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- Kudos | February 14th, 2024
Kudos | February 14th, 2024
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[ good morning ]
Here’s everything you need to know today
A spicier Consumer Price Index (CPI) than expected caused one of the worst sell sprees the market has seen since the banking system edged a collapse last year.
In response—this market has gone fully manic with a lot of volatile overreactions to earnings data.
In particular—Lyft had a typo in their 2024 guidance yesterday that effectively predicted profit growth 10x higher than reality. Their stock experienced one of the wildest aftermarket swings in history and the memes were pretty great too.
But the real news here lines up with what we’ve been seeing for the past few days. The market ran way too hot after AI mania reignited this bull run in mid-January. Now we’re just watching valuations cool to a more realistic level while bond yields briefly assert their dominance over equities. Inflation is still trending in the right direction—The Street just drank a little too much of the Kool Aide here and priced in far more and far steeper rate cuts than our economy ever could have afforded.
The real danger here will come next month if we’re staring down the barrel of a CPI print that’s even higher than this one. If inflation finally hits 2.9% in February—the market will jump right back to euphoria. Anything north of 3.2% will intensify the bear action we’re currently experiencing.
Since the most infuriating possible outcome is also the likeliest—gear up for inflation to stall out at exactly 3.0% when February data prints next month.
For now—there’s still plenty of wild action driving the markets today. With major indexes surging this morning in response to getting oversold yesterday, there’s still enough volatility left for everyone.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ rideshare ]
Typo Briefly Sends Lyft Soaring
The rideshare company has great numbers—but not THAT great
BREAKING NEWS
Markets are still reacting to a wild error in Lyft’s earnings report yesterday that briefly sent the stock soaring more than 60% higher in after-hours price action. This has obscured just how much Lyft has defied the odds with an amazing Q4 performance
WHAT HAPPENED
After Uber pushed their way to profitable growth, Lyft stock was basically left for dead in the rideshare market. The stock has essentially been nothing but down since their 2019 IPO and 2023 was a messy year for their stock price.
However, a year after Uber fully got their act together—it looks like Lyft finally solved their efficiency formula. Gross bookings are on a consistent uptrend—hitting 17% year-over-year (YoY) growth. Riders using the Lyft platform jumped 26% YoY, signaling consistent gains for the network’s engagement. With their algorithm hitting new milestones for efficiency and stern capital controls in place for the next few quarters—Lyft management is confidently projecting positive free cash flow (FCF) for 2024.
NOT THAT PROFITABLE THOUGH
However, this is all overshadowed by a single-character typo in Lyft’s 2024 guidance. This document was released before Lyft’s actual earnings call (which is standard practice) and projected that their adjusted profitability would rise 500 basis points (or, y’know: 5%) in 2024. This profit metric basically tracks how much money Lyft makes per ride—so a 5% bump would be unfathomable and quickly compound across Lyft’s entire balance sheet throughout the year.
The real number is 50 basis points—half a percent. That’s still a massive expansion for the year and is going to be a critical piece of the puzzle pushing Lyft towards positive FCF this year and wider profitability in the years to follow. Luckily, Lyft stock isn’t getting punished too hard for the mistake (yet).
WHY IT MATTERS
Frankly, this result is another important example highlighting how jumpy The Street is right now. With ARM jumping over 100% last week and falling 25% immediately after—investors are starting to become concerned we’re approaching a local top to the wider market. Price action usually becomes incredibly volatile as a bull market runs out of steam. So, a 60% jump in Lyft’s stock last night was already a massive overreaction—even before that profitability typo was corrected. Either way, Lyft’s stock has leveled out one early trading with the company achieving a 20% boost. There’s a long way to go—but Lyft can pull this off.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | -1.41% | 6.53% | 41.18% |
| Consumer Disc. | -1.99% | 1.89% | 18.03% |
| Consumer Stap. | -1.07% | 0.04% | -1.23% |
| Energy | -1.01% | 1.07% | -6.60% |
| Financials | -1.35% | 3.89% | 5.13% |
| Health Care | -0.93% | 1.92% | 6.80% |
| Industrials | -1.02% | 3.92% | 12.86% |
| Materials | -1.41% | -0.39% | 0.62% |
| Real Estate | -1.83% | -4.47% | -6.84% |
| Technology | -1.70% | 5.60% | 42.65% |
| Utilities | -1.66% | -4.84% | -11.89% |
*Market data based on standard trading hours and calculated close to close
[ travel ]
Airbnb Beats Revenue While Losses Expand
No high-performing stock can defy gravity in this economy
BREAKING NEWS
Airbnb stock is trading with a lot of volatility this morning after a solid earnings performance. Why can’t The Street agree on a direction for the stock?
