Internal | August 23rd, 2024

GOOD MORNING

Here's everything you need to know today: Cathie Wood just got another reminder that timing is everything. After offloading a big chunk of Zoom stock at rock bottom in July, she’s probably kicking herself as shares surged 13% on Thursday. Zoom surprised everyone with a strong Q2, raking in $1.16 billion in revenue and an adjusted EPS of $1.39—both well ahead of Wall Street’s expectations. 

It turns out Zoom isn’t just about awkward video calls anymore. The company has been quietly expanding its enterprise offerings, including its contact center business, which landed its biggest customer ever this quarter. Plus, it’s been reducing customer churn, proving it can still find ways to squeeze money out of a post-pandemic world. Zoom even raised their full-year outlook, which is great for your least-favorite meeting platform but a bit of a facepalm for Wood, whose early exit has cost her investors potential millions (again).

Even though Zoom is still a far cry from its pandemic high, with shares down nearly 90% from their October 2020 peak, that doesn’t make this rebound any less painful for Wood. Zoom’s stabilization could have been a lifeline for her ARK Invest funds, but instead, it’s another missed opportunity. If Cathie had just held on a little longer, this might have been her redemption story rather than another “Ack!”

Let’s Dive Into More Details Below…

BREAKING NEWS
During the seemingly endless days, weeks, and months of COVID-19, people tried to maintain a sense of normalcy within their homes. Some baked bread from scratch, while others scheduled daily happy hours on their Google Calendars to keep spirits up as the world sorted out. But there were a lot of new attempts to get in shape. One study indicated that people who typically exercised 1-2 times per week increased their frequency by an average of 88%.

That surge in fitness activity was great news for Peloton, whose revenue more than doubled from $714 million in 2019 to $1.82 billion in 2020, eventually surpassing $4 billion in 2021. Fast forward to 2024, however, and Peloton is struggling harder than its users doing a 45-minute high-intensity workout. The company that became synonymous with high-end stationary bikes has seen its stock price drop about 45% year-to-date, leaving investors to wonder what exercise routine the company has planned for the latter part of the year.

With subscription numbers flattening and stock prices taking a beating, Peloton is banking on this shift to diversify its offerings and reclaim its place in the fitness market without pushing people to buy a fancy new bike. A strategic pivot to strength training is a key new element in Peloton’s push to keep its balance sheet swole in a post-COVID world.

WHAT HAPPENED
Peloton’s latest earnings report has folks feeling cautiously optimistic, but let’s hold off on the confetti. The company pulled in $644 million in Q4, barely scraping past expectations by a measly 2% and eking out a 0.2% year-over-year growth. The real kicker? Peloton’s glory days of hawking overpriced bikes are fading faster than your New Year’s resolution, and they know it. With subscriptions now raking in over $1.67 billion and finally outpacing hardware sales in 2023, it’s clear that Peloton’s future lies in keeping you locked into that $24-a-month membership—because who needs to actually own the equipment when you can just pay rent on it forever, right?

Enter Peloton’s Hail Mary: a pivot to strength training. With bike demand cooling off faster than a post-ride sweat, Peloton’s scrambling to rebrand itself as more than just a bike company. They’re diving into strength training, yoga, meditation, and whatever other fitness trends they can slap their logo on. Strength training is the shiny new toy in the fitness world, and Peloton’s banking on it to attract a new crowd—people who couldn’t care less about cycling but are all about that full-body, at-home workout life.

But hold on—don’t go tossing that bike in the basement just yet. Peloton’s bike rental program is still rolling along, now expanded to include the Bike+ in the UK, and surprisingly, it’s actually doing better than expected. It’s a clever play to snag those who aren’t quite ready to drop two grand on a bike but still want in on the action. This rental gig helped shave 110 basis points off subscription churn year-over-year in Q4. Sure, hardware sales dipped by 4%, but the gross margin jumped to 8.3%—a far cry from the dark days of negative margins. And with a GAAP EPS of -$0.08, an 88% improvement year-over-year, Peloton’s inching closer to profitability while trying to flex its way into the future of at-home fitness.

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We're Buying This Stock At An Unbelievable Bargain

Last we wrote up this stock they just went public in one of the biggest IPO's of 2020.

But as we told our Moby Premium Members, this stock was just way too expensive even though we loved the company.

