Amazon’s Big Bet, Oracle Eyes TikTok, Robinhood, Home Depot and Walmart

Amazon bets on office-based work, Oracle enters the TikTok race and Robinhood, Home Depot and Walmart post impressive numbers.
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(By Sundry Photography)
(By Sundry Photography)

Good morning! Today’s word count is 1,338 words, or an 8-minute read. Let’s get to it:

“The S&P 500 hit a new intraday high as investors awaited further developments on the stimulus package and U.S.-China trade relations,” The Wall Street Journal writes.

  • S&P 500: $3,387.04
  • Nasdaq: $11,170.80
  • Bitcoin: $12,270.15
  • U.S. 10-Year: 0.669%

Justin Oh’s Quick Read

Despite Home Depot’s ($HD) 23 percent quarterly sales growth from consumers doing more DIY projects, the stock looks unattractive to me at $285 per share. It’s a solid, high-quality retail business. But buying in at approximately 18x forward EBITDA is too high, especially when faced with possible tighter consumer spending without further stimulus and Covid-19 vaccines potentially coming over the next 3-4 quarters.

Amazon Bets on Office-Based Work with Expansion in Major Cities

Amazon plans to expand its physical offices in six U.S. locations – New York, Phoenix, San Diego, Denver, Detroit and Dallas — which reinforces its long-term plans to return to office work.

Why It Matters

Amazon is going against the pandemic-influenced grain.

  • Google, Facebook and Uber have already told employees they can work from home until next summer.
  • Twitter told employees they can work from home indefinitely, and Facebook is eyeing a more permanent remote policy over the next decade.
  • Amazon sent employees home when the pandemic hit, but only until Jan. 8.

Expanding into New York City shows big tech isn’t done settling in major cities.

  • Amazon purchased the Fifth Avenue building for more than $1 billion.
  • Facebook also agreed to lease the entire office space at the James A. Farley Building in Midtown Manhattan.
  • “Urban locations remain core to Amazon’s company structure and provide needed talent pools that it expects will remain robust,” according to Amazon Vice President of Workforce Development Ardine Williams.

Part of this shift to remote work is due to cost-cutting woes, which Amazon isn’t experiencing.

  • Despite early struggles to meet demand, Amazon has doubled down and grown in size and power during the pandemic.
  • The company generated nearly $90 billion in sales and took on 175,000 new warehouse workers in the most recent quarter.

Amazon has eyed expansion for a while.

  • The new growth strategy comes a year after Amazon’s plans to establish a second headquarters in New York crumbled.
  • The company says the expansion strategy isn’t “derived from or linked to any financial incentives from local or state governments.” Amazon was set to receive around $3 billion in tax incentives for its second headquarters plan.
  • But the Jeff Bezos-led outfit is getting a discount in some areas – Amazon is receiving some building incentives in the Fifth Avenue building deal that will reduce the cost of refurbishing the space.

Numbers to Consider

  • 900,000 Square Feet – The amount of office space Amazon is preparing to add across six cities.
  • $88.9 Billion – Amazon’s total sales generated in the most recent quarter.
  • $3,212.00 – Amazon’s open price Tuesday.

Read More: (WALL STREET JOURNAL)

Oracle in Early Talks with ByteDance to Buy TikTok

*Oracle has entered the chat*

“Oracle, an enterprise software giant, is in talks to acquire social media company TikTok’s U.S., Canadian, Australian and New Zealand assets,” CNBC writes.

Why It Matters

It’s a challenge to Microsoft.

  • Microsoft has been working on a potential acquisition for a month, even before President Trump signed the executive order mandating a sale.
  • Other companies, such have Twitter, have expressed interest. But Twitter’s size alone makes an acquisition of this magnitude tough without outside help.
  • Oracle’s market capitalization pales compared to Microsoft’s, but the former is still big enough to try and provides a legitimate alternative for ByteDance.

Oracle may have an inside track.

  • The company is working with a group of U.S. venture capital firms that already have a stake in TikTok, including General Atlantic and Sequoia Capital.
  • It’s also hard to ignore the ties between Oracle co-founder and executive chairman Larry Ellison and President Trump.
  • Ellison has expressed his support for Trump and even threw a campaign fundraising event for the President earlier this year.

Buying TikTok could reshape Oracle’s business.

  • This could be Oracle’s first dive into a consumer-facing social media or video basis.
  • It’s even possible they could take the customer data collected by TikTok and improve its marketing product.
  • Oracle has historically been “acquisitive” but has struggled to find new “avenues of growth” as Amazon, Microsoft and Google have collectively come to dominate the cloud computing space.

