Hey Snackers,
"Heart full of equity, you're an asset..." Lyrics from the new Justin Bieber album, in which he romantically likens his wife to a stock. Biebs is obviously a hardcore Snacker.
The S&P 500 and Nasdaq rose to record highs, fueled by rising tech shares.
Google's parent shuts down a "moonshot" — could be the new normal
Low as a kite... Google's parent Alphabet is shutting down energy kite startup Makani, which wanted to make wind energy cheaper by flying power-harvesting wind turbine kites in the air (tbh, they look more like small planes). But yesterday, Alphabet announced that it's pulling the plug on one of its most innovative companies. It's an attitude shift:
- Google's main biz is ad sales from its ginormous online platform (Google search, YouTube, Google Maps, etc) — ad sales are 85% of its revenue. Buuut... Google wants to be more.
- Enter "X", Google's secretive lab of moonshot projects, part of its "Other Bets" division. X is all about making cool stuff: think do-gooder, futuristic projects like self-driving cars (Waymo), LTE balloons (Loon), and drone delivery (Wing). All — including Makani — graduated from X into Alphabet subs.
Getting in a gym sesh before 7am... Google's moonshot goals are a little more ambitious — and waayy more expensive. CEO Sundar Pichai has said Alphabet will increasingly start seeking 3rd-party investors for Other Bets, because:
- $2.7B & $3.4B: How much Google lost on "Other Bets" in 2017 and 2018
- $4.8B: "Other Bets" loss last year. We're sensing a trend...
Other Bets are 'future insurance'... Google is big enough to afford moonshots, and in a way, it can't afford not to take them: It risks being left in the dust when a huge opportunity hits (#DontMissTheNextiPhone). So far, its 1 big win is Waymo (valued over $100B). But... Makani is the 1st moonshot to shutter since Pichai became Alphabet's CEO in December as the co-founders, who were major champions of the passion projects, retired. We think that signals a shift in openness to fund riskier moonshots.
Garmin takes the road less traveled to Profit Land
An OGPS makes a comeback... An original GPS company. We're talking Garmin. The GPS-tech company was founded in 1989 by Gary Burrell and Min Kao (hence, "Gar-Min"). Its stock just hit a 12-year high on an A+ earnings report: quarterly profit nearly doubled, jumping to $361M in Q4. Garmin has a bunch of divisions, but it's lost some of its consumer-appeal over the years. Enter the smartphone...
- Car GPS: Garmin introduced GPS III in 1997 to guide your commute (your dashboard is still bruised from the suction cup) — now you connect apps like Google Maps to CarPlay instead. Garmin's auto revenue declined 14% last year and profits are close to zero.
- Wearables: Garmin's Foretrex was the wrist-worn GPS sported by joggers in the early 2000s (1st gen iPod not included). Then Fitbit and Apple took over the wrists of casual joggers. Garmin is still in the wearables game, but lags marathons behind Apple.
- Handheld GPS: Garmin launched the compact eTrex in 2000. Now "handheld GPS" is synonymous with smartphone.
To beat iPhone... go where iPhone won't have service. And Garmin's winning in areas like: Marine GPS (no bars in the ocean), Aviation GPS (does inflight WiFi even work?), and Outdoors (think extreme skiing). Garmin wants to be 35K feet in the air and 30K leagues under the sea — anywhere iPhone can't.
Don't underestimate the power of Barriers to Entry... The road less traveled is usually toughest, but Garmin uses it to its advantage. Marine/aviation are tougher areas for others to enter than regular consumer markets — that means less competition. GPS guiding a military plane is a bigger technical responsibility than GPS guiding you to Starbucks. With big responsibility comes a fat profit margin — Garmin made 74 cents of profit for every $1 of aviation sales.
What else we’re Snackin’
- Blue: Blue Apron is hoping to sell itself after the number of meal kit customers plummeted 36% to just 351K
- Crypto'd: Visa grants crypto exchange Coinbase the power to issue Bitcoin debit cards
- Member: Equinox, SoulCycle's parent and posh gym chain, is leaning deeper into coworking with a fresh fancy space in NYC
- Taking Off: Virgin Galactic stock inexplicably soared 23% — in the past 3 months, it has more than tripled in value
- Promo: Groupon stock plummets 44% because the discount deal site's new move into selling goods aggressively didn't work
- Ew: Burger King is removing artificial preservatives from its Whopper, so it created probably the least appetizing ad ever — behold, "The Moldy Whopper"
Thursday
- Earnings expected from ViacomCBS, Dropbox, Domino's Pizza, and Six Flags
Disclosure: Authors of this Snacks own shares of Alphabet and a Bitcoin
ID: 1095459