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December 14, 2020

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The Week Ahead on Wall Street

Economic Data

There are no economic data reports scheduled to be released today.

Tomorrow November industrial production, November capacity utilization, the November import price index, and December’s Empire State Index will be published. The Empire State Index is the result of a monthly survey of manufacturing activity in New York state. It helps investors and industry professionals get a sense of manufacturing sentiment and statistics in New York, and the direction of the sector across the country.

On Wednesday December’s Markit manufacturing PMI, Markit services PMI, and NAHB home builders' index will be released. PMI refers to the Purchasing Managers Index, a measure of manufacturing trends that can guide decisions for business leaders, market analysts, and investors. November retail sales will also be announced on Wednesday. The National Retail Federation expects retail sales to rise between November and December with the holiday shopping season. In October retail sales rose just 0.3%, which was lower than economist estimates of 0.5%.

On Thursday November housing starts, November building permits, and initial jobless claims are published. Last week first-time unemployment filings jumped to 853,000—well above economist estimates of 730,000. The latest figure is the highest it’s been since September and is the first time since October that it has risen above 800,000.

On Friday November leading economic indicators and the Q3 current account deficit will be released. The account deficit in Q2 was -$171 billion.

Earnings to Keep an Eye On

On Wednesday Herman Miller (MLHR) will release its latest results. Amid a pandemic that has battered office-centric businesses, the furniture company has expanded in-home offerings with the release of a special edition Sayl chair for gaming. At least two trends could combine to give Herman Miller a good quarter: more people are working and spending time at home, and more people are playing video games. Wall Street will be watching to see if the push of at home products offset lost business in the office-arena.

On Thursday FedEx Corp (FDX) will announce its earnings. The shipping company is well-positioned to take advantage of the pandemic-related boost in e-commerce sales. FedEx earnings nearly doubled what analysts expected earlier this year, and Wall Street expects the run to continue. FedEx’s stock is currently up around 200% since its March lows.

General Mills Inc (GIS) will also announce earnings on Thursday. General Mills sales surged along with other packaged food companies during the pandemic. The company is hoping to hold on to customers with new products and increased marketing in the coming year. Investors will be paying close attention to future guidance from General Mills in terms of how they are thinking about retaining the influx of 2020 customers—especially if a vaccine allows people to venture out more in 2021.

On Friday Nike (NKE) will release its latest results. Last quarter the athletic apparel giant beat revenue estimates by more than $1 billion. Wall Street expects strong performance to continue with holiday sales. In a hint at which retailers are leading in sales this season, UPS set limits on the number of packages delivery drivers could pick up from Nike stores in certain locations.

Lastly Darden Restaurants (DRI) will also release earnings on Friday. Fast-casual chains like Darden Restaurants have boomed on coronavirus vaccine news, with shares of spiking more than 17% in November. A recent surge of infections across the country is worrisome for chains like Darden. Investors will be asking for guidance heading into what is expected to be a tough first quarter of next year.

The Week Ahead at SoFi

It’s getting cold outside, but our events are coming in hot. Join us this week for a variety of virtual experiences—from mastering LinkedIn to investing in a volatile market. Catch them on Zoom, Twitter, and LinkedIn. Register for upcoming events in the SoFi app, and catch up on past events on our YouTube channel.


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Disney Investors Look Ahead

The Remarkable Success of Disney+

Disney’s (DIS) debut in the streaming market with Disney+ has been far more successful than executives expected. After launching just one year and one month ago, Disney+ now has 86.8 million paying customers, which is where the company originally hoped it would be after five years. People flocked to the streaming service during the COVID-19 pandemic looking for a way to entertain their kids and for nostalgic content during a stressful time.

Disney hopes the roaring growth for its streaming service will continue even after the pandemic subsides. At Disney’s investors day last week, the company’s CEO Bob Chapek shared that Disney now aims to have 230 million to 260 million Disney+ subscribers by the end of 2024.

Competing With Netflix

Netflix (NFLX) is still the name to beat in the streaming world. The company has almost 200 million subscribers globally. Netflix also got a boost at the onset of the pandemic, but currently it is not growing as quickly as Disney+.

Analysts expect that Netflix will have about 300 million subscribers by 2024. If Disney+ reaches its four-year goal, it will be much closer to Netflix in size than it is now. Disney also owns Hulu and ESPN+, so if these services continue to be successful, Disney’s combined streaming subscriber numbers could be higher than Netflix’s in four years.

