__As thick as Jack Dorsey's beard...__ __[Twitter](https://robinhood.com/stocks/TWTR)__'s earnings. The little blue bird (apparently named Larry) just delivered 2020 results. It was a news-packed year, to say the least. As usual, Twitter served as the hub for current events convos. 

- __Last year:__ Twitter posted a $1.1B loss, compared to a $1.5B *profit* in 2019. Its yearly sales growth pales in [comparison](https://snacks.robinhood.com/newsletters/4xb7z6qlpUK2BEuIpPn3mA/articles/4KWjn4C3xdmPqHHyw5CmsG/) to __Snap__ and __Facebook__'s.
- __Last quarter:__ Sales jumped 28%, and profit nearly doubled from 2019, suggesting a recovery from the early pandemic ad dip.
- __Post-Trump:__ Twitter banned Trump's account a week *after* its most recent quarter ended. But its January usage was above average compared to recent years, and is expected to remain strong this quarter.

__Larry flying high...__ Twitter stock soared to a record high yesterday. The positive outlook soothed concerns that engagement would drop post-Trump-era. But investors might also be eyeing Twitter's 60-day shopping spree:

- __In December,__ Twitter [bought](https://techcrunch.com/2020/12/11/twitter-acquires-screen-sharing-social-app-squad/) screen-sharing social app __Squad__. The tech could allow users to host live video chats on Twitter, a la Zoom.
- __In January,__ Twitter [snatched](https://snacks.robinhood.com/newsletters/66eEsAltTmjRV2qtUGM2Qk/articles/jBOTGWl8iXG56NxQTMMPm/) up the team behind social podcasting app __Breaker__ to help with its new audio-based social "Spaces" (__Clubhouse__ vibes).
- __Also in January,__ Twitter acquired email newsletter startup __Revue__. Twitter plans to use it to allow people to sign up for content directly on Twitter. 


Fleet

__Twitter is focused on destroying friction...__ and bringing everything a creator needs into one app. Right now: you follow Bill Gates on Twitter, but get his Gates Notes newsletter on Gmail. You follow Elon Musk on Twitter, but attend his live chat on Clubhouse. You follow T Swift on Twitter, but watch her Live stream on Facebook. From newsletters, to live podcasts, and hosted video chats: Twitter wants to make sure that *Twitter* is the final destination for users and creators — instead of an app that redirects you to other platforms.  

Twitter just dropped earnings, but we're more interested in its recent shopping spree

__Get in the e-Hummer, we're going shopping...__ __[GM](https://robinhood.com/stocks/GM)__ stock has been cruising around all-time highs, thanks to its ambitious [plans](https://snacks.robinhood.com/newsletters/HQks7GDlIhzjFEeDazdjv/articles/77nznSEvhjPcvF1dvYL2Ee/) for an all-electric future (phase out gas-guzzlers by 2035). It also just [posted](https://www.wsj.com/articles/gm-earnings-beat-wall-street-estimates-11612961437?mod=hp_lead_pos5) strong quarterly earnings and an upbeat profit outlook for 2021. But GM has a big (tiny) problem: chips.

- __The Great Chip Shortage...__ is unrelated to Lay's, but makes auto makers hungry. The average car contains 50 to 150 chips. Problem: there's a global chip [shortage](https://snacks.robinhood.com/newsletters/31E6cwe7ndD6pM602Hiv9R/articles/3Nn6tVCu3oGQg2XsCbQmyc/). 
- __All the WFH'ing we've been doing devoured the chips.__ When US car sales [rebounded](https://www.cnn.com/2021/01/05/business/us-car-sales-recover/index.html) quicker than expected, car companies realized they hadn't stocked enough chips to meet demand. __[Ford](https://robinhood.com/stocks/F)__ had to [shut](https://www.cnn.com/2021/01/11/tech/ford-plant-shutdown-computer-chip-shortage/index.html) down a plant last month because it was chip-outta-luck.

__Seeing the chip bowl half-empty...__ Despite all the positive news surrounding GM, investors got hung up on its semiconductor problems. Yesterday, GM said it expects lost production from the chip shortage to erode $1.5B to $2B of its 2021 profit. That's about the same L that Ford is expecting to take. GM also plans to extend shutdowns at several of its American factories. 

- __Meanwhile...__  __[Tesla](https://robinhood.com/stocks/TSLA)__ has been using its *own* self-driving computer chip in some car models since 2019. Elon [claimed](https://www.bloomberg.com/news/articles/2019-04-22/musk-boasts-tesla-built-best-chip-in-the-world-drops-nvidia?sref=q3KSFp38) that the Tesla-designed chip is "the best in the world." Whoa.
- __But that doesn't mean it's immune (yet)...__ to the chip drama. Last month, Tesla said it's working hard to manage through the shortage, which may have a temporary impact.

Crunchy

__Car companies will have to become more like tech companies...__ to be successful in the future of electric, autonomous mobility. The competition is steep: GM's Cruise, __[Google](https://robinhood.com/stocks/GOOGL)__'s Waymo, Tesla, and even __[Apple](https://robinhood.com/stocks/AAPL)__, are all [working](https://snacks.robinhood.com/newsletters/bg6FaCgu8qc8z1Zllmofx/articles/69TIKhpJCGDMRD0UH2suPS/) on fully self-driving vehicles. The winner will likely be the car with the best self-driving brain. AI chips are *critical* to that. That's why Tesla, GM, and others, have joined the race for the best autonomous chip. Not only could it make them self-sufficient — but it also could give them the edge they need to stand out. 


GM will take a profit hit on the global chip shortage, while Tesla makes its own chip

Dow Jones

S&P 500

Nasdaq

Bitcoin

_Elon flaunting his chip_

🐦 The Twitter rabbit hole intensifies 

__Call it a trilogy...__ The third of the "stimuli" is coming. In March 2020, we got a massive $2T rescue [package](https://snacks.robinhood.com/newsletters/CLl0evxvaKPwXSPACmU6C/articles/jtOWtkujqwVzIeEa8NYkj/) (feat. $1.2K checks for most Americans). In December, we got a $900B package to tide us over (feat. $600 checks). Now, Congress is closing in on a $1.9T stimulus. House Dems [released](https://www.wsj.com/articles/democrats-stimulus-plan-offers-1400-checks-at-same-income-levels-as-previous-rounds-11612823749) some  juicy deets yesterday:

- __$1.4K payments__ to individuals making up to $75K/year (and $150K for married couples). Payments get smaller after those thresholds, and individuals who make $100K+ get nada. 
- __$400/week unemployment__ insurance payments through August 29th.
- __ETA:__ The goal is to get this through the full House later this month (Congress is busy with Trump's impeachment trial).

