October 29, 2021

Facebook goes through it an identity crisis

Good morning traders,

Welcome back to The Daily Setup. Markets were up yesterday, with the Nasdaq and S&P 500 closing at record highs. Here’s what’s on the docket today:

  • Facebook renames itself
  • Twilio sinks like the Titanic
  • Amazon misses on corporate earnings

So let’s send a few emails and cut out early for the weekend.


Chart of the Day, Shell & Metaverse


Iceberg, right ahead!
-lookout for the Titanic and Twilio’s Q4 guidance

Twilio (TWLO) reported earnings after the bell on Wednesday. The software company’s shares did their best Twitter post-earnings impression by getting hammered in Thursday’s trading. The stock finished the day down 17.6% despite healthy sales. In my opinion, if your company’s ticker begins with a “TW”, be afraid, be very afraid. I’m looking at you Hostess (TWNK).

  • The company reported adjusted EPS of $0.01/share vs. the forecasted loss of $0.14/share.
  • Twilio projects an adjusted Q4 loss of $0.23 to $0.26/share vs. analysts estimates for a loss of $0.10/share.
  • Revenue for the quarter was forecast in the $760M to $770M range, which was above the Street’s estimates of roughly $745M.
  • The company also announced that COO George Hu would be stepping down. CFO Khozema Shipchandler (he should have been a naval officer with that name) will assume the chief operating duties.

RBC Capital Markets, Mizuho Securities, and Macquarie Research, to name a few, maintain a buy to outperform rating on the company’s stock.TWLO put in a low for 2021 of $275.60 on May 11th. Shares traded as low as $278 Thursday morning. It is an interesting situation and something to monitor to see if buyers decide to build support in this area.

Shell of a company

(Shell on the Senate floor.)

Lying Homer Simpson GIF - Find & Share on GIPHY

Oil giant Shell posted disappointing earnings on Thursday, with $4.1B in revenue compared to last quarter’s $5.5B. If you think that’s bad, take a look at their Q3 2020. Shares dropped roughly 3% on the news, and closed yesterday at $47.44, down 5% from Wednesday.

  • Shell’s stock has risen 41% this year, but that’s not as good as it sounds, because the share prices dropped 45% in 2020  — something that could be attributed to the COVID-19 pandemic’s public health push to contain the virus’ spread by keeping people at home. Given that this stock’s boost may also be attributed to a global energy supply crunch, 41% isn’t so rosy.
  • Third Point’s Dan Loeb –who has a $750M stake in Shell– called for the corporation to break up into separate companies that would distance their natural gas and renewable ventures from their old oil & refining business.
  • That’s probably not going to happen, though. Shell loves itself too much to engage in any sort of conscious uncoupling.

Loeb wants Shell to split so that its natural gas and renewable initiatives don’t go down with what he thinks is the oil company’s sinking ship. If there’s a break, gas and renewables could escape some of the PR sh*tshow Shell’s may be facing after being questioned by Congress about potentially misleading the public for that their products impacted climate change for nearly 50 years… allegedly of course. Aside from that, Shell’s probably going to keep recovering now that rona’s under control.

Welcome to the Metaverse

-a live look at Zuck yesterday
Today the company formerly known as Facebook (FB) announced that it will be known as Meta going forward. Pulling a Ron Artest, huh? The term is short for metaverse and comes from the comic book and science fiction realm. For those of us who are normal humans, think of it in terms of that Spider Man movie from a few years back where there were a bunch of different Spider Men, and the existence of a metaverse allowed them all to exist in one place. Including one that was a pig. Yes, a pig.

  • The ticker symbol will be changing to MVRS on December 1, and I mistook it for MRSA like the first five times I read it.
  • The newly christened Meta will organize and report in two segments: Applications, which are Facebook, Instagram, WhatsApp, etc. and Reality Labs, the hardware business such as Oculus.
  • Reading the company’s plans from the Connect conference, it sounds like the company has ambitions of substituting the real world with the metaverse, so basically we will soon be living in the matrix. #TeamBluePill
  • I think the biggest impact here is the beloved FAANG acronym… MAANG does have a ring to it though…

Shares of Facebook, errr, Meta, were up 1.5% on the day, so the initial foray into the metaverse was positive. If augmented reality and virtual reality applications take off in a big way, it could be a growth driver for both the hardware and software sides of the company.  Congratulations to the newly named Chief Technology Officer Andrew “Boz” Bosworth, who is being promoted from his old role as Sheriff of Fansville.