Additionally, Netflix’s business model is almost entirely based on streaming, whereas Disney typically has revenue streams coming from movie theaters and other sources. Some investors feel that Disney will be better able to adapt to changing consumer habits if and when people return to pre-pandemic routines.

Planning for a Return to Movie Theaters

Wall Street has been keeping tabs on the success of Disney+. Disney shares reached all-time highs recently despite the fact that the company’s theme park division has missed out on billions of dollars in revenue due to the pandemic. Disney reported its first quarterly loss since 2001 last month.

At Disney’s investor day, it shared plans and projections for several high budget, high-profile shows on Disney+ through its Marvel and Lucasfilm divisions. The company also discussed a number of movies which were originally slated to come out in theaters, but will now debut on Disney+, including the much anticipated Pixar film Soul, which will be released on Disney+ on Christmas Day.

In addition to sharing near-term plans for Disney+, the company also shared plans for releasing films like Black Widow in theaters once consumers return to pre-pandemic moviegoing habits. Investors seem confident that Disney will be able to adapt and deliver the kind of entertainment customers need no matter what the next year brings.

Hyundai Buys Majority Stake in Boston Dynamics

A Win-Win Partnership

Hyundai (HYMTF), the South Korean automaker, announced it is purchasing a controlling interest in Boston Dynamics, the semi-infamous robotics company. The investment values Boston Dynamics at $1.1 billion. Through the deal, Hyundai will own an 80% stake in the company and SoftBank (SFTBY) will control the remaining 20%.

The deal will have advantages for both companies. Boston Dynamics will gain access to Hyundai’s in-house manufacturing resources, which will allow it to scale production of its products. Hyundai, on the other hand, will have the opportunity to incorporate Boston Dynamics’ technology into a number of projects it is working on, from automated factories to self-driving cars to delivery robots.

P.S. SoftBank is also a SoFi investor.

Hyundai’s Investments in Robotics

This deal marks the third time Boston Dynamics has changed hands in just seven years. The company was founded at MIT in 1992 and operated as a research firm until Google (GOOGL) bought it in 2013. It was then sold to SoftBank in 2017.

Hyundai has recently made several investments in the robotics industry. It is working on commercializing autonomous driving systems through a partnership with Aptiv (APTV). Hyundai is also developing an all-terrain “walking” car called Elevate. The company says its Ultimate Mobility Vehicle (UMV) could be used for disaster relief, or even for missions to other planets.

Boston Dynamics’ Projects

Boston Dynamics has been at work on science fiction-like projects of its own. It has built and launched a robot that can perform repeated tasks with human-level mobility.

The company also gained attention for its four-legged robot, nicknamed Spot, which can climb stairs and navigate uneven terrain. Spot costs $74,500 and has not sold in large quantities. But now that Boston Dynamics has partnered with Hyundai, the technology used for Spot and other Boston Dynamics projects will be leveraged in new ways.

Not-So-Breaking News

  • Pfizer (PFE) shares bucked the negative trend on the final day of the week after the FDA Advisory Committee voted overwhelmingly to recommend emergency approval of its COVID-19 vaccine.
  • In order to raise new funds, Nio (NIO) is planning to sell up to 69 million new shares in the US. The China-based electric car maker is following in the footsteps of other electric vehicle companies, like Tesla (TSLA), who have recently made similar moves.
  • AMC (AMC) secured a $100 million investment, butthe theatre giant still needs $750 million of additional liquidity to stay afloat through 2021. If AMC can't secure more funding it may be forced to enter bankruptcy proceedings.
  • MetLife's (MET) US property and insurance business is being acquired by Swiss insurer Zurich Insurance (ZURVY) for $3.94 billion. The deal helps Zurich expand its footprint in the United States and gives its subsidiary Farmers Group access to MetLife’s 7,700 agents.
  • Bloomberg reported that Apple (AAPL) is building its own cellular modem for future devices. The move might replace components currently made by Qualcomm (QCOM), causing shares of the semiconductor giant to fall.
  • Finals week doesn't have to be a disaster. Check out these four tips for surviving finals week that will help college students get to the other side of finals and with good grades.

Financial Planner Tip of the Day

"As you’re shopping online be sure to avoid holiday scams. When shopping online, it’s best to stick with reliable and trusted retailers. If you see an incredible deal from an unknown site there’s a very good chance it is just too good to be true."

Brian Walsh, CFP® at SoFi

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