__Why now...__ The stock market is at record highs thanks to low interest rates, strong tech earnings, and this upcoming stimulus. But the US economy isn't doing so hot: in January, the economy added only 49K jobs — and the unemployment rate barely budged, falling to 6.3%. That’s still a big improvement from April, when unemployment hit 14.7% after the US lost ~22M jobs. Buuuut...

- __10.1M Americans are still unemployed__, at a rate that’s nearly double pre-pandemic levels. This has [especially](https://fortune.com/2021/02/05/covid-unemployment-rate-january-jobs-report-2021-jobless-job-loss-us-economy-working-women/#:~:text=More%20than%202.3%20million%20women,labor%20force%20since%20last%20February.&text=The%20ongoing%20employment%20crisis%2C%20which,and%20other%20%22essential%22%20industries.) hurt women of color, who disproportionately work in "essential" industries. To make things worse...
- __The pace of recovery has slowed__ each month since June. And some of the improvement is coming from people *dropping out* of the labor force (they aren't counted as unemployed). 
- __2.3M+ women have dropped out of the labor force__ since February 2020, compared to ~1.8M men. Women’s labor force participation is at its [lowest](https://www.cnbc.com/2021/02/08/womens-labor-force-participation-rate-hit-33-year-low-in-january-2021.html) level since 1988, partly because of child care needs. 


_The Stimulus Trilogy_

Stim

__This is (hopefully) the final stretch...__ but it might be the longest and toughest in the road to recovery. It’s getting harder each month for the US economy to gain back jobs, and it could be even harder to bring back people who dropped out. And [GDP](https://learn.robinhood.com/articles/29d9WQgPq119raQYS1Wm6H/what-is-gross-domestic-product-gdp/) is taking a hit: the US economy shrank 3.5% in 2020, the largest shrinkage in 74 years. On the upside, GDP is expected to return to pre-pandemic levels by mid-2021 (thanks partly to stimulus spending). But employment isn’t [expected](https://www.wsj.com/articles/u-s-economy-expected-to-reach-pre-pandemic-peak-by-mid-2021-cbo-says-11612195200#:~:text=Gross%20domestic%20product%20is%20expected,through%202025%2C%20the%20CBO%20said.) to bounce back for several years.


What’s in the big $1.9T stimulus (and what’s in it for the economy)

__Adorable little alien robot...__ __Reddit__'s logo is cute, but its threads don't always fit that description. This year, Reddit has been at the center of a social-driven retail trading [frenzy](https://snacks.robinhood.com/newsletters/31odJOl6c3lLq4SuSoWt9z/articles/5ZO850evnEJXwTwEDdxKTk/). On Sunday, it made headlines again for spending its entire marketing budget on a five-second Super Bowl [ad](https://www.youtube.com/watch?v=_wkvH0qBMP8&feature=emb_logo) (inspired by the trading frenzy). Now it's making headlines for a different (but also likely related) reason:

- __Reddit raised $250M__, doubling its valuation to $6B from $3B in 2019. Reddit's fresh cultural relevance and an influx of new users lured VCs.

__Craigslist aesthetic...__ The internet has transformed since Reddit launched in 2005 — but Reddit has stayed true to the early 2000s vibes. That's fitting, since it thrives on being the dark horse of social media. Though Reddit and __[Facebook](https://robinhood.com/stocks/FB)__ were founded just one year apart, they couldn't be more different – especially in the eyes of advertisers: 

- __Design:__ FB gets a Millennial-friendly facelift every few years. Reddit is still sporting the text-heavy Craigslist look.
- __Identity:__  Redditors are anonymous, with obscure usernames and no headshots. FB makes you send 10 forms of ID to change your name.
- __Discoverability:__ FB is all about a single feed for following friends. Reddit loves interest-specific communities and hard-to-find threads.
- __Size:__ Reddit has 50M+ daily users. Facebook has 1.84B, including Instagram and WhatsApp.
- __Moderation:__ Facebook gets the brunt of regulatory and media scrutiny around moderation, and has hired thousands of reviewers. Reddit relies on user volunteers and is known for moderation-light policies.
- __Advertising:__ Facebook is basically a digital billboard (worth $84B in ad sales last year). Reddit is far from a powerhouse, with $100M in 2019 ad revenue. But that could change...


Thread

__With more funding comes more pressure...__ to cater to advertisers and make $$$ for investors. Reddit [said](https://redditblog.com/2021/02/08/fueling-reddits-future/) it's using some of its new funds to  grow its ad biz, and noted that ad sales jumped 90% last quarter from the previous year. But to *really* capitalize on its engaged communities and cultural relevance, Reddit will likely have to address some of its non-ad friendly traits — *and possibly become more like FB* (not necessarily a good thing). Most importantly, it'll have to revisit its laissez-faire moderation. Reddit has been [criticized](https://www.nytimes.com/2021/02/08/technology/reddit-raises-250-million.html) for [allowing](https://www.theverge.com/2018/4/11/17226416/reddit-ceo-steve-huffman-racism-racist-slurs-are-okay) racist/sexist/offensive dialogue on its platform. That could scare off marketers. 


Reddit's valuation doubles after a $250M fundraise — will it become more like Facebook?

💰 Stimulus round #3 

__Filter wars...__ 2020 was a big year for social. It was how we connected, doom-scrolled, entertained ourselves, and tapped our worries away. Now that __[Facebook](https://robinhood.com/stocks/FB)__ and __[Snap](https://robinhood.com/stocks/SNAP)__ have dropped full-year earnings, we have proof: they both crushed it — but Snap is still a small fish compared to Facebook (think: Nemo vs. blue whale). In 2020:

- __Users:__ Facebook's daily users jumped 11% to 1.84B. Snap's jumped 22% to 265M. Wild stat: typical users opened Snap *30 times per day* last quarter.
- __Sales:__ Facebook's ad sales popped 21% to $84B. Snap's sales soared 46% to $2.5B, as its active advertisers *doubled* from 2019.
- __Profit:__ Facebook's  profit soared 58% to $29B. Snap has *still* never posted a profit, though its loss shrank to $945M.

