Taking it in the (Padded) Shorts

‘How to lose $9B in one day’ is not a new Kate Hudson rom-com, but instead is the absolute disintegration of Peloton’s (PTON) market cap on Friday. Shares were down an astounding 35% following a massive miss on earnings and cutting forward guidance. Right now, thousands of dads across the country are feeling quite smug thanks to their DIY solutions of duct-taping an iPad to an old Schwinn exercise bike.

• The company appears to be making some operational changes, announcing a hiring freeze and a slowdown in showroom openings.
• Friday exacerbated a tough 2021 for Peloton, which is down about 63% YTD.
• 2020 was a monster for the company, up 434%, but it appears that much of 2021’s growth was pulled forward into those results.
• And on an embarrassing note, CEO John Foley’s net worth dropped from billionaire status to a paltry $850M. Cue Gary Gulman.

Belief in the reopening trade will most likely be the main driver of PTON for the near future. If people flock back to the gym then names like Planet Fitness (PLNT) could come back from the dead and outperform Peloton. That especially rains true if the traditional pattern holds of gyms being crowded in January but emptying out by March while members continue to have their dues auto-debited.

Pfize on the prize

Shares of Pfizer were up almost 11% on Friday after a study showed that their COVID-19 treatment pill reduced hospitalizations and deaths in high-risk patients by 89%. I’m not a doctor but that sounds good. That result really rains on Merck’s parade, since their pill, molnupiravir, only reduces deaths and hospitalizations by 50%. MRK shares slid nearly 10% on Friday.

• Meanwhile the only thing Moderna knows how to reduce is their own share value. After posting flimsy Q3 earnings, MRNA stock tumbled over 16% on Friday, leaving Pfizer no competition for the COVID-treatment crown.
• Merck’s head start means they’re technically still in the game. Their pill’s already on the market, while Pfizer’s still needs emergency authorization from the FDA, who’s currently reviewing PFE’s product.
• This pill is just the Pficing on the cake. Last week, Pfizer’s Q3 earnings had already beat estimates, with revenue outpacing predictions by over $2B thanks to their vaccine. They already had the upper hand going into Q4, but their pill has turned a battle into a smackdown.

The combination of Pfize’s baller study and the strong performance of their injectable vaccine means that the FDA is probably going to push emergency authorization as fast as possible. Between booster shots and the potential FDA approval of this pill, Pfizer is likely to have a strong couple of quarters coming up.

Bridging the gap

After hours and hours of pushing and straining (and intraparty negotiating) on Friday, Congress passed a $1T infrastructure bill that will hopefully fix that one pothole you always hit on your way to work. $555B of the legislation will go to fixing necessities like gas mains, roads, and trains, as well as funding renewable energy initiatives and mitigating climate disasters. *Joe Manchin’s withered coal-powered heart beats its last*

• Because six progressive Dems voted against the package, it would have died on the House floor without the support of thirteen Republicans, making its passage technically a bipartisan effort. We forgot what that word meant.
• The lefties who voted against were holding out for Biden’s much larger and more controversial $1.75T (previously $3.5T) social spending bill, Build Back Better. They wanted to vote on the larger bill before this one so that they could force moderate Dems to vote for BBB by holding the smaller infrastructure bill hostage.

Now that the infrastructure bill has passed, Democrats are inoculated from the charge that they’ve been ineffective in power. Huge spending on social welfare, health care, and renewables aren’t guaranteed. What you can bet on are solid performances from the construction sector and from raw materials such as concrete, cement, and gravel, since the $1T bill locks in spending on highway maintenance and transit projects.

There’s apparently a lot of money in antivirus screen pop ups, as McAfee (MCFE) is nearing a deal to sell itself to Advent International and Permira for around $10B. The company, founded by the most interesting man in the world, the late John McAfee, is partially owned by private equity firms TPG and Thoma Bravo, along with Singapore’s sovereign wealth fund.

• MCFE shares were up about 20% on Friday, closing at $25.46.
• McAfee shares are up about 50% over the past 12 months, outpacing the S&P 500’s 34%.
• If you need a diversion from a tedious conference call, check out John McAfee’s Wikipedia page, it’s quite the rabbit hole.

The cybersecurity space has been popular for dealmaking recently, with NortonLifeLock (NLOK) buying Avast for $8B and Microsoft (MSFT) purchasing RiskIQ. If the trend continues, figuring out who’s next may be the play, so maybe keep an eye on Crowdstrike (CRWD) and Palo Alto Networks (PANW). Seriously though, those pop ups are annoying and are getting in the way of me trying to figure out whether or not John McAfee really killed himself in that Spanish prison.

Hey Trevor Milton, Hold my Beer

Shares of electric van maker Workhorse (WKHS) plummeted Friday after it was announced that the U.S. Justice Department had opened up an investigation into the company. Details regarding the inquiry were not disclosed in the filing. The company has also been under investigation by the SEC since September, making it the third EV company to face review by federal prosecutors and regulatory agencies in the last 14 months. Looking at you Nikola and Lordstown Motors. Let’s review the last eight months for Workhorse.

• The United States Postal Service awarded a $6B contract to Workhorse’s competitor Oshkosh Corp. to produce a fleet of new vehicles for the mail carrier that will undoubtedly not make deliveries any faster.
• Since July, the company has installed a new executive team (red flag), withdrew financial guidance (redder flag), and stopped production of their vans (reddest flag). Call me old school, but I think a vehicle manufacturer should, you know, manufacture vehicles.
• The stock closed the day down 9.4%, which is 85% off its high of $42.96 put in on February 4th of this year.

William.com Just Didn’t Sound

Right

Software company Bill.com announced its fiscal Q1 earnings that topped analysts’ estimates, as well as included a favorable outlook for upcoming quarters. Shares of the company rallied to an all-time high of $343.50, before closing Friday’s trading session up 13.8%. Bill.com provides software that allows small to medium sized businesses to automate back-office operations, thus freeing the human race from mind-numbing activities such as writing manual checks and playing “find the invoice” in overstuffed filing cabinets.

• Adjusted EPS came in better than expected with a loss of $0.15/share compared to Factset’s analysts’ estimates of a loss of $0.21/share.
• Revenue grew an astounding (and not sustainable) 152% from a year earlier to $116.4M vs. analysts’ estimates of $104.7M.
• The company expects Q2 top and bottom line estimates of an adjusted loss between $0.17-$0.18/share on revenue of $130M-$131M vs Factset’s estimates of a loss of $0.23/share on revenue of $117.6M.

That was unexpected

Christmas came early on Friday with the October Jobs Report, which brought news that the U.S. added 531k jobs last month and dropped the unemployment rate to 4.6%. Not only did both figures beat estimates, but wages were higher and employment gains occurred across the board. Someone might want to tell Jerome Powell.

• Don’t pop bottles just yet, but some numbers in the report suggested that the economy might never fully recover to pre-pandemic levels. The stabilizing unemployment rate is still a full percentage point above its resting place at the beginning of 2020, and total labor force participation is still 4.2M away from where it was pre-COVID.
• A more complete picture of recovery will come this Wednesday when October’s CPI data drops, giving us a better understanding of inflation’s effect on consumer sentiment.