Bright Spots in the Economy & Tech ??

In this issue of the Peel:

• ?? A blowout jobs report sent stocks flying higher for the week!
• ?? It is (was) a good day to invest in tech, as Meta and Amazon killed it.
• ?? Another multi-billion dollar tech giant is going public—guess who?

Market Snapshot ??

Banana Bits ??

• New York, Los Angeles & Dallas are battling it out to determine the host site for the next World Cup
• Stay calm folks. Japan issued a statement assuring Taylor Swift will make it to the Super Bowl
• Bond King, PIMCO expects the Fed to cut rates by 75 basis points in 2024
• Tech giant, Reddit has selected the New York Stock Exchange for its upcoming IPO

CapLinked’s Data Room is (Literally) Paradise

We joke that a good data room is paradise. But what if your VDR provider sent you to actual?paradise?

That’s exactly what CapLinked is doing. Because they know their data room — which is the most intuitive VDR on the market — can make your workday?almost?as easy as kicking back on the beach.

So they’re sending clients who open an enterprise-level data room?on a luxury trip to Thailand.?Because they deserve it.

But now’s your last chance to get in on the action if you haven’t already —?get the ball rolling on a new Enterprise VDR?before the end of the month to claim your PTO.

Macro Monkey Says ??

Land of the Free, Home of the Employed

According to the latest Nonfarm Payrolls report that just dropped, consumers are in better shape than ever. The US economy added 353k jobs in January, which is a surprise to the upside by even the most optimistic economists’ predictions.

Expectations vs. Reality

The whisper number ahead of the report called for 177k new jobs. The actual number was double that despite attention-grabbing headlines about mass layoffs at technology companies. It’s easy to read about Amazon, Apple, and Meta firing thousands of employees and taking it as a representation of the world at large. Outside of the tech bubble, however, employers are adding roles at a record pace. The unemployment rate has held steady at 3.7% for the past two years, the longest stretch it has remained below 4% since the 1960s.

Source

?

Granular Look

Prior to this year, job gains were primarily concentrated in a few sub-industries that were still recovering from the pandemic. This time, wealth was shared between professional and business services (mostly white-collar office jobs), which added 74k positions, and blue-collar jobs. Healthcare roles were a bright spot, adding 70k jobs, with the most roles seen in ambulatory health care, hospitals, and nursing homes. The retail industry added another 45k jobs, and local and federal governments notched 36k. Additionally, most workers saw a small increase across the board. Average hourly wage growth rose 0.6% to $34.55 per hour, largely because of a rise in higher-paying industries.

Source

?

Recession Retraction Statements

Over the past year, there have been plenty of economic fearmongers out there. This report had to knock the wind out of their sails. Robust consumer spending, wage growth, and job additions are pretty much the exact opposite recipe for an upcoming recession. According to Jason Furman, a notable Harvard economist and former adviser to Obama, “The continued strength in the labor market is truly stunning and yet more evidence that we’re not close to having been in a recession.” Whenever a new jobs report is released, prognosticators also look back in the rearview mirror for any past adjustments. This exercise indicated that the labor market was even stronger in 2023 than originally thought.

Source

Presidential Implications

Of course, no politician will ever waste an opportunity for self-promotion. The Biden administration is touting this jobs report as a victory, highlighting legislation such as the American Rescue Plan and the Inflation Reduction Act as catalysts for job growth. On the flip side, whenever these economic reports show a downtrend in the economy, it’s usually crickets from the active administration.

What's Ripe ??

Meta (META) ??20.3%

• Meta (FKA Facebook) showed itself to be a winning platform after delivering a blowout earnings report. Not only did the company report revenue that exceeded expectations, but it rewarded investors with the first dividend payment in the company's history.
• While AI hype drove some of the earnings beat, most of it had to do with simple, old-fashioned cost-cutting. Tech companies, and Meta in particular, have been cutting the fat lately. They’ve slashed tens of thousands of jobs in order to firm up earnings. Seems to be working.
• Oh, and about that dividend, Mr. Zuckerberg’s ownership in the company will net him about $700mn. I can imagine the stoicism on his face when he heard the good news!

Amazon, Inc. (AMZN) ??7.9%

• This was a moment in the sun for tech stocks as Amazon followed Meta with another solid report. Amazon Web Services continues to be a bright spot for the company.
• In fact, Amazon’s stock performance has been so good as of late that Jeff Bezos decided to cash in on the action. He plans to sell 50mn shares, which, according to my calculations, is roughly $8.5bn dollars.
• Normally, for a CEO, or former CEO in this case, getting rid of that much stock would be a negative signal to the market. However, given the company’s past growth and future growth potential via AWS combined with AI tailwind, investors are more than forgiving.

