theStreetFika: Scones, Sips, Strategy & Stocks

On October 20th, General Motor (GM) revealed the all-electric Hummer starting at $112K. A lot of the talk since then has focused on the hefty price tag and many articles were published on how GM is out of touch with reality because Tesla's Cyber Truck is much cheaper. I think all that talk misses the point that the Hummer EV could be a transformational moment for electric trucks, just as Tesla's Roadster was for electric cars when it launched in 2008. In retrospect, this could prove to be the moment EV trucks become mainstream. At launch, the Roadster was also priced well above $100K and it ignited the first real frenzy around electric vehicles - at least in Silicon Valley. The Hummer can be that for the rest of America. At $112K, the Hummer EV may look like its targeted customers are Hollywood and/or literal royalty, but it can be a huge boon for electric trucks in general, at least from a marketing perspective. Hummer is an iconic and extremely popular brand, with a loyal fan...

NextDoor is Zucked Last week, techcrunch reported that Facebook is working on Neighborhoods -a NextDoor clone- based on Facebook's local groups.  What are the take-aways? If there was ever a time for everyone’s subtlety bigoted grandparents to get on Facebook, now’s it. Joking aside, Neighborhoods aligns very well with Facebook's strategy focusing on groups. NextDoor has been in hot water for inadvertently fostering racism. Facebook’s track record with moderating groups - or lack of - suggests it will not be able to avoid the same. Facebook is well-versed in copying features from other apps - just ask SnapChat and TikTok - to limit their growth. I expect this will do the same for NextDoor and force it into the arms of a SPAC. Quibi: Now Quiti Quibi, the app that staked its future on short videos, is shutting down just six months after it launched. Earlier, there were discussions that the app would be snapped by a SPAC. It turns out that Quibi is not even good enough to attract...

Last week Apple announced a new iPhone . As with previous iPhone reveals, many greeted the event with a collective yawn, convinced nothing is innovative enough. I will not discuss whether the product revealed was innovative or not, as this is rather subjective and depends on the definition of innovation. Instead, I’ll focus on what I think is more meaningful: the change in Apple's business strategies. Is Apple a Services or a Hardware company? Apple has always been a Hardware company and its primary business model has always been to sell premium hardware at high margins. The chart above from  Chartr  on Apple's 2019 revenues seems to confirm this. It shows that over 80% of Apple's revenues  still come from the sale of hardware products ($214B vs. $46B from Services) with a sweet 55% of total revenues from the iPhone alone. However, the chart above doesn't tell the whole story. It doesn't say that Apple has doubled its revenues from Services in 3 years - revenue...

Last week, SoftBank Vision Fund head Rajeev Misra said he is preparing a SPAC. The SPAC will be run by Vision Fund investment advisors and will include money from Vision Fund 2 and outside investors. SoftBank founder Masayoshi Son previously said he planned to raise a second $108 billion for the second Vision Fund. However, Misra has struggled to raise money for the second vision fund after poor performance from Vision Fund 1 and the pandemic have curbed outside interest. This could be yet another indication of how easy it has been to raise money through SPACs. SPACs are the trend du jour of investing . As discussed previously , there are several reasons why they are hot; however, I think investors should do their due diligence before they hop on the SPAC wagon . For me, SPACs are the next investing bubble .  Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.

Earlier this week, Nikola's CEO said the company's plans are intact even if GM deal unravels . This is not surprising for me. He and the other Nikola executives are begging for it to be November 30th already. That's when they will be able sell their shares. For me, Nikola is all hype and no substance. Most of its value is in the idea, the concept, and that simply can’t justify the $20 billion valuation it was at not long ago, or even the $7 billion valuation where it is at now. After all, it's a company that does not have a product yet, and won't have one anytime soon if some of the accusations about its technology from short-selling firm Hindenburg Research are true. Per the Hindenburg report, Nikola hyped its technology to attract investors and land partnerships with other auto makers, including General Motors (GM). Following the report, Nikola's founder and former CEO resigned. Even though the stock has bounced from its lows on the news of the resignation, I ...

