Tuesday,
March 16, 2021
Market recap
Dow Jones
32,953.46
+174.82 (+0.53%)
S&P 500
3,968.94
+25.60 (+0.65%)
Nasdaq
13,459.71
+139.84 (+1.05%)
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Top Story
Blackstone and Starwood Acquire Extended Stay America
The Largest Hotel Sale Since the Pandemic Began
Blackstone Group (BX) and Starwood Capital Group are buying the hotel company Extended Stay America (STAY) for $6 billion. This is the largest sale in the hotel industry since the COVID-19 pandemic began.
Analysts expect that hotels’ revenue will not return to pre-pandemic levels for two to three years, but Extended Stay has outperformed the rest of the industry during the pandemic. Blackstone and Starwood have high hopes that the chain will continue to perform well in the near future.
Extended Stay Outperforms Hotel Industry Peers
Demand for leisure and business travel has tumbled during the pandemic. US hotel occupancy was about 65% just before the pandemic. In mid-April it fell to 22%. On average, it was about 44% during 2020. Extended Stay was able to maintain an occupancy rate of 74%.
Extended Stay is a hotel chain for guests booking for several weeks or longer. Its rooms are larger than a typical hotel room and most of them have kitchens. During the pandemic, healthcare workers and other essential workers needing to work away from home turned to Extended Stay.
Expectations for a Bright Future
Extended Stay owns 567 properties and it franchises an additional 82. About two thirds of its locations are in the top 25 US metro areas.Blackstone and Starwood expect that as the economy begins to reopen, construction workers, contractors, consultants, and other professionals will embark on long-term business travel to these areas. If this is the case, Extended Stay’s occupancy and balance sheets will stay strong.
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Stripe’s Valuation Hits $95 Billion
Stripe Has Nearly Tripled Its Valuation
Online payment company Stripe has secured $600 million in a Series H funding round, bringing its valuation to $95 billion. This is almost three times its last reported valuation of $36 billion from April 2020.With this new funding, Stripe has become Silicon Valley’s most valuable private company. It overtook SpaceX, which was most recently valued at $74 billion, and Instacart, which was valued at $39 billion earlier this month. Internationally, Stripe’s valuation is below that of privately-held ByteDance, the parent company of TikTok. The Chinese app developer was valued at $180 billion in December.
Stripe’s Role in the Ecommerce Boom
Stripe builds software which allows companies to accept online payments. As the pandemic set in a year ago, businesses both large and small shifted their operations online almost overnight. As a result, demand for Stripe’s services surged. “Several years of offline-to-online migration are being compressed into several weeks,” Stripe’s leadership explained during the company’s previous funding round in April.Many people have grown accustomed to the convenience of online shopping during the pandemic and may not return to their pre-pandemic habits even when more of the population has the COVID-19 vaccine. This means that Stripe could be positioned for even more growth.
Plans for the Future
With its fresh funding, Stripe will expand its operations in Europe. It also plans to launch in Brazil, Indonesia, and India later this year.Many Investors are curious about when the company might pursue going public. The company’s co-founder John Collison last year said Stripe has “no plans” to go public right away, despite its impressive growth and valuation.
EV Companies Set High Revenue Growth Goals
Three EV Makers Forecast $10 Billion in Revenue in Three Years
Electric vehicle startups are setting aggressive revenue growth targets. Faraday Future, Arrival Group, and Fisker (FSR) have all announced plans to top $10 billion in revenue within three years of beginning sales and production.For context, Google (GOOGL) reached $10 billion in sales over the course of eight years, which is the fastest a US startup has ever reached this milestone. Uber’s (UBER) sales hit this mark within nine years of its first sales, and Tesla (TSLA) took 11 years to hit $10 billion in revenue. Investors have conflicting views about whether or not these EV companies’ revenue goals are realistic.
EV Bears’ Opinions
Some analysts say these targets are overly optimistic because the EV sector is getting too crowded and the success of EVs is too dependent on government policies, which are subject to change.Other bears note that EVs currently make up only 2% of the automotive market in the US, and it may prove difficult to convince swaths of new customers to spend money on electric vehicles. More charging stations and other infrastructure is convincing some new consumers to buy EVs, but other people may be reluctant because of their price tag and because of concerns about charging.
EV Bulls’ Opinions
In contrast, EV backers believe that shifting consumer sentiment as well as more stringent government regulations will pave the way for an EV boom. EV bulls also say that because cars have such a high price tag, it takes a relatively small amount of sales to push revenue into the billions.EV optimists are also eying Tesla (TSLA) which has reached a market capitalization of $665 billion. Though Tesla’s share price has dipped in the past several months, it climbed more than eightfold in 2020. EV optimists believe that other startups in the sphere could also see this type of growth.
Not-So-Breaking News
- Roche is acquiring GenMark Diagnostics for $1.8 billion. The market for the type of syndromic panel tests GenMark makes is expected to top $2 billion by 2024.
- Academy Award nominations were released yesterday. Netflix (NFLX) received 35 nominations. Best picture nominees include Mank, The Father, Judas and the Black Messiah, Minari, Nomadland, and Promising Young Woman.
- AMC Entertainment (AMC) announced that it will reopen its California locations starting on March 19. Shares of the movie theater surged on the news.
- Canadian telecommunications company Rogers Communications (RCI) has agreed to purchase its rival, Shaw Communications (SJR) for $16 billion. The two companies hope to join forces as they roll out 5G service. However, they could face scrutiny from antitrust regulators.
- Gilead Sciences (GILD) announced it is collaborating with Merck & Co (MRK) to develop a two-drug HIV treatment. Shares of both companies climbed on the news.
- A self directed 401(k) plan allows you to add alternate investments to your portfolio, such as real estate. Read more about self directed 401(k) rules and options.
Financial Planner Tip of the Day
“It’s certainly not easy to prioritize investing for retirement. If you’re in your 20s or 30s, you might have student loans or other goals that seem more ‘immediate,’ such as saving for a down payment on a house or kid’s college. But setting aside a little every year starting in your 20s could make the difference between hundreds of thousands of dollars of accumulated investment earnings by retirement age. That’s one reason it’s important to begin planning for retirement early.”
Brian Walsh, CFP® at SoFi