Olin a day’s work

Rumor Has It

Olin Chemical, a manufacturer of specialty chemicals for resins, glues, and ammunition, is on a roll. Q3 EPS came in at $2.38, 14% better than expectations– making this the third consecutive quarter they’ve outperformed estimates. Shares closed at $56.65 Thursday, up 2.74% from Wednesday’s close.

  • All three of OLN’s divisions are doing well, but Epoxy and Winchester both posted record earnings, with the latter more than doubling its business from a year ago (thanks, Uncle Sam).
  • Analysts are hot for OLN. Olin boasts a Zacks rank of #1 (Strong Buy) in the Diversified – Chemical category, for example, and an A grade for Value.

Olin’s given investors a surprise (the good kind) three quarters in a row, and most analysts don’t think that’s going to stop anytime soon. In addition, the manufacturer’s decided to scale back on certain less profitable chemical production processes in order to redirect their efforts towards higher-earning fields, so it seems like they’ve got their head screwed on straight.

Amazon, Ford & GDP?

Other News

Andy, Please Report to Jeff’s


Amazon (AMZN) reported (bottled) piss-poor earnings on Thursday, and the Andy Jassey experience is off to a bit of a disappointing start. EPS came in at $6.12 vs. expectations of $8.92, while revenue also fell short of estimates, at $110.81B vs. $111.6B. The company also guided downward for 4Q 2021, sending shares down almost 4% in after hours trading. Let’s just hope for Andy’s sake that Jeffrey Starship doesn’t get too mad and launch him into orbit aboard one of his phallic rocket ships… or worse, cancel his Prime Video and make him use Peacock.

  • The new Q4 guidance puts sales between $130B-$140B, which represents growth of 4-12%. Previously analysts were expecting sales in the $142B neighborhood with 13% growth.
  • The company also expects the fourth quarter to be weighed down with higher labor, shipping and freight costs, as well as ongoing supply chain challenges.
  • If this underperformance keeps up, would anyone be shocked to see Bezos take a page from the Pat Riley/Miami Heat playbook and climb back into the CEO saddle? Keep your head on a swivel Andy.

Ford Strong
Shares of Ford (F) rocketed higher Thursday on earnings that almost doubled analysts’ estimates (only economists are worse forecasters) and raised their full-year profit guidance, something their rival General Motors (GM) was unable to do. The company also restarted its quarterly dividend payment to shareholders. The stock closed the day up 8.7% and is up 92% YTD, compared to GM which is up 30% in 2021.

  • The company produced 3Q EPS of $0.51/share on $3B in operating profit vs. Wall Street’s estimates of $0.27/share on $1.7B in operating profit.
  • Ford forecast full-year operating profit with a range midpoint of $11B vs. a previous midpoint of $9.5B. This implies an operating profit of $2.1B vs the Street’s estimate of $2B.
  • Shareholders are reported to expect a $0.10/share dividend in the fourth quarter. Don’t spend it all in one place…
  • Ford said, “increased availability of semiconductor chips and higher vehicle shipments in the third quarter enabled it to post higher-than-expected results.”
  • Ford is quickly approaching its 2014 high of $18.12.

The Gross Domestic Product grew just 2% this quarter, down from 6.7% last quarter and the lowest it’s been since the U.S. began recovering from the pandemic. At least it’s better than the 0.2% predicted by the Debbie Downers at the Atlanta Fed branch. The general 2% consensus reflects both supply chain issues and consumers’ growing pessimism and concern about the state of the economy.

  • Much of this pessimism is due to that good old “transitory” inflation that’s decided to stick around. The Fed’s favorite inflation metric, the core personal consumption expenditure index (Core PCE), rose 3.6% from last year, the highest since May 1991.
  • Residential fixed investment– an indicator of housing market activity– also declined, likely because of sky-high home demand and a low supply.
  • But if you can’t afford a house, don’t worry. You can expect to spend more and more of your savings on rent.

Jeff Bishop

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