Monday, February 7th, 2021 – Volume 1 – Issue 150

Crypto Just Flipped — Why Everything is Up Today

Dow Jones: 35,091.13 (0.00%)
S&P 500: 4,483.87 (-0.37%)
Nasdaq: 14,015.67 (-0.58%)
Russell 2000: 2,012.60 (+0.51%)
Bitcoin: $44,023 (+5.54%)
Ethereum: $3,145 (+4.84%)

 

Welcome back from the weekend… The stock market was mixed today, chopping up-and-down after last week’s rally. Only the Russell 2000 was able to squeak out a win to start the week.

Earnings volatility was the hot topic last week, but this week it’s likely to be inflation — investors are getting ready for the January CPI report on Thursday. Economists are expecting a 7.2% inflation reading (which would be the fastest pace since 1982). 

Earnings: Tyson Foods (TSN) made a big 12%+ move today after beating expectations while raising prices, showing that pricing power is the name of the game as inflation runs hot. Tomorrow, we’re keeping an eye out for reports from Pfizer (PFE), Chipotle (CMG), Peloton (PTON), Corsair Gaming (CRSR), and Lyft (LYFT).

Crypto: XRP led gains with a near-18% jump today as unsealed court documents brought some positive sentiment to the SEC vs. Ripple case. Bitcoin broke out above $44k as crypto inflows quadrupled last week, and Ethereum is holding steady above $3,100 despite net outflows.

Now, for the top stories of the day…

Source: Heat Map & Sector Performance — Finviz.com

Peloton Soars 20%… Amazon, Apple, and Nike Acquisition Rumors Spread

From being a pandemic gold mine to falling 80% from all-time highs, PTON continues to shock the market. And today, shares of Peloton jumped another 20%+ as reports have emerged that a number of big-time companies are flirting with the idea of scooping up the connected fitness company. 

A report from the Wall Street Journal said that Amazon approached Peloton about a potential deal, and a separate report from the Financial Times named Nike as another interested entity. One analyst also believes that Apple is “aggressively involved” in acquisition talks as well… However, as of right now, Peloton has not moved forward with any formal sales processes.

This all begs the question — why would any of these giant corporations be interested in Peloton’s falling knife when demand seems to be faltering? Well, to be fair, Peloton is an interesting target for a business looking to expand into health and wellness — and with nearly 3 million paying subscribers, PTON already has a customer base willing to hand over cash for a connected fitness ecosystem.

Two Major Airlines Just Merged in Massive $6.6 Billion Deal

The two biggest ultra-low fare airlines are joining forces. Frontier and Spirit came to a merger deal over the weekend, in which the former will take a 51.5% controlling stake in Spirit Airlines. The deal is valued at $6.6 billion, marking the first merger of large U.S. airlines since Alaska Airlines combined with Virgin America in 2016.

Spirit stock (SAVE) surged nearly 17% this morning as the deal implies a per-share value of $25.83, a 19% premium over Friday’s levels. Spirit shareholders will receive 1.9126 shares of Frontier for each SAVE share they own, as well as $2.13 cash as part of the deal! Frontier stock (ULCC) gained 4% on the news.

The new name, CEO, and headquarters will all be revealed when the deal closes in the back half of ‘22. But the two companies seem excited about joining up and taking more market share away from the industry-dominating titans (American, Delta, United, and Southwest). “It makes a lot of sense and the opportunity has been ripened by the demand patterns of the pandemic,” said Samuel Engel, senior VP at consulting firm ICF.

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Meta is Threatening to Shut Down in Europe

Tensions between Zuck’s Meta and the EU are heating up… The cause of the problem? Data (of course). Meta warned in its annual report last Thursday that the company is considering shutting down FB and Instagram in Europe if it can’t effectively transfer data back to its HQ in the USA. 

Meta, along with many other businesses, depend on transatlantic data between the US and EU in order to operate the wide range of global services they offer. But the EU is in the process of drafting new regulation to protect the privacy of European citizens. 

Now of course, Meta doesn’t want to cut off the European revenue stream. After all, its an entire continent of opportunities. But if the company can’t properly make money using data collected by European users, they may have no choice but to use those operating funds for a better ROI elsewhere. Shutting down in Europe “would materially and adversely affect our business, financial condition, and results of operations,” the company said in a statement.

Will Tesla Start Accepting Bitcoin Again?

