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Super Starship

Published 2024/06/10, 12:19

Market scorecard

Markets slipped and bond yields rose after a surprisingly strong US jobs report on Friday. Traders were reassessing their expectations for a September Fed rate cut, opening the door to the possibility that cuts might only start next year. Despite this, all major indices posted weekly gains to start June.

US employers added 272 000 jobs in May, breezing past economists' expectations of 180 000, coupled with higher than expected wage increases, indicating that the economy remains strong despite elevated interest rates. The unemployment rate increased to 4% presenting a mixed picture of a labour market that is cooling but still hotter than anticipated.

In company news, GameStop (NYSE:GME) shares plummeted 39.4%, despite Roaring Kitty's YouTube stream which attracted over 650 000 views, making it the largest finance stream ever. The video game retailer's surprise quarterly earnings report showed narrowing losses, but sales declined by 29%. In other news, Crowdstrike (NASDAQ:CRWD) is up 5.4% in after-market trade on the news that it will be added to the S&P 500, when the index rebalances later this month.

On Friday, the JSE All-share closed down 0.35%, the S&P 500 fell 0.11%, and the Nasdaq was 0.23% lower.

One thing, from Paul

How is your Apple (NASDAQ:AAPL) iPhone treating you? Which model do you have? Is it time for an upgrade? I think so!

According to Visible Alpha, a research firm, an alarming number of people are still using iPhone 12s, which were a huge seller because it was Apple's first 5G phone and the network providers pushed them hard with many sales promotions. That was October 2020, back in the dark days of Covid.

Smartphones are truly ubiquitous. Literally everyone has one, and that's a good thing. Anyone with a smartphone today has better access to knowledge and expertise than a Harvard or Oxford graduate from the most illustrious family 20 years ago.

Apple is hosting a Worldwide Developers Conference today and is expected to share the enhancements going into its next mobile operating system, as well as its plans for on-device AI. The hype around these features will be important to drive sales of the iPhone 16 models.

We expect Apple to sell about 250 million iPhones in 2025, at around $1 000 each. That's a lot of money! Remember that smartphone sales have accounted for more than half the company's revenue for the past 12 years.

Apple is trading just below $197 per share. The all-time high is $199.62 and in my opinion, it's high time that it went through the $200 mark.

Byron's beats

On Thursday last week SpaceX launched its 4th Starship. The structure, which is taller than the Statue of Liberty and weighed 5 000 tons at liftoff, entered space successfully, coasted halfway across the planet and landed 65 minutes later at the targeted splash-down site in the Indian Ocean.

The two primary goals of this launch were to bring Starship's first stage booster back down to earth in one piece and to achieve a controlled entry back into the atmosphere of the upper stage, which is essentially the Starship. Both of these very complicated tasks were done with precision.

Love him or hate him, Elon Musk has achieved the unimaginable. Before SpaceX, the idea of landing a reusable rocket was laughable. Now they have achieved that with a structure over 50 meters tall. I'm a big Musk fan, but I must confess I thought the idea of inhabiting Mars was farfetched. Not anymore.

Michael's musings

Investing in startups and young, exciting companies is tough. Their value is based on future sales, and the current business is often very reliant on one or two key customers. A wrong step can easily mean the end of the company. That is why we have an unofficial rule in the office that we won't buy any company with a market cap of less than $10 billion.

Now it seems that we need to increase that hurdle. Byju's is an Indian multinational educational technology company, headquartered in Bengaluru, that used to be India's highest-valued startup at $22 billion. HSBC now say that it is worth zero. Byju's faces court cases, its directors and auditors have quit, and it recently failed to raise capital to keep going.

The name Byju's may sound familiar. That's because Prosus (JO:PRXJn) is their biggest shareholder with 10%, having contributed $500 million over various fundraising rounds. Oops.

HSBC also estimates that Prosus' stake in a number of other startups - Meesho, Pharmeasy, ElasticRun, and Stack Overflow - are not nearly as valuable as they once were; and has cut those valuations in half. These are HSBC's subjective views, but they will play a role in setting expectations when those companies need to raise capital in the future.

The frustrating thing here is that Prosus' previous management used to justify their high salaries on the basis that they were superior allocators of capital. Thankfully there is now a new management team and the money lost on these startups is still relatively small in relation to the Tencent (HK:0700) stake.

Bright's banter

Waystar Holding (NASDAQ:WAY), a healthcare payments software maker, has priced its IPO at $21.50 per share, raising $968 million, making it one of the largest listings of 2024. The IPO gives Waystar a valuation of about $3.5 billion.

This IPO which took place on Friday is the fourth-largest in the US this year, and the largest by a US-based company, contributing to the $18.5 billion raised by 89 companies through US IPOs since 1 January 2024.

Waystar, based in Lehi Utah, reported a net loss of $51.3 million on $791 million in revenue for 2023, slightly better than the previous year's loss.

To be clear, this Waystar has nothing to do with the company from the TV show Succession, which features Logan Roy's fictitious conglomerate called Waystar Royco. No rollercoasters and hate speech, just good old healthcare payments.

Signing off

As usual, Asian markets are mixed this morning. Benchmarks rose in India and Japan but declined in Hong Kong, mainland China, and South Korea.

Locally, Spar issued a profit update, indicating that it expects earnings to drop by up to 13% for the half-year ending in March, due to issues with the SAP rollout in KZN and high interest rates. Elsewhere, retailer TFG reported record revenues of R60.1 billion, an increase of 8.9%. Their e-commerce business, Bash, saw a 44.4% growth, with over 3.5 million app downloads, boosting total online sales by 22%.

US equity futures are up pre-market. Today the Nvidia (NASDAQ:NVDA) 10-for-1 stock split will come into effect. The price will be 10 times lower, but you'll own 10 times the number of shares. Your position will have the same value, so don't panic.

The Rand is trading at around R18.87 to the US Dollar.

It's a new week, with new opportunities. Enjoy.

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