__You ARPUnny...__ One number fascinated us: ARPU (aka, average revenue per user). ARPU = a company's sales divided by its users. The ARPU gap between Facebook and Snap is *massive* — especially in North America, which makes up nearly half of FB's sales, and more than 70% of Snap's. In North America:

- __*FB makes 10X more per user than Snap does*.__ Last quarter, Snap's average revenue per daily user was $7. Facebook's was $70. Why advertisers pay more for FB:
-  __FB has better ad targeting:__ it collects more user data  (knows what you like), and it's older than Snap (knows what you've liked since you were 13). 
- __It has billions of users__ (bigger reach potential), and they skew older than Gen Z Snap (bigger spend potential).


_Snap goes ham on AR filters_

__Snap should augment itself (AR-style)...__ Snap is proud of its "privacy-first" approach, so it likely won't collect more data to try to beat FB. But it *can* boost ARPU by making ads more *engaging*. One key way it's doing that: Augmented Reality. Snap launched AR ads with companies like __[Estee Lauder](https://robinhood.com/stocks/EL)__ and __Dior__, letting you virtually try on lipstick shades and shoes. These shoppable lenses have attracted new advertisers during the pandemic. Snap calls itself a "camera company," and it's leaning into this identity to stand out to brands. What Snap lacks in data, it could make up for with creativity.


Facebook is slaying the ARPU game, so Snap should lean into its camera

__Biggest kiss cam fails of the 90s...__ When you're five hours deep into a YouTube rabbit hole, you don't question the content. __[Google](https://robinhood.com/stocks/GOOG)__ shares surged 14% for the week on expectation-topping earnings. Sales soared 23% last quarter, driven by YouTube and Search ads: YouTube revenue jumped 46%, proving that Google's core ad biz is stronger than ever after the pandemic slowdown (#adpocalypse). 

__Just keep pinning...__ After seeing its shares more than triple in 2020, __[Pinterest](https://robinhood.com/stocks/PINS)__ has mood-boarded its way to another success: the stock jumped 20% for the week on inspo-worthy earnings and user growth. As we sat in bed pinning our post-pandemic getaway, Pinterest's sales jumped 76% last quarter from a year earlier. It also notched a $208M profit, compared to a loss a year ago. Pinterest has been investing in ad tools to compete with social media — that  seems to have paid off. 


Highs

Who's up...

__"Now I drive alone past your street"...__ *Sad*. __[Spotify](https://robinhood.com/stocks/SPOT)__ shares plunged after it reported quarterly earnings last week. Investors were bummed about a wider-than-expected loss, though sales and user growth were solid. The real bright spot: podcasts. 25% of Spotify's 345M users listened to pods last quarter, and listening hours nearly doubled from 2019. Joe Rogan went Spotify-exclusive, driving new pod-heads to the platform. With music, Spotify has to pay record labels for streams. With pods, it gets more bang for its subscription buck. And with *original* pods, it can "double dip" by running its own ads. 

__Exx-on, exx-off...__ Gas legend __[Exxon](https://robinhood.com/stocks/XOM)__ lost a ginormous $20.1B last quarter, its fourth-straight losing quarter. For the full year, Exxon lost more than $22B — compared with a $14.3B *profit* in 2019. The pandemic crushed oil demand, but prices have been rising since the pandemic plunge. Exxon shares actually jumped for the week since investors think the WOAT is over. 


Lows

...and who's down

👻 Ad Bowl: Snap vs. Facebook

__The man, the meme, the legend...__ Elon Musk is making crypto headlines (again). Bitcoin surged as much as 20%  to a record high of  $47K yesterday, after Tesla revealed it invested $1.5B in BTC. Tesla also said it'll start accepting the crypto coin as payment for its cars (casual). Tesla's not the first company to get in on Bitcoin, but it's the biggest so far.

- __Last year:__ __[MicroStrategy](https://robinhood.com/stocks/MSTR)__ [poured](https://www.microstrategy.com/en/company/company-videos/microstrategy-announces-over-1b-in-total-bitcoin-purchases-in-2020) $1B+ into Bitcoin, __MassMutual__ invested $100M, and  __[Square](https://robinhood.com/stocks/SQ)__ bought $50M worth of BTC for its corporate portfolio.

__1 BTC = 1 Model Y?...__ Tesla’s move isn't a total shocker: Elon has been a big crypto cheerleader recently, and his Twitter endorsements have been credited with boosting coins like BTC. But why would Tesla's board allow it to pour $1.5B of its $19B cash reserves into a volatile crypto? In PR speak: To “diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.” Human translation: "We have some extra cash and think it’s a good investment."

- __Diversify:__ While Bitcoin is crash-prone, some see it as a [hedge](https://snacks.robinhood.com/newsletters/3LgF2GHrBcJKBJ4WJf1iwx/) in case the US dollar loses too much value and prices soar (aka: inflation). While cash can theoretically be printed endlessly, Bitcoin supply is capped at 21M coins.
- __Maximize:__ Bitcoin has been on a tear, nearly 5X'ing since October (partly because of institutional buying). Tesla's hoping to gain more than it would with a traditional investment (or simply holding cash). If a company feels comfortable with its cash situation, it might place corporate funds in riskier investments — like Tesla just did.

__To go mainstream, a cryptocurrency must pass the "faith & acceptance" test...__ and Tesla's investment just brought Bitcoin closer to that. The US Dollar has value because it's backed by the government and controlled by the Fed. Bitcoin is a decentralized currency (aka: not controlled by a central bank), so it's value lies in people believing it has value. Tesla's latest move is a big vote of confidence: it could inspire other companies to invest and speed up mainstream Bitcoin acceptance. But if BTC crashes and Tesla loses on its investment, then it could have the opposite effect.


The Elon Effect: Bitcoin soars to a record on Tesla's $1.5B investment

__Bitter as Lululemons...__ Barely a year after launching, __Target__'s athleisure line "All In Motion" has hit $1B in annual sales. The private label sells things like sports bras, leggings, and yoga mats (pandemic trifecta). And it's quickly catching up to 23-year-old __Lululemon__, which made $2.3B in sales from January to September 2020. 