Fast forward to today and this tech stock is down over 85% and has gotten absolutely crushed.

But now this stock is starting to round a corner and we think it's approaching a bottom.

The price tag relative to their potential upside is starting to make more sense and the Moby investment team just placed a 7-figure bet on them!

That's why we're initiating our Moby 5 Star Rating now and just recommended this stock to our Premium Members.

• But what stock is it?

• Why do we think it just hit a bottom?

• How much upside is there?

Just click the button below to join Moby Premium and find out which stock it is!

BREAKING NEWS
Oh, cool. We now know who Elon Musk (and Morgan Stanley) roped into his takeover of Twitter, even though we were all pretty aware that he didn’t want anyone to see.

Thanks to a hilarious legal butt-fumble by Musk’s legal team, the list of investors backing his $44 billion experiment to own social media is now public, so let’s scan through it, shall we? OK, sure, we’ve got Silicon Valley royalty like Andreessen Horowitz and Jack Dorsey, and there’s Palantir co-founder Joe Lonsdale’s VC firm, a Saudi prince (there’s always a Saudi prince), there’s Binance (that’s a little awkward), and Fidelity is holding quite the bag on X. But so far no one’s jumping out at us, nothing bad like Jeffrey Eps– wait, no, there’s Sean “Diddy” Combs. Ruh roh.

WHAT HAPPENED
The only reason we’re seeing this list is that Musk’s lawyers, in a genius move, tried to get civil charges that he stiffed laid-off X employees on their severance after Musk’s mass firings by moving the case from state court to federal court. But, the federal judge who took the case complied with a journalist's request to make X cough up a corporate disclosure statement. And, fun twist, after the list was unsealed the case got punted back to state court for lack of federal jurisdiction. On social media, this would get a “LOL.”

Now, thanks to that slapstick legal maneuvering, we’re staring at a list of nearly 100 entities with stakes in X Holdings Corp., and while there are few surprises on the list, one name sticks out like a sore, alleged sex criminal thumb: Sean Combs, a.k.a. Diddy, whose legal issues are the kind of headlines Musk doesn’t need right now. The one-time hip-hop mogul is reportedly under federal investigation for human trafficking and other sex crime charges. There’s also the matter of security camera footage showing Combs viciously beating his ex-girlfriend in a hotel hallway going public in the spring.

But maybe Combs’ X stake is a form of Karma, after all. On Tuesday, the WSJ reported that Musk’s $13 billion Twitter buyout is officially the biggest bank finance disaster since the financial crisis, leaving Morgan Stanley, Bank of America, and others holding the bag on a deal they can’t unload. The loans have been “hung” on their balance sheets longer than any similar deal in recent memory, thanks to X’s tanking financials, cementing the deal as a record-setting flop in the world of merger finance.

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BREAKING NEWS
If you're as much a fan of history as we are here at Moby, you're likely familiar with the Luddites. You've probably heard the term used negatively, often referring to someone unwilling—or simply unable—to adapt to new technology, like updates to Slack or, even worse, random Zoom audio settings.

For those unfamiliar, the Luddites were a group of English textile workers in the early 19th century who protested the introduction of automated machinery in the textile industry. Around 1811, they responded to the economic and social upheaval caused by the Industrial Revolution, a transformative period that marked the shift from an agrarian and handicraft economy to one dominated by machine manufacturing. The Luddites feared that new machines, such as mechanical looms and knitting frames, would lead to unemployment and devalue their skilled labor.

Many historians, economists, and even sci-fi enthusiasts share a similar unease toward large language models and general AI—not because they oppose technological progress, but because, like the Luddites 200 years ago, they fear the socio-economic impacts of unregulated machinery. They worry that these technologies could threaten communities, livelihoods, and futures.

WHAT HAPPENED
According to Gallup, FOBO, or Fear Of Becoming Obsolete (a term we learned while writing this), is growing steadily. Since 2017, Gallup's survey shows a 22% increase in people worried that technology will make their jobs obsolete—up 7% from 2021. This anxiety is more pronounced among younger workers compared to older ones, and it has also increased more among those earning less than $100,000 than among higher earners. The silver lining? The fear of being replaced by AI is shared equally between men and women.

