09/17/2020

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Tuesday,
September 29, 2020

Market recap

Dow Jones

27584.06

410.10 (1.51%)

S&P 500

3351.60

53.14 (1.61%)

Nasdaq

11117.5

203.96 (1.87%)

Amazon

$3,174.05

$78.92 (2.55%)

Uber

$35.565

$1.105 (3.21%)

Spotify

$236.42

$0.44 (0.19%)

Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority. For more information on COVID-19 and your finances click here.

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Top Story

Amazon’s Prime Day is Two Weeks Away

Amazon Could See a Record-Breaking Q4

Amazon’s (AMZN) Prime Day usually gives the company a boost during the summer, a season when sales tend to be low. This year, however, Amazon decided to postpone Prime Day until the fall because the company was overwhelmed dealing with the pandemic-induced spike in demand for its services during the spring and summer.

Amazon confirmed yesterday that the shopping extravaganza will take place October 13 and October 14 this year. Analysts are saying this could lead to a record-breaking fourth quarter earnings report for Amazon.

Keeping Up With Competing Membership Services

Amazon created Prime Day in 2015 as a way to entice new members and drive sales during the summer lull. In 2019, the company made Prime Day a two-day event for the first time. Last Prime Day, Amazon sold over 175 million items—more than it sold on the previous Black Friday and Cyber Monday combined. Though Amazon does not report Prime Day revenue, analysts estimate that the company made over $7 billion from the two day event last year.

Amazon has over 150 million Prime members around the world, 50 million of which have been added over the past two years. Recently, companies like Walmart (WMT) began offering competing membership opportunities for customers, so Amazon will be looking to maintain its dominance through Prime Day offerings this year. Amazon already said it will offer discounts on popular items like its Fire TV products and Echo smart speakers, as well as many other deals.

The Potential Impact on Amazon’s Shares

Amazon is also looking at Prime Day this year as a test run for what is expected to be the busiest ecommerce holiday shopping season ever. Because people will likely be traveling less and doing less in-person holiday shopping this year, ecommerce companies are gearing up for a huge spike in demand. Amazon already hired hundreds of thousands of workers to deal with increasing demand. Earlier this month the company announced it would add 100,000 new jobs in the US and Canada to help with the holiday boom. Additionally, Amazon will increase its fulfillment center square footage by about 50% this year.

Amazon’s stock climbed by over 60% this year so far, and is currently priced at about $3,000 per share. If the company can show that it has the capability to handle a spike from Prime Day ahead of the holidays, and if it can stay ahead of competing membership services, shares of the company could be pushed even higher.

Prime day is just two weeks away. Both investors and customers are eager to see what Amazon has in store.

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Uber Wins a Lawsuit in London

Uber is Granted an 18-Month License

Uber (UBER) won an important legal battle in London. In November of 2019, Transport for London, the UK capital’s transportation regulator, revoked the rideshare giant’s taxi license. The British regulatory group was particularly concerned about unauthorized drivers picking up passengers.

Uber was allowed to continue operating while an investigation unfolded. Yesterday, a judge ruled in favor of the company and restored its license for 18 months. On news of the decision, Uber’s shares rose 6% in premarket trading. Its shares ended the day up 3.21% yesterday.

London is Uber’s Largest European Market

There are about 3.5 million Uber users and 45,000 Uber drivers in London, making it Uber’s largest European market by a long shot. A ban in London would have been a huge blow for the company.

In response to regulators’ concerns about safety, Uber put a number of new security features in place, including a system to check drivers’ identities with a combination of facial recognition technology and human reviewers.

Uber Faces Other Lawsuits Around the World

The case in London is one of several lawsuits Uber is dealing with around the world. In California, Uber is fighting legislation that would force it to classify its drivers as employees instead of contractors.

The company is up against a similar lawsuit concerning minimum wage, holiday pay, and other benefits for its drivers in the UK. The case has made it to the country’s supreme court and a verdict will likely be released by the end of the year.

Uber was an early leader in the gig economy. The results of the lawsuits facing the company could result in changes for gig workers across a variety of sectors. For now, Uber will be permitted to continue operating in London, and investors seem to be cheering the news.