__Cutsey generic name (check)...__ Private labels like All In Motion, Good & Gather (food), and Cat & Jack (kid's clothes), are profit puppies for Target. They're not Target-branded, but they're Target-*owned*. Tarjay has launched more than 30 of these brands —  and 10 of them are doing more than $1B/year in sales. Private labels are cheaper to supply than external brands, so the profit margin is usually higher. Especially for private label clothing:

- __Profit margin:__  How many cents of profit a company keeps for each dollar of sales. It costs Target less to make/sell its own pants than buy/sell Levi's, so Target's margin is higher for its own brands.
- __Clothing has higher margins__ than food or home goods (that’s why it's always at the front of the store). Companies can price clothes way higher than what they cost to make (not true for pasta).
- __The Tarjay Way:__ Most All in Motion items cost less than $30. But Target would rather sell those than Lulu fits, since it can keep more of the profit. 


_Tarjay schemes on Lulu_

Stretch

__Big retailers are becoming mini malls...__ And winning a spot on their shelves is becoming more crucial. Retail-pocalypse drove mall staples like J.C. Penney and Neiman Marcus to bankruptcy last year, while the pandemic accelerated retail closures. That's partly why [25%](https://www.cnbc.com/2020/08/27/25percent-of-us-malls-are-set-to-shut-within-5-years-what-comes-next.html) of US malls are expected to close by 2025. Meanwhile, Target and Walmart are transforming into one-stop-shops for all your needs, from groceries, to home decor, and fashion. That's why __Ulta__, __Levi's__, and __Disney__, have moved into Target – and why __Sephora__ is moving into __Kohl's__. 


 Target’s athleisure line hits $1B in sales (and Lulu needs to watch its back)

🚘  Tesla rides with Bitcoin

__iPhone on wheels...__ but you prob won't need the AUX cord. The iCar has been [rumored](https://snacks.robinhood.com/newsletters/5IY3S446M65u2ZfgBIvX73/articles/6bOoypg8HADNs3hUhU4dFv/) since 2015. Just like with the rest of its products, Apple isn't building/assembling it itself. Now we finally know who the manufacturer might be (spoiler: not Tesla). 

- __The news:__ Apple is [reportedly](https://www.cnbc.com/2021/02/03/apple-and-hyundai-kia-driving-towards-deal-on-apple-car.html) close to sealing a deal with __Hyundai-Kia__ to make an Apple-branded, fully self-driving electric car. Tentative ETA: 2024. Secretive Apple didn't confirm.
- __The deets:__ The "Apple Car" would be designed in Cupertino... and manufactured at a Kia assembly plant in Georgia. But there's a chance the deal won’t happen.

__2 Fast 2 Furious...__ Apple's first car attempt, "Project Titan," began in 2014 and crashed in 2019. So why is the Fruit trying again? To put it in marketing terms: *the TAM is huge*. Total addressable market =  the total amount of money companies could make selling a specific product/service. 

- __$500B:__ The annual TAM for smartphones. Apple controls more than a 30% share of that, according to Morgan Stanley analyst Katie Huberty. 
- __$10T__: The TAM for global mobility. Apple would need only a 2% share of that market to match the size of its iPhone biz (it made $66B in iPhone sales just last quarter).  


_When you realize Apple Car doesn't allow Spotify_

iCar

__Apple’s not a first mover. *It’s a second shaker*...__ Apple's working on a fully autonomous EV... but a bunch of other companies will probably get there first (Google's __Waymo__, GM's __Cruise__, and Tesla's Tesla are well on their way). But Apple cares more about being the *best* than being the first. __BlackBerry__ came before iPhone, but iPhone won. __Fitbit__ came before Apple Watch, but Apple Watch won. __Bragi__ [made](https://www.theverge.com/2015/1/9/7512829/wireless-earbuds-ces-2015-bragi-dash) the first truly wireless earbuds, but AirPods won. And Tesla came before Apple Car... but Apple doesn't care.

Apple might release a self-driving EV — it's not the first, but could it be the best?

__Mind the gap...__ 2020 highlighted inequality in America, including one key element: the racial wealth gap. A legacy of slavery and discrimination contributes to the massive gap in generational wealth-building. Segregation affected educational and job opportunities for Black Americans. Redlining, a discriminatory practice that discouraged providing loans in areas with large Black communities, stunted Black home ownership. We’re still seeing the effects of those policies today:

- __Wealth:__ The typical white family has [eight times](https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.htm) the wealth of the typical Black family ($188K vs. $24K), and 5X that of a typical Hispanic family. 
- __Ownership:__ Nearly [75%](https://www.census.gov/housing/hvs/files/currenthvspress.pdf) of white Americans owned their homes at the end of 2020, compared with less than half of Black Americans.
- __Income:__ White workers, on average, are paid [more](https://www.epi.org/publication/state-of-american-wages-2018/) than Black and Latino workers at almost every education level.

__Closing the gap...__ is good not only for society, but also for the American economy: Citi [found](https://www.citivelocity.com/citigps/closing-the-racial-inequality-gaps/) that if these financial gaps are closed today, $5T would be added to the economy over the next five years. From 2016 to 2019, median wealth for Black Americans [grew](https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.htm) 33%, compared to 3% for white households. But there’s still much left to be done. 

__Since 2020...__ more companies have started to help, through everything from diversity hiring efforts to educational grants and donations. But many of these corporate initiatives aren’t cash giveaways: *they’re loans and investments*. 

- __JPMorgan Chase__ [pledged](https://snacks.robinhood.com/newsletters/6CYbtZgaeQFf8W6pRxaYg0/articles/5APdARhy7BYjqPv9X5dWHs/) $30B over the next five years toward loans for Black, Latino, and underserved communities. __Citi__ dedicated $1B to support home and business loans for communities of color. 
- __Twitter__ is [investing](https://www.forbes.com/sites/sarahhansen/2020/11/12/twitter-joins-netflix-and-paypal-with-commitment-to-invest-in-racial-equality/?sh=6dd7185a71ce) $100M in "community development financial institutions," which are dedicated to providing lending and banking services to low-income, underbanked customers — many of whom are people of color. __Netflix__ launched a similar effort.
- __ServiceNow__ created a $100M racial equity fund to promote more lending within Black communities.


