Tuesday,
April 6, 2021

Market recap

Dow Jones

33,527.19

+373.98 (+1.13%)

S&P 500

4,077.91

+58.04 (+1.44%)

Nasdaq

13,705.59

+225.49 (+1.67%)

Uber

$57.40

-$0.20 (-0.35%)

GameStop

$186.95

-$4.50 (-2.35%)

Norwegian Cruise Line Holdings

$29.71

+$1.99 (+7.18%)

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Top Story

The Week Ahead on Wall Street

Economic Data

Today, US job openings for February will be released. Job openings in the US were 6.9 million in January. Analysts expect that number to increase slightly to 7.0 million for the latest reading.

On Wednesday, the February trade deficit, February consumer credit, and the Federal Open Market Committee minutes will be released. The FOMC meeting minutes provide a detailed snapshot of the Federal Reserve's prior policy setting meeting and shed light on the Central bank’s stance on monetary policy. Investors will likely be parsing through the minutes for any clues on what the Fed thinks about rising rates and potential inflationary pressure.

On Thursday, initial jobless claims and continuing jobless claims will be published. Jobless claims jumped to 719,000 last week, which was higher than anticipated. This week, the figure is expected to decline to 690,000.

On Friday, February wholesale inventories and the Producer Price Index for March will be released. The PPI measures the change in sale prices for raw goods and services in the US. The PPI increased by 0.5% in February and will be another closely watched inflation metric.

Earnings Reports

Today , Paychex Inc. (PAYX) reports earnings. The HR technology company recently won a 2021 Big Innovation Award from the Business Intelligence Group and was named a leader in real-time payments. With more employees working remotely and online payments gaining traction during the pandemic, investors will be eager to see what’s in store for Paychex.

On Wednesday , Lamb Weston Holdings Inc. (LW) will share its quarterly earnings. Lamb Weston is one of the world's largest processors of frozen french fries and other frozen potato products. Although bars and restaurants have been closed in certain states, more people were cooking from home over the past year. Wall Street will be curious to see how these trends impacted the food giant. Lamb Weston also recently announced it is investing $250 million to expand its Chinese processing capacity as it aims for growth overseas.

Simply Good Foods Co. (SMPL) will also report earnings on Wednesday . The healthy snack food company owns the Atkins and Quest Nutrition labels and will likely be expected to discuss what an economic recovery could mean for these diet-centric brands.

On Thursday look for an earnings report from Constellation Brands Inc. (STZ). The spirits company saw many of its main sales channels like bars, restaurants, and stadiums shut down during the pandemic. However, as pandemic restrictions ease, shares of Constellation Brands have increased recently. Constellation also owns part of Canopy Growth Corporation (CGC), a Canadian-based cannabis company. As more states legalize medicinal and recreational marijuana, Constellation could stand to benefit.

Conagra Brands Inc. (CAG) also reports quarterly results on Thursday . Over the past 12 months Conagra shares have risen nearly 20% as demand for packaged foods remained relatively robust. The company is also considering a sale of Hebrew National to JBS, the Brazilian hot dog producer, which could fetch Conagra around $700 million.

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LG Makes Plans to Exit the Smartphone Market

LG to Stop Smartphone Operations by July

LG Electronics (066570:KS), a South Korean electronics company, will exit the smartphone market this summer. LG was once the third-largest global smartphone maker and remains the third-place player in the US behind Apple (AAPL) and Samsung (005930:KS). However, the company has had difficulty keeping up with rivals recently and it wants to focus on other areas of its business. The decision followed a unanimous vote by the LG Electronics board.

LG will stop making and selling mobile phones by July 31. LG's mobile unit has been unprofitable for 23 consecutive quarters, and total losses stand at more than $4.4 billion.

LG Shifts its Priorities

By exiting the smartphone market, LG Electronics can focus on growth drivers including electric vehicle components, home appliances, and robotics. The mobile unit represented around 8% of LG's total annual revenue in 2020. LG warned the decision would hurt revenue in the coming months, but in the long run the changes will improve its financial health.

Analysts say that shedding its phone business could help the company’s annual profit increase by $708 million in the coming years. Investors cheered LG’s decision to stop smartphone production and the company’s shares climbed on the announcement.