Podcaster Wondery Contemplates Its Next Move

A Wondery Sale Could Be the Largest Transaction in Podcast History

Wondery Inc, which creates podcasts like “Dr. Death” and “Dirty John,” is exploring a variety of strategic options, including a possible sale. If Wondery decided to go this route, analysts expect that the company would sell for at least $200 million, or double that. If the company sold for $400 million, it would be the largest transaction in the podcasting industry to date. Wondery may also decide to raise money from investors or to make a deal with a special-purpose acquisition company.

Numerous sectors of the media industry have been working to invest in podcasts recently, from record labels, to streaming services, to TV networks. Spotify (SPOT) recently spent hundreds of millions of dollars buying podcasters Gimlet Media, the Ringer, and Parcast. Similarly, SiriusXM (SIRI) recently agreed to acquire the podcast company Stitcher. Numerous companies from a variety of different media sectors could be eager to acquire Wondery.

Wondery’s Strategies

Wondery was founded four years ago and has since produced some of the world’s most beloved podcasts. It also handles distribution and advertising sales for dozens of shows produced elsewhere, which reach about 9 million listeners per month. The company’s revenue has gone up by about 75% from a year earlier and is expected to top $40 million this year.

Though advertising is the main source of revenue in the podcast industry, Wondery found ways for about 25% of its sales to come from other sources. For example, the company recently debuted its own app, which gives Wondery some independence from large podcast platforms. The app costs $4.99 and gives users access to bonus features and sneak peaks of shows. Additionally, Wondery sold the rights to some of its material to TV show producers.

Podcast Listenership Is on the Rise

The podcast industry has boomed in recent years. In the US, the amount of people listening to podcasts monthly has grown by 54% since 2017.

While some analysts worried the COVID-19 pandemic would negatively impact podcast listenership because people are not commuting as much, it appears that the opposite has been true. People have more time on their hands and fewer human interactions, so they are turning to podcasts more than ever. This could lead to even more growth for Wondery and the podcast industry as a whole. Investors will be eagerly watching to see if Wondery decides to pursue a sale or another strategy in the coming months.

Not-So-Breaking News

  • Oracle, (ORCL), Walmart (WMT), and TikTok parent company ByteDance are still discussing how to transfer TikTok’s US operations to the two domestic companies. The White House threatened to block TikTok from being downloaded on US app stores as of last Sunday, but a judge ruled to block this order, so TikTok will stay on US app stores as the negotiations unfold. However, the court did not counteract a larger ban on TikTok, set for November 12, if the American companies do not reach a deal with ByteDance.
  • JD Health, the healthcare branch of Chinese ecommerce superpower JD.com filed for an IPO in Hong Kong. Just three months ago, JD.com raised $3.8 billion when it listed in the city. JD health has not yet announced when the IPO will take place, or what the price of shares will be.
  • Cleveland-Cliffs (CLF), an iron-ore mining company, reached a deal to pay $1.4 billion in cash and stock for the US operations of ArcelorMittal (MT), a Luxembourg-based steel and mining company. The deal will make Cleveland-Cliffs the biggest iron ore pellet maker and the largest flat-rolled steel producer in North America.
  • Big Hit Entertainment, the music label behind BTS, the wildly popular K-pop boy band, priced its shares ahead of its long awaited IPO. The company will offer shares for about $115 each, which would raise about $820 million in total. Big Hit shares are expected to begin trading in October.
  • Yesterday, Caesars Entertainment (CZR) announced it is in talks with William Hill (WMH), a UK sports betting company, about a $3.7 billion takeover. William Hill also received an offer from Apollo Global management. This could be the beginning of a bidding war as companies vie for dominance in the growing US sports betting market.
  • Contrary to common belief, not all debt is considered to be bad. Head to SoFi Learn to find out the difference between good and bad debt—and how to find a balance between the two.

Financial Planner Tip of the Day

"With investing, you can’t guarantee against the possibility of loss completely. But spreading your assets out reduces your vulnerability because your money is distributed across areas that aren’t likely to react in the same way to the same occurrence."

Brian Walsh, CFP® at SoFi

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