Headline Development
Hertz (HTZZ) just made the largest EV purchase ever, acquiring 100k Teslas (TLSA) for a reported $4.2b - half of which will go to Uber (UBER) drivers. On top of this, Hertz will also invest significantly in EV charging infrastructure across its global operations. According to the press release, the order means EVs will comprise 20 per cent of the organisation’s global fleet. For Uber, the rental scheme (available to 4.7 star plus drivers with min 150 trips) will start at $334/week (dropping to $299/week over time).
For Tesla (TSLA), this catalysed a 10% jump in the market cap (now over $1 trillion), with Elon Musk’s $289m net worth making him the richest person on earth by quite a margin (Bezos is sitting at a measly $193b). In fact, Musk made more in the past nine months ($119b) than Buffet has in his entire life ($105b)!
This week saw the first-ever multi-day music festival in the metaverse (for a refresher on what this is look at last week’s WIRE here). The festival (below) is much like any other festival (Coachella, Glastonbury) but all online and featuring avatar versions of 80 artists and celebrities including Deadmau5, Flume, Nina Nesbitt and Paris Hilton. Throughout the festival, attendees were able to purchase wearable NFTs for their avatars from various merchandise stores. They’re joined by Roblox (RBLX) who also just announced launched EDC Las Vegas in collaboration with Insomniac, a 50% owned subsidiary of Live Nation (LYV). With the ability to pull in millions of attendees, Metaverse music festivals give us a peek at some of the real commercial opportunities the Metaverse presents from brands, artists and other stakeholders.
Other Developments
Space stations are prominent in the news this week.
Firstly, Nanoracks (private), Voyager Space (private) and Lockheed Martin (LMT) announced that they are planning on getting a private (4-person) space station - called Starlab (below left) - into Low Earth Orbit (LEO) by 2027. The ambition is for this to be a tourism hot spot, as well as an R&D (i.e. material research, plant growth) and manufacturing hub. The space station will have a ‘habitat module’ of around 340 cubic meters (vs the ISS’ 916 cubic meters).
This comes in the same week that Jeff Bezos’ Blue Origin (private) announced their own space station - called Orbital Reef (below right). Blue Origin is working on the project with Sierra Navada’s (private) Sierra Space, with the backing of Boeing (BA), Redwire Space (RDW), Genesis Engineering (private) and Arizona State University. As expected, Orbital Reef will be a tad larger than Starlab, accommodating ten people with separate areas for living and R&D. Additionally, it will have multiple ports and berths for visiting spacecraft with end-to-end services (i.e. transportation, leasing, tech, hardware, robotics) being offered by Blue Origin. It is also expected that Boeing’s Starliner spacecraft and Sierra’s Dream Chaser would provide additional transport options to the space station.
Amazon’s (AMZN) Kuiper announced a partnership with leading US telco Verizon (VZ) to provide 4G/5G coverage to remote areas of the globe. This means Verizon will be able to build 4G/5G towers in remote locations and tap directly into Kuiper’s constellation of 3,236 satellites without the prohibitive cost of digging and laying fibre cables.
NASA (private) has announced the winners of a deep space food challenge, with 18 teams receiving $25k each. The challenge sought solutions that would help “fill food gaps for a three-year round-trip mission with no resupply”, improve the accessibility of food on earth and maximise food output whilst minimising inputs and waste. The winners included Space Bread (a space bakery), Mission: Space Food (cell-based meat) and Interstellar Lab (modular food production systems), pictured below.
A new Apple (AAPL) patent shows that the company is exploring smart-glasses technology which may see images projected directly onto the wearer's retina. The document explains that such technology could help eradicate eyestrain, headaches and nausea (associated with AR/VR), although, the thought of FaceTime and push notifications hitting my retina is exceedingly nauseating!