WHAT HAPPENED
Airbnb reported a mixed bag for earnings by beating revenue numbers with $2.22 billion in sales for Q4. However, their net loss expanded a little to $349 million thanks to a variety of factors. Airbnb still experienced a much healthier Q4 than analysts expected though.
HIGHER STANDARDS
At the same time, Airbnb posted guidance that lightly beat The Street’s expectations while also announcing a $7 billion stock buyback. Airbnb is at a self-described ‘inflection point’ as management is looking to completely revamp operations in 2024.
The buyback was great—but that guidance is the main reason Airbnb is getting pushed around in early trading. Once again—Airbnb is one of these strong stocks that rose 30% since November. The winter rally pushed the stock too high and the brand is getting pulled back to earth despite strong outperformance.
WHY IT MATTERS
This is a healthy dynamic that signals a market that isn’t getting taken over by irrational price action (yet). It’s completely fine that the market ran a little hot in December and January and our analysts are encouraged by stocks deflating a little in the wake of a CPI that was too hot and valuations that ran too high. Airbnb is in a great position to grow in 2024. For now—their stock stayed relatively flat in early trading, swinging anywhere from 2% up to 3% down.
[ fintech ]
Robinhood Rides Retail Wave to Stunning Profit
Regular investors have finally joined the party
BREAKING NEWS
Robinhood stock is ascendant after the company announced they had achieved a real profit a full quarter before The Street expected they would. Let’s break down the return of the retail investor.
WHAT HAPPENED
Robinhood boosted revenue in Q4 to $471 million—way higher than the $455 million analysts predicted. More importantly, Robinhood eked out a profit of 3 whole pennies a share in Q4. The Street expected a 0.01 loss per share instead. This is a massive boost from the $0.19 loss per share Robinhood generated in Q4 of 2022.
TRADERS ARE BACK
There was no major trend driving this beat—instead, a rising tide across Robinhood’s whole platform lifted every major product. The bull run of Q4 is finally bringing retail traders off the sideline in a big way—and it’s honestly amazing that Robinhood has been able to bring customers back to the platform after they experienced a massive breach of trust during the Gamestop meme mania. Average revenue per user at Robinhood has surged to $81 as active users grew to over 10.9 million.
WHY IT MATTERS
These results will be great if they actually stick. Robinhood may only be getting this lift temporarily if the Q4 bull market doesn’t hold. if wider bullish conditions extend through Q1—Robinhood has a great opportunity to continue mounting a recovery here. For 2024—Robinhood is focused on expanding their crypto platform to Europe and boosting their wider user base. Either way, the return of a wider base of retail investors is a great sign for the wider market. Robinhood stock popped over 14% in early trading on the great result.
Extra Moby Snacks
Instacart isn’t having a fun time on the public market. The stock is down in early trading despite announcing layoffs affecting 7% of their staff. Can they find a better level?
Uber has decided that Lyft shouldn’t be allowed to own the whole spotlight—so their management team announced a massive $7 billion share buyback to celebrate their first year of profitability. Uber stock surged 8% in early trading. Put another way, Uber just added near 3x of Lyft’s entire market capitalization to their stock with a single press release. Economies of scale are wild, y’all.
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