The clock is ticking down.

  • President Trump’s executive order gives 90 days to get a deal done.
  • Otherwise, any agreement afterward is subject to the sanctions outlined in his order.

Numbers to Consider

  • $174 Billion – Oracle’s market capitalization.
  • $10.4 Billion – The company’s fiscal fourth-quarter revenue, a six percent decline.

Read More: (CNBC)

A Quick Look

Robinhood’s Valuation Soars

  1. Robinhood announced Monday it raised $200 million in its latest fundraising round.
  2. The FinTech firm’s Series G round raised its valuation to $11.2 billion. It’s raised $1.7 billion in total.
  3. Robinhood said it handled 4.3 million daily average revenue trades in June, outperforming TD Ameritrade, Charles Schwab, E-Trade and Interactive Brokers, according to CNBC.

Read More: (THE INFORMATION)

Strong Home Depot Results Show Consumer Spending Shift

  1. Home Depot’s revenue rose 23 percent to $38.05 billion in the May-to-July period.
  2. The Atlanta-based retailer reported comparable-store sales in the U.S. – which compare sales at stores opened more than a year – grew 25 percent year-over-year.
  3. Home Depot’s quarterly earnings were $4.33 billion, or $4.02 a share, an increase from $3.48 billion, or $3.17 a share, in 2019’s Q2.

Read More: (WALL STREET JOURNAL)

Walmart Flexes Its Scale to Power Through Pandemic

  1. Increased demand for online grocery ordering boosted Walmart’s quarterly e-commerce sales, jumping 97 percent from a year ago. Comparable U.S. sales, those at stores or digital channels, rose 9.3 percent in the quarter ending July 31.
  2. U.S. traffic dropped 14 percent in the July quarter, but the average amount spent per transaction rose 27 percent as customers consolidate store shipping trips.
  3. Walmart’s net income increased to $6.48 billion, nearly double the $3.61 billion a year ago.

Read More: (WALL STREET JOURNAL)

Worth Your Time

Under Pressure: As Uber and Lyft face mounting pressure to classify freelance drivers as full-time employees, both companies are discussing licensing their brands to operators of vehicle fleets in California. The shift would resemble an independently operated franchise, similar to how groups of black cars were run, allowing the ridesharing firms to maintain their current “arms-length” association with drivers. (NEW YORK TIMES)

Liquid Sunlight: Japanese telecom conglomerate SoftBank Group has been doubling down on tech after its startup-focused Vision Fund reported huge losses at the beginning of the year. The firm has bought up a $1.2 billion stake in Amazon and positions in Netflix, Tesla, Microsoft and Alphabet. It’s part of an effort led by CEO Masayoshi Son to invest in more public, liquid stocks. (THE INFORMATION)

The Big Payback: “States are asking for around $26.4 billion from major pharmaceutical industry players (McKesson Corp., AmerisourceBergen Corp. and Cardinal Health Inc. and Johnson & Johnson) to help pay for damage wrought by the opioid crisis, people familiar with the matter said, the latest demand in yearslong litigation seeking to hold companies accountable for widespread drug addiction.” (WALL STREET JOURNAL)

Tidbits

Epic Games filed a motion for an injunction against Apple in the U.S. District Court for California’s Northern District Monday after receiving a letter that its developer tools were getting cut off.

Tesla’s shares rallied again, surpassing $1,800 for the first time yesterday in a phenomenon that grows more unexplainable each day.

Amazon is making a play to unlock the massive untapped market potential in cloud computing by negotiating a stake in cloud firm Rackspace.

Indian billionaire Mukesh Ambani plans to challenge Amazon in India by investing in local online retailers as India’s rising middle class’s spending power grows.

“Some Justice Department staffers have expressed internal concerns over plans to bring an antitrust lawsuit against Alphabet Inc.’s GOOG +1.00% Google—and what they view as an aggressive timeline favored by Attorney General William Barr.”

Boeing is planning more job cuts to respond to the pandemic-driven drop in jetliner demand, which it expects to continue for at least three more years.

A Couple Cents Content

Justin Oh looks at Moderna and how valuable the biotech firm can be with so many players in the vaccine race. (POST)

Activision Blizzard’s stock is blowing up thanks to the success of “Call of Duty: Warzone.” But how much firepower does it have? (POST)

In case you missed last night’s Live Show, Justin Oh discussed Tesla’s stock split, Nvidia, Fundrise, Beyond Meat, Square and more. (YOUTUBE)

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