🍨 Daily Scoop: Profit Still Matters
By Thu, Oct 24, 2019
Hey Scoopers,
The stock market ended up with a rather calm day on Wednesday. There were quite a lot of quarterly earnings reports and calls, but nothing moved the market.
Beyond the overall market, the bad boy of the car industry turned some surprising profit in Q3. It looks like turning profitable is still something investors value. Talking about valuing profit, a recent bubble in the plant-based food industry has officially burst.
Oh, by the way, in your point of view, when is the right time to accept you made a mistake about a particular investment and give up? If you have any tips, send it to Softbank. This story is in the “Water Cooler” section. For the rest, scroll down to the “Overall Market,” “What’s Up?” and “What’s Down?” sections.
MARKETS
- U.S. markets: All three indices inched slightly higher on Wednesday. Scroll to the “Overall Market” section to learn more.
- Cryptocurrency:Well, it happened finally. Bitcoin’s price crash to $7,400 per coin. People blame Mark Zuckerberg and the Congress for it. Some other people think the new quantum computing breakthrough by Google can be the reason. It looks like the crypto bubble is bursting once more.
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OVERLL MARKET
Business as usual
What happened on Wednesday?
All three indices wrapped Wednesday slightly higher than where it started the day. Quarterly earnings were still going on, but there wasn’t any major market-mover news. Some companies lost money, and others gained some. But, none moved the market drastically.
WHAT’S UP
Showing profit is still cool
So, what happened?
Shares of Tesla (Ticker: TSLA) were up almost 9%. The bad boy of the car industry announced its Q3 earnings report with non-GAAP earnings per share of $1.86, higher than the consensus estimate of an adjusted loss of $0.23.
One thing that caught our eyes reading the company’s Q3 report is the dominant presence of China and Shanghai Gigafactory in the document. Interestingly, the company is already manufacturing a complete car in Shanghai Gigafactory, well ahead of its sister Gigafactory in the U.S.
what’s down
Another bubble burst
Shares of Beyond Meat (Ticker: BYND) are now less than $100 per share. The stock has been sliding down a steady slope, as investors realize there was no justification for the company’s valuation. Believe it or not, just a few weeks ago, the stock was trading at almost $240 per share.
Two reasons are dragging the stock down:
(1) Initially, the company didn’t issue enough shares. And, the excitement about the future of food made so many individual investors wanting to have a piece of the action. Realizing the excitement is higher than expected, Beyond Meat, rightfully, issued more shares, and increased the volume of available shares in the market.
(2) Also, the food industry is always looking for innovation. Menu innovation at fast-food restaurants is a fuel of growth. Suddenly there it was, a new menu item. But when there is demand, there is also a surge in supply. We now have seen a myriad of private and public companies rushing to launch their own plant-based food. Investors are suddenly realizing that Beyond Meat is not the only game in town.
Those two reasons are why the bubble of Beyond Meat has burst rapidly.
WATER COOLER
When it’s time to say we were wrong?
So, what happened?
The WeWork saga continues. In this episode, we have Softbank, the biggest venture capitalist fund in the world and the largest investor in WeWork, who has decided to bail the former CEO out of his debt, and award him millions of dollars in “consulting fees.”
Companies go bankrupt all the time. Badly-managed firms run out of cash every day. And, people who borrow millions of dollars to buy luxury properties fail to pay back their debt and default on their loans. But, not all of them have Softbank to bail them out.
That’s exactly what happened to Adam Neumann, the former CEO of WeWork. The guy was about to “con” stock market investors to believe that WeWork is a $47 billion company. Now that it has all became clear, he gets more than a billion-dollar to give up his control and some ownership in the company?!
What confuses us the most is that why Softbank doesn’t accept that it has made a mistake. Pouring billions of dollars in a cash-burning house of card that may collapse any day now, dragging thousands of employees with itself, and Softbank can’t still accept the mistake and is about to put more money into this bad investment.
It looks like Softbank is having a hard time accepting that it has made a mistake. How many times have you kept investing in a dipping stock with a hope for a bounce? Do you have any investment tips for Softbank?
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