Unity Software (U) has launched the Unity Gaming Service to make it easier for developers to launch cross-platform multiplayer games. This usually wouldn’t be newsworthy, however, ‘themes’ like interoperability will become increasingly important in future, particularly with the shift towards metaverse applications and the need for cross-platform interoperability….which companies like Unity will be at the center of.
BMW (BMW.DE) will stop making internal combustion engines (ICE) at its Munich plant by 2024, in another step towards going fully electric. According to Reuters, ICE engines will be produced in Austria and the UK in future, with the company having set itself a target of at least 50% of new global car sales to be electric by 2030. Additionally, Range Rover (part of India’s Tata Motors) has announced a 2022 plug-in hybrid powertrain (below), which will be joined by a fully-electric car in 2024.
Mastercard (MA) has signed a deal with Bakkt (BKKT) to offer innovative crypto and loyalty solutions to it’s merchant, bank and fintech customers in the US. Thanks to Bakkt’s digital asset platform, Mastercard is aiming to offer their partners various solutions such as the ability to “buy, sell and hold digital assets through custodial wallets powered by the Bakkt platform”. Furthermore, crypto will be integrated into Mastercard’s loyalty solutions, allowing partners to offer crypto rewards and create “fungibility between loyalty points and other digital assets”.
Earnings
A big earnings week, with highlights including:
Facebook (FB): Earnings topped analyst estimates, taking a bit of heat off the company which was also trying to manage an ongoing document dump during the week! In summary, the company saw Daily Active Users (DAUs) hit 1.93 billion with Average Revenue Per User (ARPU) hitting $10. As the company shifts to the Metaverse, they also announced that earnings for Facebook Reality Labs (AR/VR) will be split into its own segment starting in 4Q.
Alphabet (GOOG): EPS 20% above street estimates, with ad revenue surging thanks to a 44% jump in YouTube and Google search ads, to $7.2b / $38b, respectively. Meanwhile, Google Cloud revenue also jumped 44%, to $5b.
AMD (AMD): Top and bottom lines beating street forecasts, with 4Q sales forecasts of $4.5b also beating expectations. Not much to love about these earnings, with sales up 54%, gross profit up 70% and gross profit margin improving from 44% to 48% over the year.
Microsoft (MS): Another top and bottom-line beat, with revenue climbing 22% year-on-year to $45bn. They also expect next quarter’s results to be better than expected. Segment-wise, Azure was the stand out (50% YoY growth), followed by search/news advertising (up 40%).
Spotify (SPOT): Paid subscribers are up 19% YoY to 172m (with Monthly Active Users hitting 381m). This puts them way ahead in the category, with Amazon Music and Apple Music estimated to have 55m and 60m subscribers respectively. In terms of profitability, the company have swung from a €101m loss (this time last year) to a €2m profit, with ARPU jumping marginally to €4.34 from €4.29 last quarter.
….and the lowlights:
Snap (SNAP): Dropped more than 20% last week after releasing quarterly results that missed expectations. According to Snap, the miss was due to recent privacy changes in Apple’s iOS mobile operating system that prevented tracking by some advertisers. Despite all of this, Snap’s daily active user numbers continued to rise (by 23% YoY) to 306m. Additionally, Snap is seeing 90% usage rates across the US, UK, Australia, France and the Netherlands in the 13-24 y/o market.
Robinhood (HOOD): Shares dropped 8% after revenues came in 15% below street forecasts, in large part due to a drop in crypto trading. Still, 3Q revenue of $365m (up 35% YoY) is nothing to sneeze at! The CFO particularly called out Doge as being a bit of an anomaly in last quarter’s earnings (so you can view this quarter as more “normalised”).
Logitech (LOGI): Off 6% as earnings, which declined year-on-year (from $267m to $139m), missed street estimates. On the positive side, the company reported record $1.3b in sales, which came in slightly ahead of forecasts.
Twitter (TWTR): Dropped ~12% this week after swinging to a 3Q loss and catalysing a bunch of downgrades (i.e. Jefferies dropped their target price to $70, from $80). Much of this is triggered by uncertainty from iOS privacy changes.
