News: Week 46
Another Apple event, Lyft turns to food delivery and the market reacts to progress on a vaccine.
|Nov 14, 2020|
While you thought the biggest news this week would be American politics, it must be said Monday’s positive progress update from Pfizer and BioNTech on their Covid-19 vaccine trials certainly trumped the American election (pun most certainly intended). However there were casualties from the good news, with pandemic favoured stocks taking a reactive hit. Meanwhile, there were more earnings, big acquisitions and another Apple event.
So with that, what happened in Week 46;
Vaccine news impacts pandemic winners
On Monday Pfizer and BioNTech announced promising results in the third phase of its Covid-19 vaccine trials. If all continues to go well they may receive emergency clearance to start producing the vaccine in a matter of weeks. In response to the news, stocks which have been pandemic winners took a hit, headlined by Peloton and Zoom which saw a 20% and 17% drop in their share price respectively at close of trading Monday, as investors saw a path to gyms, schools and offices reopening.
Hopin reaches $2 billion valuation in record time
At the same time that Zoom took a valuation hit, the online event software provider Hopin announced a $125 million capital raise, valuing the young company at $2 billion. With this valuation jump, and growing the team from four to 200 employees in 12 months, it may be one of the fastest growing companies we have seen. The UK company's revenue run rate is now $20 million, with 50,000 customers to date ranging from the United Nations to individuals having digital wedding ceremonies. The question remains whether physical events will return at the same level once there is a vaccine. (link)
Apple’s “just one more thing” event
Another month, another Apple event. In the third digital event in succession, Apple presented the new line up of Macbooks which for the first time will be powered by Apple Silicon, named the M1 chip. Apple has used its own chips in iPhones, iPads and the Apple Watch for years, but this is a first in the Macs, having moved away from Intel. A big win will be improved battery life. (recording)
Tencent captures Chinese gamers
After a rollercoaster fortnight for Ant Group and its suspended IPO, the other notable Chinese tech group Tencent released its quarterly earnings. Tencent has a laundry list of products and business arms, but broadly they’re known for messaging (WeChat), media, gaming and a suite of fintech propositions, headlined by WeChat Pay. Revenue grew for the group 29% YOY, with gaming the big earner during the pandemic. Tencent is also confident the new Chinese lending regulations will have less of an impact on their business, as they issue loans via affiliate WeBank rather than the brokerage model Ant Group is under scrutiny for. (earnings)
Lyft looks to food delivery
As ride sharing apps took a 50% hit on revenue in Q3 for their core mobility services, they are turning to food delivery to pick up the slack. Last week Uber posted 125% YOY growth for its food delivery business, and now Lyft have signalled they’re joining the category. It’s an extremely busy sector now, but Lyft co-founder John Zimmer believes Lyft can offer more competitive rates to restaurants. To me this feels less clear as food delivery groups have yet to prove profitability, but it does provide further evidence that these are logistics businesses first and foremost. (link $) (earnings)
Spotify podcast acquisition
Following the Swedish streaming business doubling down on exclusive podcast content with popular hosts like Joe Rogan and Michelle Obama, the latest acquisition is all about monetisation. Spotify has purchased Megaphone, an ad platform that will help Spotify broadcast personalised ads in podcasts depending on listener demographics. Podcast advertising is still a relatively small industry, with estimates having it at being a $1 billion industry. But Spotify are making long term bets, and unlike musicians, they won’t need to pay 70% in royalties to podcast publishers. (link)
Disney+ highlights from company earnings
While the Walt Disney Company reported a loss of $710 million as its travel and amusement parks business continued to suffer from the pandemic, its direct to consumer media streaming business Disney+ added 16 million subscribers last quarter, with 73.7 million paying customers as at September 30. In the same period Netflix added only 2.2 million new subscribers, albeit from a base of 193 million. (earnings)
Xbox Series X & Playstation 5 release
This week both Microsoft and Sony released their new flagship gaming consoles in time for the holidays. In a year where the likes of Facebook and Google have released new cloud-based gaming platforms, many gamers still see consoles as the optimal gaming experience. Meanwhile internet service providers are bracing themselves for an overwhelming surge in traffic, with users downloading game titles such as Call of Duty: Black Ops Cold War which comes in at 136GB. That’s the equivalent of watching Netflix in high definition for two straight days.
TikTok ban not enforced
Also remember the whole TikTok vs America saga? They were told to sell their US business or face being banned in the country through limitation of core infrastructure services like cloud hosting and content delivery. Well the Commerce Department has decided not to enforce that ban, giving the Chinese owned app more time to figure out what’s needed for them to remain operational in their biggest market. This feels like a good move, allowing US regulators more time to consider what their policies on Chinese technology services should be, rather than applying an ad hoc decision just on TikTok because they’re popular. (link $)
Forwarded this? If so, subscribe here. On Saturdays I send a weekly recap of news (this email), and on Mondays a feature article with thoughtful opinion and analysis.
Thanks for reading, have a great weekend and enjoy The Masters! (Its okay, it doesn’t matter if you don’t like golf, it’s The Masters!)