LG Stuck in the Middle

LG's smartphone difficulties have not been because of a lack of innovation. The company, which entered the mobile phone market in 1995, won several innovation awards for phone designs and features. However, it failed to win in the high-end user segment, which is dominated by Apple and Samsung. Most of LG’s smartphone sales came from handsets priced at $300 or less.

LG's exit could pave the way for rivals with low-priced smartphones to gain market share. This could provide opportunities for Samsung, Google (GOOGL), and Chinese electronics companies. It is the end of an era for LG and investors are eager to see how the smartphone market will respond.

Alcohol E-Commerce Boom Drives Investment Buzz

Online Alcohol Sales Poised to Surge

Online liquor sales surged during the pandemic as shutdowns meant consumers were unable to buy liquor at stores, restaurants, and bars. Many investors believe that online alcohol sales are poised for continued growth even after the pandemic subsides. As a result, the sector has seen several major acquisitions, venture investments, and IPOs recently. Venture capital funding for alcohol ecommerce startups in 2021 is already closing in on the total for all of 2020.

According to a recent study, in 2024, global online alcohol sales are expected to surpass $40 billion. That's up from $5.6 billion in 2020.

Deals Abound in Q1

During the first quarter of the year, investors have rushed to gain a piece of the alcohol ecommerce market. On the mergers and acquisitions front, Uber (UBER) inked a deal to acquire Drizly. The rideshare giant is paying $1.1 billion for the alcohol delivery startup.

Meanwhile, Vivino, the mobile wine app which gives users recommendations and sells bottles online, secured $155 million in venture funding. The round was led by Kinnevik AB and Sprints Capital and included participation from GP BullHound and Creandum.

Gopuff, the delivery service which recently acquired BevMo, the alcohol seller, raised $1.15 billion in venture funding. The Series G round was led by D1 Capital Partners and Fidelity Management and Research. On the IPO front, Vintage Wine Estates announced it will tap the public markets by merging with a SPAC called Bespoke Capital Acquisition Corp. (BSPE)

Some Investors Remain Wary

Despite interest in alcohol ecommerce startups, some investors are choosing to stay on the sidelines until it becomes clear how and if consumer habits will change after the pandemic. “We don’t want to pay a higher valuation because someone did well in COVID,” said Catharine Dockery, a founding partner at Vice Ventures.

The companies which inked deals early in 2021 saw their valuations and demand for their services surge during the pandemic. Though online alcohol sales are expected to boom in the coming years, there will likely still be unexpected twists and turns for the industry as consumers begin to transition out of the pandemic.

Not-So-Breaking News

  • GameStop (GME) announced yesterday it may sell as much as $1 billion in stock. The video game retailer said it could offer a total of 3.5 million shares. Proceeds will go to expanding its ecommerce operations.
  • Norwegian Cruise Line Holdings (NCLH) is requiring COVID-19 vaccinations for all guests and crew who board its ships this summer. In July, the company plans to restart trips in the US at 60% capacity. It hopes to add 20% more passengers to its fleets departing from US ports every 30 days after that.
  • Tesla (TSLA) reported first-quarter vehicle deliveries of close to 185,000, surpassing Wall Street's expectations. The electric vehicle maker said it delivered 182,780 Model 3s and Model Ys cars and 2,020 Model S and Model X vehicles. Wall Street had expected Tesla to ship about 177,000 electric cars in the first-quarter. Tesla’s shares climbed on the news.
  • Warner Bros. (T) and Legendary's Godzilla vs. Kong raked in $32.2 million in box office sales during its weekend debut. It was shown in more than 3,000 North American theaters. This marks the largest weekend haul for a movie since the pandemic began. Globally, the film has earned $285.4 million.
  • US Treasury Secretary Janet Yellen called for a global minimum on the tax rate companies must pay. The move is aimed at preventing corporations from moving out of the US to find more favorable tax rates. Yellen said she's working on this initiative with G-20 nations to prevent a "race to the bottom."
  • How much wealth do you really have? Explore ways to calculate net worth and why you should.

Financial Planner Tip of the Day

“Stock market investing can be more appropriate for big goals in the distant future, such as saving for a child’s education or your own retirement, which could be 20 or 30 years down the line. This relatively long time horizon not only gives your investments a chance to grow, but it means that you also have the time to ride out market downturns that may occur along the way.”

Brian Walsh, CFP® at SoFi

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