Hey Snackers,
Groceries, pharmacies, and... chokeslams? Florida's governor deemed World Wrestling Entertainment an "essential service" in the state, allowing WWE to resume airing live matches. These essential wrestling matches will essentially be closed to the general public.
Markets gained on more coronavirus optimism, fueled by news that the rate of infection is leveling off. And Amazon stock hit a record high, driving up the Nasdaq.
And today's Great 8 matchup in Snacks Madness is Costco's annual membership vs. Nike's Air Jordan Brand. Vote for your favorite product @RobinhoodSnacks on twitter.
JPMorgan and Wells Fargo lose big on expected loan losses — the defaults are coming
Like that $50 you spotted Tracy for dinner... you know you'll never get it back. JPMorgan is in the same spot — except its loans are in the billions. America's largest bank saw its profit fall a stunning 70% in the quarter, as it set aside an extra $6.8B to cover looming losses from defaulted loans. Wells Fargo also evaporated $3B of its profits to cover expected loan fails.
- Banks make loans to individuals, companies, and government entities, then collect interest on the loans — think mortgages, credit cards, biz loans, and bonds. That's all fine and dandy when most people are able (and expected) to pay those loans back...
- But with 17M newly unemployed Americans and businesses closed across the country, banks are shifting their expectations (big time). Many IOUs will turn into "sorry, I literally cannot pay you back," as sources of income disappear.
Enter "Loan Loss Provisions"... That's money set aside by companies in advance to cover expected future losses. Most earnings reports are backward-looking, but the 1st two big banks to report had more forward-looking reports to share:
Planning for losses is crucial (so is hedging them)... While the banks' consumer units are being pummeled by the economic crisis, it wasn't all bad news. The volatile stock market boosted JPM's trading revenues by 32%, while interest-earning deposits jumped 23% as people stashed cash in checking accounts. While these gains offset some losses, planning ahead for worst-case default scenarios is crucial to the banks' survival.
Roku surfs the quarantine streaming waves with 3 tailwinds at its back
Like that excited friend who can't keep a secret... streaming player Roku is so giddy with its recent success that it couldn't help but share a little sneak-preview into its earnings ahead of their May 7 release.
- 3M: The number of new accounts Roku estimates it added in the last 3 months. Its total active accounts are estimated to be around 40M.
- 49%: How much Roku expects streaming hours have risen over the same period compared to last year — that's 13.2B hours of streaming through Roku (or how you feel after finishing all of Netflix).
- 10%: How much Roku's stock popped after the preview victory.
Roku is kind of like the People's Streaming Device... It accounts for 44% of all streaming hours in the US. Its dongles start at $29.99/month, compared to Apple TV's $140+ shiny black boxes. It's not as sleek as Apple TV or as Alexa-integrated as Amazon Fire Stick — but it's cheap, it works, and is compatible with most TVs. Most Americans can swing that.
Tailwinds are great for business... When economic trends align with your biz model, it's like a strong wind pushing you further in your desired direction. Roku's got 3 at its back:
- Lockdown Life: Quarantine boredom + the launch of exciting streamers like Disney+ and HBO Max are likely to get people hooked on streaming devices.
- Live sports is cancelled: Just another reason to cut the cord.
- Saving Mindset: With the economic crisis, people may opt for Roku's low-cost streaming device over pricier ones. But this is also a headwind — 63% of Roku's revenue comes from ads, which marketers aren't splurging on since your spending is way down.
Almost-unicorn Thrasio hits a $780M valuation — it's obsessed with your Amazon purchases
Not a heavy metal band or a violent rash... Thrasio is an unfortunately-named (yet profitable) startup that just got a little closer to becoming a unicorn. It raised a fresh $110M, bumping it to a $780M valuation. And its whole business revolves around being Amazon's most aggro customer — its slogan is literally "We Buy Amazon Businesses:"
- Scout: Thrasio tracks down the best-selling, most highly-reviewed everyday essentials on Amazon — think: best foam roller, excellent cotton socks, world's #1 can-opener. Then...
- Acquire: Thrasio buys the generic brands from the small biz owners who are making bank on Amazon (but who may not have the resources to scale). Thrasio drops over $1M in cash to snag these seven-figure brands from their owners. Then...
- Integrate: Thrasio integrates these fast-growing brands into its platform, and scales them more effectively.
Fast times at Thrasio High... Thrasio has been profitable since Day 1 of its founding in mid-2018, according to its founders. Now it's the fastest-growing acquirer of Amazon-trepreneurs, with some impressive stats to boot:
- In just a year of fundraising, Thrasio raised a total of $250M in three investment rounds.
- Its current valuation is 32X larger than its seed valuation a year ago, and this latest investment is $90M bigger than its last.
- In just a year and a half, it has acquired over 43 businesses — its sales have grown from 0 to more than $200M.
Sometimes, you really can buy success... That's exactly what Thrasio is doing: it's buying up already hot, successful businesses that are clearly in demand, adding them in a pile with other successful businesses, and coming out with an even bigger, fatter pile of success. With the investment cash and operational scalability that Thrasio brings to the table, it can do what successful Amazon sellers do on a much larger scale.
What else we’re Snackin’
- Snatched: Paypal, Intuit and Square win the federal gov's approval to distribute small business loans as part of the $2T coronavirus relief package.
- Cancelled: Boeing's customers cancel a whopping 150 orders of the 737 Max, crushing the struggling plane producer even more.
- Team: Drug giants GlaxoSmithKline and Sanofi team up to develop a COVID-19 vaccine — they're hoping to pump out millions of doses by the 2nd half of 2021.
- Track: Apple pulls a Google, launching a coronavirus Mobility Trends Report based on Apple Maps data — walking is down 80% in NYC, driving fell 69% in LA.
- Loan: Disney gets a $5B credit line as it furloughs half of workers in its theme park and resort hotel business, which is closed indefinitely.
- Drama: Live Nation's Ticketmaster sparks Twitter outrage after changing its refund policy to only cover cancelled (and not postponed) events.
Wednesday
- Retail Sales Report
- Earnings expected from UnitedHealth, Citi, Morgan Stanley, Bank of America, Goldman Sachs, and Bed Bath & Beyond
Disclosure: Authors of this Snacks own shares of JPMorgan, Roku, and Amazon
ID: 1152044