Tesla and crypto have gone hand-in-hand ever since Elon began tweeting about Bitcoin and Dogecoin. In fact, he’s on record saying “I would like to see Bitcoin succeed,” and has spoke at length about crypto’s benefits in the past. But after just two months of accepting BTC for car payments, Musk slammed on the breaks.

Elon wants to “confirm that the percentage of renewable energy usage is most likely at or above 50%, and that there is a trend towards increasing that number” before taking BTC for Teslas again. And even though Tesla’s position in Bitcoin has grown to nearly $2 billion (as of the end of 2021), we’re still waiting on official data that BTC is sustainable enough for the electric car company.

But here’s the thing — testing Bitcoin’s sustainability is pretty tough. Even with a 2019 report showing that 74.1% of the Bitcoin mining industry was “heavily” driven by renewable energy sources, the decentralized nature of crypto makes things difficult to confirm. So until we know for sure, it looks like Doge is the only crypto that Tesla will take (for limited items).

Crypto Just Flipped — Why Everything is Up Today

Crypto fund inflows quadrupled last week, capping off three straight weeks of net inflows as BTC started to climb out of its sub-40k price slump. Bitcoin was able to hold above its $40,000 support through the weekend, and is now trading above $44k (inching towards the $47k level we saw at the beginning of 2022).

With positive sentiment coming back into BTC, the rest of the crypto market has been lifted by the rising Bitcoin tide. However, “Investment products flows for Ethereum suggest investors remain bearish,” according to CoinShares. This is the ninth straight week of outflows for Ethereum funds.

As most of the top cryptos surge over 6% today, XRP is outperforming the market. XRP surged nearly 30% this morning as new developments indicate that a verdict in the SEC vs. Ripple case may be coming close to a verdict.

Bulls

Peloton (PTON) +20.93% -Peloton shares are surging on speculation a larger entity such as Nike or Amazon could be acquiring the company. 

Spirit Airlines (SAVE) +17.17% – Spirit shares surged as the company announced it was merging with Frontier Group in a deal valued at $6.6 billion. 

Royal Caribbean (RCL) +8.44% – Cruise stocks bounced back today following dismal falls last week of disappointing earnings. Covid cases have also begun to decline and Royal Caribbean said last week the recent omicron surge was only a “short-term operational challenge.” 

Bears

Chewy (CHWY) -7.08% – Chewy continues to be a highly volatile stock amid the speculative sell-off as investors struggle to find a fair valuation for the company under current circumstances. 

Alibaba (BABA) -6.08% – Shares of BABA were hit hard today after rumors surfaced Softbank may be preparing to sell its stake in the company. 

Block (SQ) -5.56% – Block continues to be dragged down after PayPal’s earnings miss.

 

TSMC (TSMC) – Morgan Stanley upgrades TSMC from equal weight to overweight due to the stock’s attractive valuation. “Stock valuation is already attractive enough to look beyond the 2022 tech downcycle. Long term, the reduced capex burden and significant outsourcing from Apple and Intel are key reasons why we form a positive outlook for year 2024.”

Peloton (PTON) – Baird reiterated its outperform rating on Peloton ahead of its earnings Tuesday, but is skeptical of a takeover deal. “While Peloton could bring significant value to other platforms, we currently assign a relatively low probability to a successful deal.”

Snowflake (SNOW) – Morgan Stanley upgraded Snowflake from equal weight to overweight saying the stock is undervalued. “With the core data warehousing business outperforming, new nascent expansion opportunities gaining steam, and significant FCF generation within reach, investors are undervaluing the durability and quality of growth at Snowflake with shares trading at 0.43X EV/CY23 Sales/Growth vs. peers at 0.54X

Quote of the Day: “The whole secret of a successful life is to find out what is one’s destiny to do, and then do it.”– Henry Ford

Fun Fact: There are 16,531 cryptocurrencies listed on CoinMarketCap.com as of January 2022

  • Tesla says the SEC delivered another subpoena in ongoing conflict over Musk’s Tweets

  • XRP surges 30% after Ripple gets permission to explain “fair notice defense” vs SEC

  • Multiple Crypto exchanges will have Super Bowl ads this year 

  • Spotify CEO condemns Joe Rogan’s use of racial slurs, but still backs his podcast

  • Rumble informally offers Joe Rogan $100 million to bring his Podcast to their platform

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