Infrastructure Passes Through Congress, ScarJo Sues Disney and Robinhood Is The Worst Of All Time
Welcome back to "This Week In The Market," where we break down all of the latest market news in easy to read, easy to understand ways. Let's go!
The Headline of the Week
It's normally this part of the show where I cover the biggest story of the week. However, this week had so many big stories that we'll have to go round-robin lightning round style. Let's dive in:
Infrastructure Is A Go
President Biden's agenda got a big boost this week as the infrastructure bill is "nearing the finish line," despite not yet existing. This approval comes off the back of a survey showing that 58% of Americans are in favor of the plan, but Republicans only came in at 19% in that poll.
Inflation Is Here, But Is It To Stay?
The NASDAQ dropped like a bad habit this week after the inflation report clocked in aligned to estimates at around 3.6%. Not the 5%+ that was potentially expected by certain mainstream media fear mongers, but I digress. When inflation rises, tech gets hit, which explains the over 1% drop in the NASDAQ. So now the bigger question is: is inflation here to stay? The country is torn. Financial experts and business leaders seem to think that inflation could stay flat or accelerate in the coming months, while Federal Reserve Chairman Jerome Powell believes the inflation to be "transitory," or essentially that prices are temporarily driven higher due to the demand for labor and goods that will eventually subside. The markets could be in for a rocky road for the next quarter or so. The good news? Consumer spending was up 11% year over year, so give yourself a round of applause. You did it, America. USA USA.
Amazon's Big Miss, Pinterest's Big Whiff
Earnings saw the heavy hitters report this week, with Apple, Alphabet and Amazon reporting, among others. While Apple and Alphabet continue to crush analyst estimates, Amazon had a weird week. They saw their third straight quarter of over $100 billion in revenue, but actually came in lower than expected. They also issued pretty light Q3 guidance, and their stock saw a remarkable after-hours selloff of nearly 5%.
Pinterest was right there with Amazon, reporting slowing user growth, but a bump in revenue. They also declined to provide Q3 guidance given the COVID-19 situation, of which their business is very sensitive due to people either staying indoors and daydreaming about home renovation projects and other Pinterest-y things, or going out to restaurants and not following through on their Pinterest day dreams. Shares free-fell over 18% in after hours trading.
How Can This Make Me Rich?: Buy the dip! Do you believe either of these companies will be going out of business any time soon? No? Then congrats, you just got yourself a nice discount. Amazon is as solid as they come with an every-expanding cloud business, and Pinterest actually saw user growth for the quarter, just less than expected. Pinterest also grew their revenue and saw their average revenue per user (ARPU) increase for the quarter! These are both aggressive overreactions from the market as to the future of these two companies.
Weird Story of the Week
A few weeks ago, I wrote about the roaring success of "Black Widow," Disney's latest entry into the Marvel Cinematic Universe, and I proposed that the way the movie was released both in the theaters and on streaming at the same time could have profound effects on how movies are released going forward. Little did I know that "profound effect" would be the star of the incredibly successful film, Scarlett Johansson, suing Disney over the distribution in question. Johansson is alleging in her lawsuit that Disney breached her contract with them by releasing Black Widow in theaters and on streaming simultaneously. Johansson, in Wall Street Journal's report, sought assurances "as far back as 2019" that the film would not be co-released on streaming and in theaters. Her representation even went so far as to tie her compensation to the box office receipts the film generated, a practice not uncommon with big stars. Johansson also alleges she tried to contact Disney and Marvel when she learned that the movie would be co-released, but was not responded to. Disney released a statement Thursday refuting her claims.
This move could be precedent setting, but is not unprecedented. Universal had a similar situation last year when COVID shook up the market and forced them to release the juggernaut that is "Trolls 2" on streaming early. This resulted in an undisclosed bonus payout to stars Anna Kendrick and Justin Timberlake. Gal Gadot and Patty Jenkins also are rumored to have received $10 million bonuses from HBO Max due to the co-release of "Wonder Woman 1984" last December. Johansson is by far the biggest star to take on her own distributor, though. We have an actual Avenger taking on the production house that really took her career to a new level, and she's out of contract. Black Widow appeared to be the final appearance of Natasha Romanoff in the MCU, so Johansson really has nothing left to lose. Depending on which way this goes, it could dramatically affect how contracts are written for these stars moving into the next Phase Four of the MCU.
Stock of the Week
It was a huge week for IPO's, with big time companies like Duolingo and Outbrain hitting the public markets. However, it was everyone's favorite FINRA license-less mobile app casino that caught the headlines this week.
Robinhood hit the public markets this week with their debut coming Thursday morning, now trading under the ticker $HOOD. Immediately, shares plummeted 8%, closing the day down around that amount and gaining the dubious honor of "worst performing IPO of that size ever." Compound that with news breaking on Tuesday night that Vlad Tenev, co-founder and co-CEO of the platform, was under investigation for not actually having a FINRA license, and it's stacked up to be a pretty mixed week for the mobile-first millennial-focused exchange.
They did get a bit of good news on Friday morning, however, when Cathie Wood, founder of the innovative ARK Invest fund, disclosed that she had purchased 1.3 million shares of the company for about $45 million, despite its horrendous showing. I love Cathie Wood and what her fund is doing, but I don't get it. I wrote about Robinhood a few weeks ago after they filed their S-1 and the fundamentals are shaky at best. Most of their revenue comes from a business practice they pioneered labelled "payment for order flow," which essentially fulfills trades on the platform by auctioning them off to the highest bidding market-maker. It's a shady practice and not one employed by any other online broker because it's shady. If there is any fundamental change to the process of PFOF, then Robinhood could be up a creek.
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