__Equal access to capital is key...__ to narrowing the wealth gap. Homeownership has been one of the greatest contributors to wealth creation for families: the average homeowner in 2019 had a household wealth of [$255K](https://www.federalreserve.gov/publications/files/scf20.pdf), compared to the typical renter, with ~$6K. But Black individuals and communities have traditionally been the most likely to be denied access to capital — and Black families are [still](https://www.cnbc.com/2020/08/19/lenders-deny-mortgages-for-blacks-at-a-rate-80percent-higher-than-whites.html) much more likely to be denied mortgages. That's why lending to and investing in Black communities is crucial to closing the gap today.


The racial wealth gap: how corporations are helping (in a very specific way)

💵  Closing the gap 

__Potting soil, pot...__ Same thing, right? __[Scotts Miracle-Gro](https://robinhood.com/stocks/SMG)__ has a green thumb in more ways than one. You might know Scotts for its gardening and lawn care products. But Scotts is also *kind of* a cannabis company: its hydroponic systems help "specialty crops" grow indoors with special lighting and no soil. Shocker: weed growers love it. Scotts made both sides greener last quarter:

- __Lawn and garden sales__ soared 147% from 2019, as Scotts rode the House Hype trend. Stir-crazy hours bring May flowers: we stocked up on soil food to level up our lawns. 
- __Hydroponics sales__ jumped 71% as more US states legalized recreational pot and a Dem-controlled government appeared more likely.
- __Scotts total sales__ more than doubled from 2019, and it posted a first quarter profit for the first time. Now it's even doing a Super Bowl [ad](https://www.cnbc.com/2021/02/03/scotts-miracle-gros-super-bowl-ad-aimed-at-boosting-covid-growth-ceo.html) (fitting).

__Every rose has its Hawthorne...__ A few years ago, Scotts decided it wanted a piece of the pot market (minus the pot). So it bought up 50 hydroponics-related brands, which now make up its Hawthorne division. Last quarter's growth was primarily driven by the lawn/garden segment, which makes up more than half of Scotts' total sales. But Hawthorne makes up the rest, and it's quickly catching up.

_Scotts' suburban alter ego_

__Investors are optimistic about federal legalization...__ of pot.  The Democrat-controlled Congress and White House support decriminalizing cannabis at the federal level. Just this week, Senate Majority Leader Chuck Schumer unveiled a [plan](https://www.finance.senate.gov/ranking-members-news/-booker-wyden-schumer-joint-statement-on-cannabis-reform-legislation) to end the federal marijuana prohibition, arguing it's good for racial justice. Meanwhile, more states are legalizing recreational use. That's partly why Scotts' stock has nearly 2X'd over the past year. Also: the Global X Cannabis ETF, which tracks a number of pot stocks, is up 75% this year.

Scotts Miracle-Gro won 2020 thanks to lawns, but it could win 2021 thanks to pot

__Hit 'em with the read receipts...__ Dating legend __[Match Group](https://robinhood.com/stocks/MTCH)__ owns Tinder, Hinge, OkCupid, and 20+ other e-romance businesses. As you spent #romantic nights in bed swiping, Match's full-year sales jumped an expectation-topping 17% (think: Tinder Gold subscriptions). But investors weren't swooning over Match's underwhelming forecast for 2021: the stock plunged 8% yesterday.

__Love knows no borders...__ neither does Match's business interests. Match makes more $$$ internationally than it does in North America — and international users are growing *faster*. In Japan, Match’s second-highest grossing market after the US, sales have soared *600%* over the last five years. Now Match owns the top two dating apps in Japan: Tinder and.... the opposite of Tinder.

- __Pairs Engage:__ Match's concierge app designed to help Japanese singles marry *within a year*. The app [suggests](https://www.insider.com/match-group-tinder-target-japanese-marriage-market-pairs-engage-2019-8) 30 potential husbands/wives each month. You get 90 days to decide if you want to exclusively date (no pressure).
- Pairs is trying to disrupt Japan's arranged-marriage industry, by offering a faster/cheaper way to get hitched. 


Date

__Match is a dating *lab*...__ more than a dating company. It dominates online dating because of this (self-proclaimed) differentiator: an "ability to deploy learnings from across our portfolio" in new businesses. Match tests new concepts and strategies through different apps, then applies its learnings to its dozens of services. Think: monetization, video dating, and safety tools. It used strategies from Tinder to scale up Hinge post-acquisition. And it'll likely use learnings from Pairs to expand to other countries with arranged-marriage industries. Its soon-to-be public rival __Bumble__ doesn't have that same breadth (yet).


The key to Match’s international dominance: being a dating incubator

🌱  Scotts Miracle (cannabis) Gro

__OG Wall Street...__ Yesterday, the __[New York Stock Exchange](https://learn.robinhood.com/articles/3cW2mgcDTwF81JifSt7FE2/what-is-the-new-york-stock-exchange-nyse/)__ temporarily [halted](https://www.nyse.com/trade-halt-historical) trading on __[GameStop](https://robinhood.com/stocks/GME)__ (five times) and __[Koss](https://robinhood.com/stocks/KOSS)__ (twice). Investors across brokerages couldn't buy or sell those stocks for around five minutes (each time). The 230-year-old NYSE is one of the two major stock exchanges in the US, along with the much younger __[Nasdaq](https://learn.robinhood.com/articles/1GXPrecRfkSNp0aBblBSsL/what-is-the-nasdaq/)__. 

- __Despite the halts,__ GameStop shares plunged 60% yesterday, and Koss dropped 43%. These companies have been in the limelight, but the NYSE actually [halts](https://www.nyse.com/trade-halt-historical) trading on individual stocks nearly every day.
- __BTW:__ Exchange halts are different from trading [restrictions](https://snacks.robinhood.com/newsletters/6pNdbb4xNa0DbChfYCxGqu/articles/3U8pYt6jL0C3FVRER3UqLx/) by brokerages, which can also pause trading of certain securities. Viral stocks like GME are still being restricted by some brokerages.