Listings
A big week for fintech listings!
Indian super app Paytm (private), which claims to have 330m users, has updated its domestic IPO filing, with the company now seeking to raise $2.4b - valuing the business at ~$20 billion. The company is expected to start trading in mid-November. The organisation started life as a digital payments platform and has since expanded its range of services to include a payments gateway, e-commerce marketplace, movie and travel ticket booking, and insurance.
Firstly, Brazil’s Nubank (private) announced its plans for an IPO in the USA, likely valuing the company at ~$55b. Since its founding in 2013 as a credit card issuer, the company has gone on to acquire more than 40m clients across the retail space whilst expanding aggressively into business banking. Meanwhile, US digital bank Chime (private) is reported to be in talks on their own IPO (another whopper, with an expected $35 to $45 billion valuation).
FaZe Clan (BRPM), a leading esports platform and social community, is listing via a SPAC merger. The organisation claims a social media reach of over 350m and esports ‘cross-platform actions’ of 143m (substantially ahead of all other esports rivals like G2 Esports, Rex Regum, NRG, TSM). The company leverages this position to generate sales from sponsorships, consumer products and content and will be positioning themselves post-listing to amplify earnings via subscription, fan clubs, gambling, love events publisher partnerships and……...NFTs/Metaverse! Current revenues are sitting at $50m (-$19m EBITDA) with future (2025) revenues forecast to jump 13x to $651m (+$131m EBITDA) - predominantly from content, M&A and ‘emerging’ monetisation areas.
WeWork (WE) is now a public company, having merged with SPAC BowX Acquisition Corp (BOWX), in a deal that now values the co-working operator at ~$10bn - a tad lower than the $47bn IPO price sought back in 2019! For 2Q21 the company pulled in $593m in revenues (with a $923m loss!). However, despite the covid-fuelled hit, new CEO Sandeep Mathrani, believes WeWork is well-positioned to benefit in the post-covid world as workplaces shift to flexible and hybrid work policies.
M&A | Capital Raise | Earnings
Well, it was quite a poor week for Pinterest (PINS) with their reported suitor, PayPal (PYPL), leaving them stranded at the altar. Yes, just a week after rumours surfaced of a $45b takeover by the payments giant, they later confirmed that they were, in fact, not interested in acquiring the social media/design platform “at this time”. Pinterest is off ~40% from its June high, with a lot of interest shifting to their upcoming earnings on 4th November (they slid after their prior earnings release when they missed quite hefty growth expectations).
NVIDIA’s (NVDA) acquisition of Arm (private) has hit an (expected) hurdle, with the European Commission opening up a formal probe - citing concerns about competition and the importance of Arm’s IP. The review will last 90 days and will decide whether the deal will proceed as is, with amendments or…...not at all. Most of the EC’s issues are expected to centre around the independence of NVIDIA post-deal and whether they would create any unfair barriers to competitors accessing Arm’s IP - which is the critical architecture for almost all edge computing applications.
Crypto exchange FTX (private) has raised $420.69m from exactly 69 investors (!) including Canada’s OTPP and Singapore’s Temasek, valuing the company at $25 billion in what they call a Series B-1 round (on top of the Series B back in July). Since then the valuation has surged 39% thanks to user growth of 48% and trading volume growth of 75%!
Brex (private), a corporate credit card provider, has just raised $300m (led by Greenoaks) at a $12.3b valuation. At present the organisation offers business banking, credit card, ‘instant revenue’, spend management and expense tracking features (off the back of a partnerships with Emigrant Bank), with plans to ultimately have its own banking license in North America soon (it withdrew the application in August!).
Have a great week.
Charlie
LinkedIn or E-Mail (cnave@granitebaycap.com)
Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity. Any views expressed in this article are those of the author(s) and do not constitute financial advice.