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Market Scorecard
It was 'Jobs Day', on Friday in the US. Their stats department announced that the US economy added 225 000 new jobs in January, much higher than the forecast 165 000. The US economy is on a record streak of 11 years of adding new jobs to their economy every month! The new additions in January came in the construction, healthcare, and leisure and hospitality sectors. With the strong job additions, their unemployment rate stayed at the 50-year low figure of 3.6%. Their economy still looks strong and that drives future company profits.
Even with the strong numbers the US market was down on Friday. Rather uniquely, the S&P 500 and the Nasdaq were down by exactly the same percentage. Normally they mirror each other, but very rarely exactly the same. Asian markets are looking a bit stronger this morning thanks to Foxconn (TW:2354), getting approval to re-open one of their factories. Good news for Apple (NASDAQ:AAPL), and limits the impact that the virus is having on the global economy.
On Friday the JSE All Share closed down 0.44%, the S&P 500 closed down 0.54%, and the Nasdaq closed down 0.54%.
Byron's Beats
On Thursday night Uber released 4th quarter and full year results. Exciting times! Below were the quarter on quarter numbers.
To break down the gross bookings numbers amongst their services take a look at this table.
I know we all love lists these days so here are some interesting Uber facts:
1. Uber operates in over 700 cities across 60 countries
2. They serve over 650 airports around the globe.
3. Uber facilitates over 18 million trips a day.
4. They have over 100 million active platform users
5. They have paid over $78bn to drivers and an additional $1.2bn in tips.
6. JUMP (scooters and bikes) has recently launched in San Francisco, Rome, Sao Paulo, Washington, Australia and New Zealand.
7. Uber Eats is the most downloaded app on both Apple (NASDAQ:AAPL) and Android in the food delivery category.
The sky is the limit for this company. From freight collaborations to insurance and financial services for drivers, Uber has massive potential. During the earnings call Dara Khosrowshahi said that the company could turn profitable before the end of the year. That shot the share price up 7% in the pre market.
The share price will be volatile until the company can prove to the market that it can maintain large profits. But often that is where the buying opportunity comes. If you are risk tolerant, you should own this one.
One thing, from Paul
There is an idea going around that the Government Employees Pension Fund (GEPF) should bail out Eskom. There are a number of reason why this is a bad idea, and they are discussed in this Daily Maverick article by Tim Cohen.
The biggest concerns are that the proposer of the deal, trade union Cosatu, insists that there can be no job cuts if this thing goes ahead. Secondly, once bailed out, Eskom will emboldened and continue to be badly managed and retain its monopoly over power transmission and near-monopoly over power generation. Finally, and most importantly, the GEPF is a defined benefit scheme, so taxpayers are on the hook for state employee pensions anyway. So, if Eskom remains a mess and the "investment" is written off, it doesn't matter to them?
In my view, Eskom should be split up, the bits that have value sold off, and its monopoly powers removed. The faster that electricity users can procure their own renewable power the better. In addition, government employees should have defined contribution pensions, like everyone in the private sector.
More on the story here, on the Daily Maverick.
Bright's Banter
The exercise-bike and treadmill manufacturer, Peloton Interactive (NASDAQ:PTON) reported its earnings last week Wednesday showing healthy growth in revenues and connected subscribers for their app in the second quarter. The company is famous for its expensive $2000 bikes, $4000 treadmills and the virtual experience which allows you to train from anywhere in the world.
Revenues for the fitness company were up 77% to $466.3 million, dashing past analysts expectations by $40 million thanks to connected fitness subscribers being up 96% to 712 005. This was not enough for Mr. Market as the shares were down 9.3% after the earnings announcement in late trade. The shares are still about 12% up since listing last year September when we first wrote about the company.
Mr. Market wasn't particularly pleased by the revenue guidance for the next quarter; which it expects to be between $470 million and $480 million. A touch lower than the streets $494 million. The company also said that it expects to add between 920 000 and 930 000 (about 35 000 more than previous estimates) paying connected fitness subscribers for the financial year.
The company spent $160.5 million in marketing, up 61% taking a big portion of its $258.7 million operating costs. This seems to be working for the company as the pseudo competitor SoulCycle saw its revenues drop by 30% over the holiday season and about 2% of Peloton members still use SoulCycle products and services.
The company seems to be ahead of the competition as more people take their health very seriously. Some of the questions that occupy my mind about this company include those about profitability and cost controlling and that remains to be seen.
There have been a couple of CEO changes in South Africa recently. The question always comes up around how long a CEO should be in the position - Research suggests CEOs are most successful when they lead for 11+ years.
Signing off
It is a big week ahead, on Friday the US and China lower tariffs on billions of dollars worth of trade, as part of the signed phase one trade deal. After getting to $/R15.08 over the weekend, the Rand is a bit stronger and is currently at $/R14,98.
Sent to you by Team Vestact.