__Why so halty?...__ There are three major reasons that exchanges press "Ctrl + halt + F" on trading. 

- __Stock swings:__ Sudden price swings can trigger halts for single stocks, *or for the entire market*. In March 2020, we had the first [market-wide](https://snacks.robinhood.com/newsletters/2yAve6xSRhLRA5umV930FV/articles/3PL2Qe5HrbEXk0n7Yh7b18/) trading halt since 1997. "Circuit breakers" kick in when the __[S&P 500](https://learn.robinhood.com/articles/7kFFEUv46vmMCmMfLuNiRX/what-is-the-s-and-p-500/)__ plunges a certain percentage from the previous day. Depending on how bad it is, trading can be paused for 15 minutes or the entire day. GME and KOSS were halted yesterday because they quickly moved outside their "[price bands](https://www.nasdaqtrader.com/content/MarketRegulation/LULD_FAQ.pdf)."
- __News event:__ Exchanges also halt single-stock trading in anticipation of major announcements (like a scandal or merger). That prevents insiders from trading on privileged info before everyone else finds out.
- __Regulatory reasons:__ The SEC can make exchanges suspend trading of a stock if they suspect something fishy — think: __Luckin Coffee__ accounting fraud.


Halt

__Trading halts are there to protect investors...__ They act as a check on impulsive emotional reactions. Selloffs can result in panic, which can cause a cascade effect that could lead to a stock (or the entire market) crashing. Since new circuit breaker guidelines were implemented in 2013, the market hasn't plunged more than 13% in a day — a hopeful sign of halts' effectiveness. Halts also level the playing field between reactive investors and those who aren't up to date on the news. They can prevent insider trading and other illegal transactions at the expense of other investors.

The NYSE halts trading on some meme stocks — so we're breaking down trading halts

__Way too lit for a Tuesday...__ __[Amazon](https://robinhood.com/stocks/AMZN)__ dropped two major bombshells in its 2020 fourth quarter earnings yesterday. First, the numbers: the Zon brought in a record-smashing $125.6B in sales, up from $87.4B in the same quarter of 2019. That's even more than __[Apple](https://robinhood.com/stocks/AAPL)__ (aka: the most valuable company on Earth) did in sales last quarter. Profit more than doubled from a year earlier to $7.2B (smaller than Apple's — *but still massive*).

__*The bigger story*...__ While Amazon's numbers are eye-popping, we're not shocked that Earth's biggest online retailer had a blowout holiday quarter... during a deadly pandemic. The real surprise: *Jeff Bezos is stepping down as CEO*. 

- __C.E.Out:__ This year, AWS CEO Andy Jassy will be taking Bezos' place as Amazon's leader. Bezos will become exec chairman, focusing on “new products and early initiatives" — like his space baby __Blue Origin__ and *The Washington Post*.
- __Part hero:__ In his 27 years leading Amazon, Bezos revolutionized the way we shop, made convenience a standard, and created jobs for [1M+](https://www.washingtonpost.com/technology/2020/10/29/amazon-hiring-pandemic-holidays/) people. 
- __Part villain:__ Thanks to him, purchasing with the click of a button is a lifestyle. But that has also hurt Main Street, killing brick-and-mortar mom & pop shops who can't compete.

_The king of ecommerce yields his throne_

__"A yawn is the greatest compliment"...__ that an inventor can receive. That was Bezos' mic drop blurb post-announcement. From 1-Click ordering, to two-day shipping — 20 years ago, we couldn't have imagined these being a norm for us. Bezos’ point: if you do innovation right, *then the extraordinary becomes the ordinary*. Investors also yawned at Bezos leaving, with the stock barely budging after-hours. It's a vote of confidence that the empire he built is strong enough to stand without him front-and-center.

Bezos steps down after Amazon's biggest quarter in history 

📦  Bezos is out 

__Don't knock the disposable earbuds...__ __[American Airlines](https://robinhood.com/stocks/AAL)__ has two major things *not* going for it. One: it's an airline during a deadly pandemic. Two: it lost a record $8.9B last year, and [doesn't](https://www.cnbc.com/2021/01/28/american-airlines-aal-and-southwest-luv-results-q4-2020.html) expect a rebound any time soon. That's partly why American has been the most-shorted US airline. Coincidentally (but not at all), American stock soared 17% from Monday to Thursday. And that's likely partly thanks to Reddit.

- __Many meme stocks__ celebrated on the r/wallstreetbets subreddit are heavily-shorted companies that hedge funds are betting *against.* Like: __GameStop__ and __Bed Bath & Beyond__.
- __Individual investors__ are participating in mass meme stock buying campaigns. It’s part experiment, part profit-seeking, and part rebellion – a chance to “get back” at Wall Street insiders, who Main Street still resents for the wreckage of the '08 financial crisis. 

__The DL on short sells...__ So how exactly are they "getting back" at Wall Street? It all goes back to [short selling](https://learn.robinhood.com/articles/the-long-and-short-of-trading/): Basically, some professional investors borrow shares of a company whose stock they think will fall. Then they sell those shares, hoping to buy them back later at a lower price and return them to the broker. If the shares fall, their profit = the difference between the price when they sold the shares and the price when they bought them back (minus interest on the loaned stock, and any transaction costs).

- __By piling into shorted stocks,__ small investors were able to drive *up* share prices, causing some hedge funds to lose [billions](https://www.theguardian.com/business/2021/jan/27/gamestop-stocks-us-hedge-fund-pulls-out-after-heavy-losses). Some funds bought back shares to avoid even *more* losses, which drove up prices even more.
- __Shorting is risky__ because the loss potential is theoretically unlimited, since the shorted stock could keep rising. Meanwhile, the gain potential is limited to what the shorter sold the shares for (because in the "best" case scenario, they can fall to $0).
- __Buying a stock is the opposite.__ The most you can lose is the money you invested, while your potential gain is theoretically unlimited. But short selling has some positives: for example, it can expose overvalued stocks.


Short

__Retail investors turned the tables...__ on professional investors like hedge funds. Like Matt Damon in *Good Will Hunting* standing up to the snooty Harvard student, retail investors said: "*How do you like them shorts?*” It’s not clear how much we’ll see this trend in the future. And it’s possible that professionals are getting in on the Reddit buying, too. After last week, it's likely that hedge funds will reevaluate their positions in heavily shorted stocks.


