Hey Snackers,
FYI, it's National Intern Day (not sure about paid vs. unpaid, but someone deserves a free lunch).
Both the S&P 500 and Nasdaq hit fresh record highs yesterday — and earnings-palooza continues today with Google, Amazon, and Starbucks.
Facebook's living its best life (as it shrugs off the $5B fine)
Fun fact... Facebook's stock price is just 5.5% away from its record high. That's despite Wednesday's big official settlement with US regulators for handing over 87M users' personal details to Cambridge Analytica.
Facebook knew this was coming... So it guestimated back in April for investors that a $3B-$5B fine was coming. It even put money aside to prep for the government's hammer. A+ for FB's forecasting department.
- The fine: $5B. Even though that's a record fine from the FTC, it's equal to less than 1% of Facebook's net worth (when measured by its $577B value by market capitalization).
- Strings attached: Hardly any. A huge criticism is that the privacy of 2B humans is controlled by 1 human — Mark Zuckerberg — who owns majority voting power at FB. This settlement installs a new "independent privacy committee" within the board that he'll have to check in with monthly.
- Personal accountability: A tad. Zuck must personally certify (with a real-life signature) every quarter that his company is following every privacy order from the settlement. Pinky swear.
BTW, Facebook also announced profits. Big ones... In the Western world, we're obsessed with Facebook-owned Instagram, which doesn't have Zuck brand baggage. In the rest of the world, Facebook's rep is fine and people use WhatsApp and Facebook at a carpal tunnel-inducing pace. Facebook's investigations aren't over, but they've barely slowed it down so far. Here are the Q2 highlights.
- Revenues up 28% to $16.9B
- Operating profit up 14% to $6.6B (if you exclude the big fine)
- Monthly users up 8% to 2.4B
Dunkin' launches a sausage partnership with Beyond Meat, revealing its core virtue
How many hogs does it take to make a breakfast sandwich?... Trick question. At Dunkin', it's none for the newest addition. Through a partnership with plant-based Beyond Meat, the coffee icon is piloting a meat-free sausage sammie. It hits 163 Manhattan locations next Wednesday (yes, there are that many there), joining fellow chains Hardee's, Carl's Jr., and Tim Hortons by putting Beyond on the menu.
2 key ingredients... highlight why this particular partnership is special for both brands.
- Breakfast: It's the only meal in fast food that's actually growing (breakfast sales rose 1% last year, but were flat for all the other meals) — So Dunkin' is giving Beyond Meat prime-time menu real estate.
- Price: $4.29. That'll get you one Beyond Sausage sandwich. And it's the same price you'd pay for any other Dunkin' sandwich — Dunkin' isn't charging a premium for fancy non-meat meat (Beyond's CEO nailed it with 👇this👇 quote):
“It takes a lot of money to buy a Tesla — It takes $4.29 to buy this. And you can basically be making the same statement about who you are, what you care about, where your values are.”
Dunkin’ is America's food democratizer... The chain takes exclusive trends and brings them mainstream. Case study: espresso. After Starbucks and your local obscure-bean artisan coffee shop dominated unpronounceable espresso options, Dunkin' jumped in last year — now it's trained 100K employees on 9K espresso machines to make sub-$4 lattes. It's the same goal for plant-based meats.
Tesla's record sales quarter... turned out to be unprofitable
95K brand new Tesla owners are happy... Shareholders not so much. Tesla stock dropped 13% after Elon announced that all those cars sold in the 2nd quarter cost the company more than they sold for — a loss of $408M last quarter. We're here to explain how a record quarter of sales could be so 😔.
Tesla is eating itself... Cannibalization. It's an aggressive term for when one of your products is so good that it's eating sales of another. For a while, Tesla's only models were the high-end S and X, starting at $72K and $77K. "High-end" translates to "I-don't-care-how-much-it-costs" customers, which translates to profits. Now Tesla's pushing its cheaper Model 3 (starting at $39K) to become the 1st mass-production electric car company — and the 3 is eating S sales.
- Exhibit A: In California, where parents dream of their kids' first self-driving ride, the number of Model S registrations at the DMV fell 54% last quarter — and the number of cheaper Model 3 registrations doubled.
The Model 3 is too good... That's the problem. Styles, looks, performance — Squint your eyes and the Model 3 looks like a Model S. But it's way cheaper. Companies can avoid cannibalization by clearly differentiating products to make the more expensive one objectively better. Now Tesla needs to learn how to not just sell a ton of cars, but do it profitably.
What else we’re Snackin’
- Departed: Uber just lost 2 more board members: Arianna Huffington and investor Matt Cohler
- Pains: Tupperware plummets 19% because of the US/China trade war
- Worst: Boeing announces its worst quarterly loss ever — $2.9B — because of the 737 Max crisis
- FYI: Tinder's new "Traveler Alert" feature will warn LGBTQ users if they enter a country that criminalizes coming out
- Move: Ford stock dips on disappointing earnings, a day after it trolled Tesla with an electric F-150 video
- Switcheroo: DoorDash's tip issue we mentioned yesterday (your delivery guy not getting them)? The CEO is now changing that
Thursday
- Earnings from Alphabet, Amazon, Starbucks, Hershey, and Boston Beer
Disclosure: Authors of this Snacks own shares of Tesla, Amazon, and Beyond Meat.
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