What's Rotten ??

Atlassian Corp (TEAM) ??14.7%

• Unfortunately, Atlassian did not join the tech party, instead, they were watching from the outside. The Aussie company saw its shares drop 14%. That is one of its worst 1-day performances on record. Oyyy.
• Adding insult to injury, the company actually had a pretty good quarter. They posted their first revenue of over $1bn, added 300k customers, and shrank net losses. So, what’s the problem?
• Investors like to focus on the tiny details. While overall revenue was up, revenue in the Cloud Division was a bit tepid. Still, Aussie billionaire co-founders Scott Farquhar and Mike Cannon-Brookes are committed to the growth story and continue to maintain their 20% position in Atlassian. Unlike Bezos, they’re not selling a single share.

Charter Communications Inc. (CHTR) ??16.5%

• A headline that should surprise no one. An old-school cable TV company that refuses to innovate is losing cable TV customers. Charter announced that it lost 61k customers to the likes of Netflix, Disney+, and Hulu.
• I wasn’t being fair. It’s not like they’ve done nothing to innovate. The Federal Government implemented a subsidy to expand internet and cable service. The Affordable Connectivity Program offers $30/month in broadband assistance. So, someone else tried to innovate, and they didn’t reject it.
• Still, the three largest US providers have lost a combined 983k broadband customers in the past 3 months. Charter’s customer base is just 5mn people in the U.S., less than 2% of the entire population. At this point, it feels like we’re all witnessing the slow but inevitable downfall of the former iconic child star.

Thought Banana ??

Tech Titan Reddit: Testing IPO Waters

The San-Francisco based tech platform offering communities where people can dive into their true passions (even if that passion is being an incel) is finally going public. Co-founders Alexis Ohanian (better known for being Serena Williams’ husband) and Steve Huffman have been pump-faking for quite some time. Huffman initially talked about an IPO in 2017, then the company filed paperwork in 2021, only to call it off during the bear market in 2022. This time, though, the company looks ready to pull the trigger.

Reddit, founded in 2005, boasts 70 million daily active users who share their (mostly harmless) thoughts and opinions with each other. Famously, it became home to the “WallStreetBets” subreddit, where Roaring Kitty and his evangelists took down an entire hedge fund. 2021 was an epic year.

Testing the Waters

Prior to the big day, companies and investment bankers often conduct testing-the-water meetings with potential investors. These meetings help to determine where the demand lies for shares and, thus, where bankers should price the stock. Reddit is reportedly looking for a valuation of $5 billion. This doesn’t seem to match investors’ expectations. Potential buyers on private platforms like Rainmaker Securities and Forge Global Holdings show otherwise. Based on bids placed for the stock in private rounds, Reddit is worth between $4.5 - $4.8bn. For this IPO to work, either bankers or the company are going to have to lower the price range, or investors will need to increase their appetites.

Source

Bellwether

In many ways, Reddit’s IPO will serve as a bellwether for the tech industry, where IPO listings have been tepid after the 2020-2021 deluge. 2022 was a year of reckoning for many companies that demanded premium valuations. Take Instacart, for example, which slashed its valuation from $39bn in 2021 to an IPO valuation of $9.9bn. So far, Instacart’s stock hasn’t had a great showing post-IPO, falling to $7.1bn.?

Reddit, which was valued at $15bn in 2021, has had to humble itself down to $5bn and may have to go even lower. The success of this IPO will determine where the real demand is for new tech shares. Reddit could either be a solid, stable stock to add to your portfolio or the greatest pump and dump of all time.?

Banana Brain Teaser ??

Friday ??

When a rectangular vat that is 3 feet deep is filled to two-thirds of its capacity, it contains 60 gallons of water. If 7.5 gallons of water occupies 1 cubic foot of space, what is the area, in square feet, of the base of the vat??

Answer: The area of the base of the vat is 4 square feet.

Today ??

Items that are purchased together at a certain discount store are priced at $3 for the first item purchased and $1 for each additional item purchased. What is the maximum number of items that could be purchased together for a total price that is less than $30

Send your guesses to [email protected]

Wise Investor Says ??

“Capital Markets reward you for what you learn that other people have yet to ascertain” — Ken Griffin

How Would You Rate Today's Peel??

??All the bananas? ? ? ? ? ? ? ? ? ? ? ? ???Meh? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ??Rotten AF

?

Happy Investing,

David, Vyom, Jasper & Patrick