Yesterday Disney said that its primary focus for entertainment is streaming and announced a major Disney+ focused reorg of its media division. Why now? While Disney's theme park and film divisions were reeling from the pandemic, Disney+ was able to save the company from an even worse fate, and in the process catapulted itself for a bigger role going forward. Disney was also facing external pressure to invest more in streaming. Last week, activist investor Dan Loeb called on Disney to end its dividend and invest more funds into Disney+. Does it make sense? Not if you're a movie theater owner. For Disney, the move makes a lot of sense. It puts streaming at the center of Disney's entertainment business. As discussed in my previous post on  Disney+ , we can expect to see more releases that follow the Mulan model. And definitely, I don't expect to see increases in Disney+ prices.   Disclaimer: This post is merely my own assessment and is not an investment recommendation. F...

This week, footwear brand Cole Haan and Slack announced a collab on limited-edition sneakers, which you can see in the image below.  Why the partnership? The Cole Haan footwear brand gets a new sneaker collection made with techies in mind. For Cole Haan, the target audience is clear - it's the Allbirds consumers in tech. However, will this appeal to customers? I’m not so sure. The customer has to be a real Slack enthusiast. For Slack, it's excellent marketing in general and more so for Slack Connect - the feature that allows different enterprises to collaborate with one another. In the announcement, Slack and Cole Haan highlighted that the sneaker collaboration idea happened on the actual app, with both companies using the Slack platform during its creation. 

Earlier this week, activist hedge fund Third Point wrote to Disney's CEO Bob Chapek to ask him to stop paying dividends permanently and invest the money (~$3 billion) in obtaining original content or marketing for Disney+. Disney already suspended its dividend payout in June and is expected to halt its next one as well. I'm with Third Point that Disney needs to halt paying dividends immediately for the foreseeable future - at least until the pandemic is behind us. Canceling dividends last minute each time is not a good strategy because the money can't be spent on anything if it's set to cover dividends.  However, I don't agree with Third Point's recommendation to hike up the price of Disney+. While Disney+ competes with Netflix for consumer attention, the goals of the two services are very different.  For Netflix, streaming is its entire business, the sole driver of its revenue and profits.  For Disney, Disney+ is not about earning subscription revenue; rather, ...

When COVID hit and the lock-downs started, everyone was expecting Slack to "Zoom"; however, as the chart below from  Chartr  clearly shows, Slack disappointed.  It's not due to lack of trying In "Slack got smacked" , I discussed why Slack is NOT slacking on growth and how Slack and Zoom differ. As discussed in  Slack to Microsoft Teams: "Damn You!"  what's limiting Slack and slowing its growth is Microsoft Teams. Teams has reduced Slack’s addressable market and Slack will not come near the heights its investors envisioned when it went public. However, in that same post, I also mentioned that I'm still bullish on Slack.  But, given Google's announcement earlier this week to revamp its G Suite and relaunch it as  Google WorkSpace , does my position change? As if competing with Microsoft wasn't hard enough, right? Although Google WorkSpace includes features that will compete with Slack and Microsoft Teams, I'm still bullish on Slack a...

What’s common between Nikola, Fisker Inc, Canoo Holdings, Lordstown and Hyliion?  They all have a multi-billion valuation despite having never generated a dime in revenues. The fact that they don’t have revenues is not very surprising because they have NOT made any products yet and don’t have any commercial services. As for the multi-billion valuation, it would have come as no surprise had they been early stage private start-ups. The remarkable thing is that they are public companies or will debut on the public markets within the next few months. These businesses are selling a vision rather than a proven track record of turning that dream into reality. This is stuff for the private markets only.  Turning a profit was never required to go public - Palantir, SnowFlake and Slack are a few companies that went public despite having negative profits. However, no product, no commercial services and no sales growth track record are a new fad.  So how did these companies rocket t...