vestact posted: " Market Scorecard US markets tumbled again yesterday as Meta shares fell sharply. A big decline in value by a large-cap stock is never pleasing and the Nasdaq was dragged down by 3.7%. The broader S&P 500 also sagged by the biggest percentage f"
US markets tumbled again yesterday as Meta shares fell sharply. A big decline in value by a large-cap stock is never pleasing and the Nasdaq was dragged down by 3.7%. The broader S&P 500 also sagged by the biggest percentage for one day in nearly a year. This market has been bi-polar, up one day and down the next.
But wait! In company news after hours, Amazon shares roared higher by 14% on a cloud revenue beat, a Prime price hike and a massive $12 billion profit gain from its Rivian stake. If the e-commerce giant can sustain this rally through to the market close today, it would be its largest one-day gain since 2012. With luck, we'll have a good end to the week.
Izolo, the JSE All-share closed down 0.22%, the S&P 500 fell 2.44%, and the Nasdaq was kiboshed by 3.74%.
Our 10c Worth
Byron's Beats
PayPal released results earlier this week, and the company swiftly lost 25% of its value. Now that hurts! Before we look at the numbers, let's see why it fell so much.
Remember, PayPal was previously owned by eBay. The two businesses went their separate ways in 2015, but PayPal was still the exclusive payments provider to eBay until June 2021. Since that agreement ended, eBay's move away from PayPal has been much quicker than anticipated. eBay was ruthless at pushing clients to its own new payments system.
The second reason is the large drop in comparative e-commerce sales at the end of last year due to supply constraints. Customers were waiting weeks for their deliveries, so they decided to get off their lazy bums and actually go to physical retail stores. That was not good for PayPal.
The third reason was the closing of 4.5 million accounts. Most of these were opened by bottom-feeders taking advantage of once-off incentive campaigns.
These three factors meant that company forecasts for the rest of 2022 were cut back. The market does not like it when guidance is revised lower, especially when a stock is priced for perfection.
Are these issues fixable? I would say so. Mainstream e-commerce will continue to grow, and supply chain issues will ease. The company will have learned from the failed incentive programme that attracts the wrong type of client, and of course, there is life after eBay.
The actual numbers were still decent. Take a look at the image below for some full-year metrics. Payments volumes grew 23% in the quarter and they added 9.8 million active accounts. That number now sits on 426 million. That is their moat, the network effect of so many accounts makes PayPal the default for all your fintech needs.
What was very impressive is that the average number of transactions per account, for the quarter, grew from 42.9 to 45.4. Extra services like crypto trading and savings accounts make existing clients more active.
The group goal is to have 750 million accounts by 2025. If they achieve this and manage to increase transactions per account at the same time, revenues and profits should soar. We advise you to accumulate PayPal shares at these lower levels. This is a good long-term play.
One Thing, From Paul
My Friday advice is to be cheerful in the face of adversity. This line seems to originate from the training programme of the Royal Marines. It's one of their founding principles.
Life is not always easy, and it's definitely not always fair. Sometimes it's downright appalling. You just have to take it on the chin and come back smiling. You only get to live once, and there's no point spending the little time you have on earth moaning. The bad things that happen make the wins all the more sweet.
In the last two weeks, we've had to endure the rubbishing of three of our major holdings: Netflix, PayPal and Meta. That hurts, but it's not the end of the world. They will recover. Other holdings have done well and will soften the blow. Life goes on.
Michael's Musings
TikTok may be a thorn in Meta's side, but it's transforming the book industry. In the US, 2021 was the best year on record for physical book sales. The trend started in teen books, moved to young adult and now encompasses a wider range of titles. The romance novel "It Ends With Us" by Colleen Hoover went viral on BookTok.
It's become a self-reinforcing cycle. Book stores pick up the trends on TikTok, promote those books in-store, leading to further traction online, and so the cycle builds. This shows the power of social media, and what can happen when advertisers have access to a billion users.
Personally, I still prefer the ease of reading on an Amazon Kindle. I have access to any book, not only the ones in a store, and I get it instantly. I am also able to download book samples, and I only buy the book if the sample was good. Another big advantage is it doesn't hurt your face if you fall asleep when reading.
Africa's largest cryptocurrency exchange Luno is expanding into the US. This makes sense because there are a lot of digital-asset investors in North America. The timing is interesting though, as crypto prices have tanked recently.
Luno was founded in 2013, and now has over 9 million active users from Mzansi to Asia. Their business model is pretty simple, they understand the paradox of choice, meaning instead of flooding their customers with over 100 different coins (which is what Coinbase, Binance, FTX, and CEX.io do), they keep their options to an absolute minimum.
According to Bloomberg, Digital Currency Group was an early investor in Luno and bought the whole thing in 2020. A year later they achieved a $10 billion valuation when they raised $700 million in a SoftBank-led funding round. This makes Luno more valuable than the JSE, A2X and the Cape Town Stock Exchange combined!
Linkfest, Lap It Up
Bernard Arnault, the owner of LVMH, was spotted wearing a unique Tiffany Baby Blue Nautilus Patek Philippe 5740 perpetual calendar. The watch was made for the 170th anniversary of the New York City-based Jeweller - The man eats his own cooking.
Lego isn't only for children. The company is tapping into millennial nostalgia, and has designed a mint green, Olivetti-inspired Lego typewriter - Build your own vintage Lego typewriter.
Signing Off
The MSCI Asia-Pacific index is up this morning thanks to a massive boost from Hong Kong-listed tech shares. Stocks in Japan, Hong Kong, and South Korea are all up as some of those bourses open up after being shut for the Lunar New Year holidays.
All eyes will be on the January US Non-farm jobs report which is set to be released today. Economists expect a gain of 150 000 jobs, but some think there may even be an Omicron-related decline.
US futures are up sharply in early trade, thanks to the Amazon beat and an even more epic after-hours rally of Snap Inc. shares. The Rand is trading at R15.24 against the US Dollar.
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