This trend isn't just fueled by TikTok videos featuring AI avatars and OpenAI scripts warning young viewers that they'll lose their jobs. Reputable sources like Goldman Sachs, MIT, and McKinsey have reached similar conclusions. Goldman Sachs, for instance, estimates that up to 300 million jobs, or 9.1% of the global workforce, could be lost to AI. The situation is even more dire in advanced economies, with 60% of jobs at risk of being replaced by AI soon. 44% of companies using or planning to use AI anticipate layoffs in 2024. A few months ago, we at Moby wrote about IBM's plans to replace approximately 8,000 jobs with AI-powered solutions, focusing on automating non-customer-facing roles. UPS and BlackRock have also made layoffs, partly due to new technologies like AI.

By 2030, McKinsey predicts that 14% of the global workforce—375 million workers—may need to change careers due to AI-driven disruption. On a more optimistic note, some experts estimate it could take at least 20 years to automate half of the current global work tasks. However, the pace varies by sector and task type, and the trend is clear: the adoption of AI in organizations is expected to be widespread, with 74.9% of organizations likely to adopt AI by 2027, according to the WEF's Future of Jobs Report from May 2023.

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1. Ford Cuts Back EV Production Plans

Ford Motor Company is scaling back its electric vehicle (EV) production targets, impacting plans at its Kentucky plant. The shift comes as Ford reassesses its EV strategy amid changing market conditions, including high production costs and concerns about consumer demand.

2. TD Bank Takes $2.6 Billion Hit from U.S. Probe

Toronto-Dominion (TD) Bank has set aside $2.6 billion to cover fines related to an ongoing U.S. investigation into its money-laundering controls. To finance this provision, TD sold part of its stake in Charles Schwab. The bank's earnings missed estimates due to additional restructuring charges, adding to its financial challenges.

3. Canadian Railways Shut Down Amid Labor Dispute

Canada’s two largest freight railways, Canadian National and Canadian Pacific Kansas City, halted operations after negotiations with the Teamsters union failed. The shutdown is raising concerns over supply chain disruptions, particularly for industries dependent on cross-border trade with the U.S.

4. Carlyle Group to Acquire Advance Auto Parts Unit for $1.5 Billion

Private equity firm Carlyle Group has agreed to purchase Worldpac, a unit of Advance Auto Parts, for $1.5 billion. This acquisition marks Carlyle’s first major industrial investment in over two years and comes as Advance Auto Parts adjusts its business strategy amid declining sales and financial struggles.

5. Peloton Shares Surge on Positive Financial Results

Peloton Interactive's stock jumped 11% after reporting quarterly revenue growth for the first time in two years. The fitness company posted better-than-expected earnings as its cost-cutting measures and improved sales contributed to positive cash flow. However, the company remains cautious, with forecasts for weaker subscription growth.

6. Elon Musk’s X Ordered to Reveal Ownership Structure

A court has ordered X (formerly Twitter) to disclose its full ownership structure. This ruling comes as part of an ongoing legal battle and reveals notable investors including Andreessen Horowitz, Binance, and Sean Combs, raising questions about the platform's governance and financial backing.

7. Nvidia Faces Key Earnings Test Amid High Expectations

Nvidia's upcoming earnings report will be closely watched as the company continues to benefit from AI-related demand. Wall Street analysts are optimistic, but there are questions about whether Nvidia can maintain its rapid growth trajectory, which has significantly boosted its stock price this year.

8. Walmart Partners with Burger King for Member Discounts

Walmart has partnered with Restaurant Brands' Burger King to offer exclusive discounts to its Walmart+ members. The partnership will provide daily discounts and quarterly freebies as Walmart looks to expand the benefits of its membership program amid growing competition in the retail sector.

9. Fed Minutes Signal September Rate Cut

Federal Reserve minutes revealed a high likelihood of an interest rate cut in September as inflation continues to decline and labor market conditions soften. Investors are now focused on how much the Fed will cut rates, with expectations ranging from a quarter to a half percentage point.

10. Amazon Faces Revived Antitrust Lawsuit Over Pricing Policies

An appeals court in Washington, D.C. has revived an antitrust lawsuit against Amazon, accusing the company of using pricing policies that stifle competition. The lawsuit could have significant implications for Amazon's marketplace operations and its dominance in the e-commerce sector.

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