitter

Good morning traders,

Welcome back to The Daily Setup. The Dow and S&P fell from record highs yesterday, while the Nasdaq was mostly unchanged. Here’s what’s on the docket today:

  • Twitter’s no good, very bad day
  • Rent the Runway may want to return its IPO
  • And more corporate earnings>

Let’s make today a good one… we’re just one day away from Friday.


Spotify and Rent the IPO Biggest Mover


“It’s going down, I’m yelling


Looks like Ke$ha got the lyrics wrong

Twitter, everyone’s favorite app to bully complete strangers from the comfort (and safety) of their own homes, released earnings after the bell on Tuesday. How did investors react to the announcement? Not well…not well at all. Shares of Twitter (TWTR) closed Wednesday’s trading session down 10.8%. Despite reporting that the changes in Apple’s advertisement-tracking system impacted Q3 revenue less than expected, Twitter reported a net loss of $537M or $0.67/share.

  • The company took a one-time hit of $766M relating to a previously announced settlement with a group of shareholders that accused the company of misleading investors. C’mon, look at Jack. He looks like a trustworthy guy.
  • Excluding the settlement-related charge, operating income was $23M.
  • According to Refinitiv, adjusted EPS was $0.18/share vs. an expected $0.15/share on $1.284B vs. an expected $1.285B.


According to Twitter CFO Ned Segal, the company’s ads have not been impacted by global supply chain issues, like Snap’s and Facebook’s, because half of their ad revenue in 2021 is associated with services and digital goods. That said, Twitter is up only 3% YTD compared to the SPY (ETF that tracks the S&P 500), which is up 22% over the same period. TWTR is just about smack in the middle of its 52-week range of $38.93 – $80.75, so keep an eye out for a continued move one way or another.

Listen(s) Up

Spotify has joined the long list of tech companies to outperform quarterly earnings expectations.. Well, not you, Twitter. The bane of all musicians’ existence posted dual 19% increases in active user and paying subscriber numbers up from last year, as well as a 75% increase in ad revenue YoY. The stock rose 8.30% Wednesday to close at $273.19.

  • $SPOT made much of these gains by squeezing customers they’d already gotten their hooks in. Back in April they increased the price of their family plans for US users, as well as the cost of all their plans for European users.
  • Over the course of the pandemic, the streaming service has mainly attracted new users through their extensive selection of podcasts. SPOT’s actually on track to surpass Apple on this front, projected to net 28.1M monthly listens over AAPL’s measly 28M. Suck it Tim Apple.
  • If it seems like SPOT was inevitably poised to benefit from the pandemic, consider that their numbers initially suffered in early 2020, possibly because nobody can bear listening to Joe Rogan unless they’re stuck in a long commute.


SPOT’s new strategy is focused on further growth of their user base. Last month they announced their aggressive “All Ears on You” campaign, which is focused on attracting smaller and mid-sized brands rather than the large companies they’ve catered to previously. Given how devoted longtime users seem to be (read: willing to eat price hikes), this appears to be a savvy and promising strategy.

Not a Model IPO

Rent the Runway (RENT) made its debut yesterday, and the first day as a public company had more ups and downs than a bipolar pole vaulter. Shares started out at $23, higher than the IPO price of $21, and it was looking like Zoolander hitting the crowd with Blue Steel. Alas, the stock ran out of gas, and finished the day down 8.14%. The clothing as a service (CaaS) business was founded in 2008 but hit hard times during 2020 as consumers found little use for a high-end subscription service as they spent their days in sweatpants. Clothing rental certainly isn’t a new concept, but RENT’s “Closet in the Cloud” demonstrated that everything can be disrupted by technology, as many of us remember a lower tech method of short term clothing use called “leave the tags on.”


If return to office does actually make a comeback in 2022, RENT could see a spike in demand. It could be worth watching this stock to see if this is going to be a name that has big intraday moves regularly. RENT may also be worth watching along with recent IPOs such as Warby Parker (WRBY) and soon to come public Allbirds, because as any fashionista knows, it’s all about the accessories.

Corporate Earnings and Capital Hill

Other News

Bubbly Times in the Fizz Biz

Have a Coke and a smile KO shareholders. Coca-Cola reported a strong quarter Wednesday morning, topping estimates on both the top and bottom lines. Sales in away from home locations such as restaurants and movie theaters were noted as being particularly robust. Of course, they were, because while stuck at home for the past two weeks to slow the spread year and a half it’s the hard stuff that we’ve all been drinking.

  • EPS came in at $0.65 vs. estimates of $0.58 on revenue of $10.04B vs. $9.75B expected. Shares fell 0.58% during trading.
  • The company noted sales growth of 6% in sparkling soft drinks and 12% in nutrition, juice, dairy, and plant-based beverages driven by strong sales of *checks notes* Minute Maid. Minute Man *cough* *cough*.


A flat tire

GM reported their Q3 results before the opening bell on Wednesday, and while the numbers appear promising on the surface, the company’s Q4 guidance looks a bit too conservative for analysts. Shares tanked, dropping 5.4% on the day, which mirrors investors’ reaction from GM’s earnings call last quarter. The stock dropped just under 14% that month before retracing back to pre-earnings levels, so keep an eye on GM in case the same occurs this time around. Current earnings and guidance are below:

  • $1.52/share and $2.9B in operating profit from $26.8B in sales.
  • Wall Street estimated $0.98/share and $2.1B in operating profit from $30.7B in sales.
  • Sales came in low due to the continued global semiconductor shortage
  • GM’s guidance for the fourth quarter implies an operating profit of $1.1B vs. a projected $2.3B by Wall Street.


Eat the Rich

Democrats may try to raise the effective tax rate on billionaires in order to finance Build Back Better. The ultrarich are crying about this, but they can dry their tears with solid gold because the wealthiest people on earth have more than doubled their net worth in the last five years to $5 trillion. Yes, that’s trillion, with a T.

  • The billionaire class loses, on average, 8.2% of their annual income to taxes. That’s a smaller proportion than that paid by nurses, teachers, and firefighters.
  • Billionaires have gotten around taxation by putting much of their income into unrealized gains— which are only taxed when sold– and sitting on them until they die. This tax plan would change that.
  • But it’s not guaranteed to happen. This plan was only considered after Kyrsten Sinema vetoed every other progressive plan that would raise taxes on corporations or the top 1%, leaving Dems with the idea to just crack down on the 0.0002%. And this plan’s not getting off the ground if Joe Manchin’s got any say in the matter.


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.

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