Hedge funds shorted American Airlines stock — then Reddit "shorted" hedge funds

__The Bank of Nook gets paid...__ __[Nintendo](https://robinhood.com/stocks/NTDOY)__ just dropped its [best](https://www.bloomberg.com/news/articles/2021-02-01/nintendo-beats-estimates-after-another-strong-holiday-quarter?sref=q3KSFp38) quarterly earnings in 13 years. The 131-year-old gaming legend brought in an expectation-crushing $2.2B in profit last quarter, and raised its annual forecast for the second time (#MarioFlex). Nintendo shares jumped 7% on the holiday Switch-mania:

- __Nintendo sold a record 11.6M consoles__ last quarter, even though Switch has been out for nearly five years. Sales jumped 7% from a year earlier. 
- __Now it's expecting full-year sales of 26.5M units__. But some analysts are saying that's modest, since it has already sold more than 24M Switches.

__Sweats. Mask. Switch...__ In 2020, the Switch wasn't just a gaming console... *it was a lifestyle product*. There were three strong winds at Nintendo's back positioning it for a blowout year:

- __Animal Crossing__: New Horizons. The long-awaited blockbuster title was an instant hit that boosted both hardware *and* software sales.
- __Perfect timing:__ New Horizons dropped in March 2020, right when pandemic lockdowns hit. The virtual island game filled with (*very*) colorful animals was a perfect escape.
- __Competitive edge:__ While __Sony__'s PlayStation 5 and __Microsoft__'s Xbox faced production/logistics setbacks that limited sales, Nintendo was able to deliver on demand.


_Nintendo pulling a Disney_

Nook

__Nintendo should pull a Disney...__ because it might have just hit peak console (Switch saturation is real). That's why Nintendo wants to monetize its characters *outside* of hardware/software. __Disney__ is a master at this: it makes money off its characters in movies, sequels, and spin-offs — *but also through theme parks, cruises, toys, and merch* (Elsa-themed everything). Nintendo could benefit from a similarly self-reinforcing ecosystem. Unlike other major console-makers, it designs most of its own games ([85%](https://www.reuters.com/article/us-nintendo-results/after-the-triumph-of-animal-crossing-a-thin-pipeline-for-nintendo-idUSKBN22J0UG) of them). Nintendo could cash in on that precious IP in a number of ways, including the upcoming Super Nintendo World theme park in Japan.


Nintendo has its best quarter since 2008, but it needs to be more like Disney

✈️ Airline shorts

__ICYMI...__ But that's unlikely. On Friday, we [covered](https://snacks.robinhood.com/newsletters/HQks7GDlIhzjFEeDazdjv/articles/6F9OH2iygvuocDMQEvXmN1/) how social-fueled stock surges have thrown the market into uncharted territory. Last week, underdog “meme” stocks like __GameStop__, __AMC__, and __Nokia__ skyrocketed, thanks to Reddit-inspired buying campaigns. From Wednesday through Friday, multiple brokerages limited — and in some cases, paused — the buying frenzy.

- __Robinhood, E-Trade, Webull,__ and others temporarily restricted certain trading activity in symbols like GME. Disclosure: Robinhood Snacks is owned by... Robinhood.
- __Some brokerages__ raised margin requirements for those stocks to mitigate risk. Margin = the percentage of the purchase investors need to fund themselves (rather than borrow).
- __Unsurprisingly,__ the price of those restricted shares dropped. Some investors were angry, shocked, and confused. *And retail investing dominated the social conversation like never before*.

__Demystify the jargon...__ Brokers cited financial and regulatory reasons for these moves. Here’s what actually happens when you place a trade, and some of the requirements brokerages face (for a Robinhood-specific explainer, check out Robinhood’s [blog](https://blog.robinhood.com/news/2021/1/29/what-happened-this-week)):

- __When you buy a coffee__ with your card, you see the transaction on your account right away. But Starbucks still hasn’t received your $$$ — it can take a few days to move. Similarly...
- __When you buy a stock,__ you may see the transaction immediately. But you actually pay and get the shares two days *after* you buy. That’s because...
- __All transactions have to go through "settlement"__ to make sure that sellers actually get paid, and buyers receive securities. AKA: to ensure everyone involved can really deliver.
- __Clearinghouses,__ which are regulated by the SEC, ultimately ensure that trades get settled. Brokers often need to deposit cash to meet day-to-day collateral requirements with clearing firms, in order to back customer trades. 
- __When buying becomes concentrated__ in a handful of volatile stocks, risk increases for everyone involved. So clearinghouses can ask firms for *more* cash deposits, to mitigate risk to the system. 
- __Those deposit requirements__ for brokers can dramatically jump based on how many risky/volatile stocks customers are buying. Wild stat: industry-wide collateral requirements reportedly rose to $33.5B on Thursday, from $26B on Wednesday.


Trade

__Last week surprised nearly everyone...__ because it was unprecedented. Mass “meme stock” buying campaigns significantly increased collateral deposit requirements on those stocks, which led to industry-wide trading restrictions... on those stocks. And retail investing reached a new level of social relevance. As the “mainstreamification” of investing continues, the “plumbing” powering the system will become more and more relevant to individual investors, too. 

The “mainstreamification” of investing spotlights the plumbing behind markets 

__You used to call me on my iPhone (12)....__ __Apple__ crossed the $100B quarterly sales mark for the first time, bringing in a ginormous [$111B](https://snacks.robinhood.com/newsletters/31odJOl6c3lLq4SuSoWt9z/articles/C5C8LDQhP2gXM5lLjxA33/) last quarter. That's nearly 3X __Facebook__ and __Tesla__'s quarterly sales *combined*. The most valuable company on Earth made $28.8B in profit, one of the largest quarterly profits for any company (ever). Every product category saw double-digit sales growth. iPhone sales, which make up over half of the Fruit's total sales, soared 18% after two years of declines. The 5G-enabled 12 inspired a wave of fresh upgrades.

__Still goin' ad on you, anyway...__ Despite all the regulatory and public scrutiny, __Facebook__ posted an expectation-beating $28B in sales last quarter, proving that advertising is alive and well. Ad sales soared 31% from a year earlier, making up 97% of FB's total sales. Monthly users across apps jumped to 3.3B (aka: nearly half of all humans). But Apple [ruined](https://www.cnbc.com/2021/01/27/facebook-fb-earnings-q4-2020.html) some of the earnings fun (claaassic): privacy changes to iOS 14 could hurt FB's precious ad-targeting abilities.


Who's up

__Max loss...__ __Boeing__ shares fell 6% for the week, after the plane-maker [posted](https://www.cnbc.com/2021/01/27/boeing-ba-q4-2020-earnings.html) a record loss of nearly $12B last year. Refresher: Boeing's 737 Max jets were grounded for nearly two years following two fatal crashes. For basically all of 2020, they were sitting in parking lots burning cash. Meanwhile, the pandemic sapped demand for Boeing's other jets, too —  *especially* its newest plane, the 777X, which is meant for long-haul flights. It was supposed to roll out this year — now Boeing doesn't expect it'll debut until 2023 (read: *expensive* delay).

__A sweet cream Cold Brew...__ to ease the pain. __Starbucks__ shares dropped 7% last week, after the caffeinated legend [revealed](https://www.cnbc.com/2021/01/26/starbucks-sbux-q1-2021-earnings.html) that dining restrictions hurt its biz (shocker). While you were whipping up Keurig cups and instant coffee at home, Starbs' sales fell a worse-than-expected 5% last quarter — and profit plunged 30% from a year earlier. Despite that, Starbucks' mobile-order game was strong: app orders increased nearly 50% since the start of the pandemic. 

Who's down...

"_It's not you, it's iOS 14"_

💵 The money pipes

__Quick recap...__ Over the past few weeks, some “underdog” stocks have seen meteoric rises thanks to mass buying [campaigns](https://snacks.robinhood.com/newsletters/31odJOl6c3lLq4SuSoWt9z/articles/5ZO850evnEJXwTwEDdxKTk/) stoked through social media (mainly Reddit, via the subreddit r/wallstreetbets). Example: from January 11th to January 27th, __[GameStop](https://robinhood.com/stocks/GME)__ shares surged 1,600%, and __[AMC](https://robinhood.com/stocks/AMC)__ stock soared 800%. __[Nokia](https://robinhood.com/stocks/NOK)__, __[BlackBerry](https://robinhood.com/stocks/BB)__, __[Tootsie Roll](https://robinhood.com/stocks/TR)__, and others also skyrocketed on the unprecedented social momentum.

- __On Wednesday,__ the New York Stock Exchange temporarily paused trading of GameStop, BlackBerry, and AMC, citing volatility.
- __Also Wednesday:__ Schwab’s __TD Ameritrade__ limited certain transactions of some high-flying stocks. But the stocks still finished the day up significantly.

__And then, yesterday happened...__ Some brokerages, including __Robinhood__, __E-Trade__, and __Webull__, temporarily [restricted](https://www.wsj.com/articles/online-brokerages-restrict-trading-on-gamestop-amc-amid-frenetic-trading-11611849934) certain trading activity in symbols like GME. Investors of the restricted companies were only allowed to hold or sell shares (not buy more). Meanwhile, some brokers increased margin requirements (the percentage of the purchase investors need to fund themselves rather than borrow). Then...

- __The stocks that were paused plunged.__ GameStop fell 44% yesterday, while AMC dropped 57%. Brokers cited financial and regulatory reasons for these moves. Some investors lost money, and many were angry (disclosure: Robinhood, which owns Robinhood Snacks, made a [public statement](https://blog.robinhood.com/)).
- __TLDR:__ Brokerages need to meet certain regulatory net capital and clearinghouse deposit requirements to remain compliant and ensure that trades go through properly. These requirements can rise as certain stocks become more volatile/risky.


Market

__This is an unprecedented moment in the market...__ From the rise of commission-free retail investing, to the surge of social-driven buying campaigns targeting hedge funds, we're moving into new territory for how the stock market operates. There's still a lot we don't know about this new reality and how it’ll unfold – including if structures, rules, or regulations will change to adapt to it.


Social-fueled stock surges mean uncharted territory for the modern market

__Major gear shift...__ __[GM](https://robinhood.com/stocks/GM)__ is a 113-year-old company known for trucks built "like a rock." 98% of its sales and *100% of its profits* come from gas-powered cars (it’s still in the money-losing phase of EVs). Large pickup trucks and SUVs are some of GM's biggest profit puppies (and biggest gas-guzzlers).

- __Over the past few years,__ GM has been shifting gears. In November, GM said it would spend $27B on electric and autonomous vehicles by 2025.
- __This month,__ GM [unveiled](https://snacks.robinhood.com/newsletters/3W8LX1jIAswA4HFNTbvVHO/articles/vdFCNmlM6aWPfSxbASbFe/) its futuristic electric delivery solution, complete with electric pallets and a fresh fleet of e-vans. 
- __*Yesterday*:__ GM went all in, [setting](https://www.wsj.com/articles/gm-sets-2035-target-to-phase-out-gas-and-diesel-powered-vehicles-globally-11611850343?mod=breakingnews) an ambitious 2035 target for phasing out gas and diesel-powered vehicles from its global lineup.

__Sounds familiar...__ GM is America's largest car maker (by sales — sorry, Tesla). It's also one of the first major automakers to slap a timeline on transitioning to full-electric. But GM isn't doing this in a vaccuum: Major governments — from CA, to Japan, to the UK — have said they'll start to ban the sale of new gas-powered vehicles in the 2030s. Meanwhile, Biden has pledged $2T to clean energy innovation, with the goal of a carbon-free power sector by... 2035.


_GM pulls a Netflix_

Electrify

__GM’s pulling a Netflix...__ and burning its boats. 100% of __[Netflix](https://robinhood.com/stocks/NFLX)__'s sales pre-2007 were from *DVDs*. Then CEO Reed Hastings moved the entire DVD team to a separate part of the building, and went all-in on streaming. In order to disrupt itself before Tesla does, GM  can't just sprinkle change into its corporate plan — it needs to burn its entire biz model.

🐦 The Twitter rabbit hole intensifies

💰 Stimulus round #3

👻 Ad Bowl: Snap vs. Facebook

🚘 Tesla rides with Bitcoin

💵 Closing the gap

🌱 Scotts Miracle (cannabis) Gro

📦 Bezos is out

✈️ Airline shorts

💵 The money pipes

🗺 Uncharted territory