U.S. Retail Spending Flat in September Shoppers spent less on gasoline but also cut outlays on big-ticket items
Retail sales—which comprise consumer spending mostly on goods like furniture, vehicles and groceries but also at restaurants—were unchanged last month from August, down from a revised 0.4% increase in August from July, the Commerce Department said Friday.
Excluding gasoline and autos, retail sales grew by 0.3% in September from the prior month. (…)
Spending declined in categories linked to big purchases like cars, televisions, beds and golf clubs. Purchases at electronics and appliance stores declined 0.8% in September while spending at furniture stores fell 0.7%. (…)
Spending at restaurants and bars grew 0.5% in September from the prior month. But prices at restaurants grew 0.9% in the same month, according to a separate Labor Department report released Thursday, meaning that consumers are getting less for their spending. (…)
- The typical American household needs to spend $445 per month more to purchase the same goods and services as a year ago, given the 8.2% inflation rate in September. (Moody’s)
ING:
The US September retail sales report is not terrible, but it doesn’t exactly instill confidence either. Headline sales came in on the softer side at 0% month-on-month versus expectations of a 0.2% increase, but the “control” group, which strips out some of the volatile series and typically better matches with broader consumer spending trends rose 0.4% MoM (consensus 0.3%) and there were some decent upward revisions. The key point though is that this nominal spending growth is not keeping pace with inflation. It implies that volume numbers are under massive pressure and recession risks are growing well before the full effects of Federal Reserve rate hikes are felt.
(…) sales growth appears even at the “control” group level to be all down to price rises, implying the real (volume) spending growth is effectively zero. Remember that real consumer spending growth was -0.1% MoM in July, +0.1% in August and if we get a zero for September, this works out at real consumer spending growth of just 0.6% annualised.
This (…) implies more cuts to third quarter GDP expectations. We will be lucky to get 1% growth at this rate.
Goldman Sachs’ own estimate of retail inflation results in real core retail sales up 0.1% in September and down 1.1% on a 3-month annualized basis.
The rule of thumb in retailing is that back-to-school sales generally dictate how the holidays season will go.
The Chase card spending tracker, through October 10, is pointing to a 0.9% decline in control sales in October.
U.S. Import and Export Prices Fall for the Third Straight Month in September
A slowdown in global demand continued to weigh down U.S. import and export prices. Import prices fell 1.2% m/m in September after declines of 1.1% in August (-1.0% initially) and 1.4% in July (-1.5% previously), according to the Bureau of Labor Statistics. The y/y rate decelerated to 6.0%, the lowest since February 2021, from August’s 7.8%.
Export prices slid 0.8%, the third straight m/m slide, after drops of 1.7% in August (-1.6% initially) and 3.7% (unrevised) in July. The y/y rate eased to 9.5%, the lowest since February 2021, from August’s 10.7%.
(…) Nonfuel import prices slid 0.4% (+3.4% y/y) in September, the fifth consecutive m/m slide, on top of a 0.2% decline in August, due to a 1.9% price drop (down for the fifth straight month) in nonfuel industrial supplies & materials (+7.1% y/y). Import prices for capital goods (+3.2% y/y) and automotive vehicles & parts (+2.9% y/y) were unchanged m/m in September following their small declines in August, while consumer goods ex autos held steady (+1.7% y/y) after two successive m/m gains. To the upside, import prices for foods, feeds & beverages rebounded 0.2% (3.4% y/y) in September following four straight m/m increases. (…)
Non-fuel import prices have now declined 2.0% since April, a 4.8% annualized rate. They are still up 3.4% YoY. If they continue to decline at the same rate, they will turn negative YoY in January 2023 and another bout of YoY durable goods deflation will begin. The correlation between the YoY change in non-fuel import prices and durable goods inflation is 77.4% since 2010.
Durable goods account for 60% of core goods CPI and 16% of core CPI.
Going into 2023, 16% of core CPI will deflate 1-3%, subtracting between 0.2% and 0.5% to core CPI. Core nondurables are 11% of core CPI with apparel accounting for nearly 30% of that. Apparel prices are up 5.5% YoY but they have been deflating at a 0.8% annualized rate in the past 3 months as merchants liquidate excess inventories and the strong dollar reduces import costs.
The inflation elephant in the room is thus core services (73% of core CPI) on which the Fed’s interest rate policy has a more indirect influence. CPI core services is up 6.7% YoY, more than twice its highest print of the last decade. Sequentially, core services prices are rising 7-8% annualized since March, a significant acceleration compared with the last 30 years:
Service-providers have two principal cost components: labor and energy. Core services inflation (blue line below) is intimately correlated with wages. The Employment Cost Index – Wages and Salaries (red) has been accelerating since Q1’21 reaching +5.7% in Q2’22.
Service providers have enjoyed strong demand as the pandemic eased and Americans stopped splurging on goods, enabling them to easily pass on their costs increases.
But demand has diminished recently per the Services PMI which has contracted for a third straight month in September.
S&P Global reported on October 5 that
cost pressures [at service providers] eased for the fourth month running amid reports of some reductions in input prices. (…) Reflecting efforts to drive new sales and pass on slower increases in input costs, selling prices rose at the weakest pace since December 2020. Despite firms passing on higher costs to clients, a number noted concessions and discounts made to customers to secure orders.
On October 14, I wrote
the fact that hourly wages rose only 0.3% MoM in each of August and September, a 3.6% annualized rate, is indicative of restraint on the part of business leaders. Indeed, this table of the last 2-month annualized wage growth rates far from suggests we are near a wage/price spiral (number on left is % of total employment):
- 0.4% Mining & Logging: ……………………….-1.4%
- 10.4% Retail Trade ……………………………… 0.5%
- 16.1% Education & Health Services: …………. 1.0%
- 14.7% Professional & Business Services: ……. 1.2%
- 8.4% Manufacturing: …………………………… 2.9%
- 10.4% Leisure & Hospitality : …………………… 3.6%
- 3.7% Other Services: ………………………….. 4.3%
- 5.0% Construction: …………………………….. 4.4%
- 4.2% Transportation & Warehousing: ………… 7.4%
- 5.9% Financial Activities: ……………………… 8.0%
- 2.0% Information: ……………………………… 14.5%
- 14.2% Governments: …………………………… 5.3% (July/August)
Employees accounting for 50% of total employment saw wage gains of less than 3.0% annualized in the last 2 months. The next 19%: less than 4.5%. Transportation and Warehousing wages should slow down (e.g. FDX, WMT, AMZN); Financial Services will suffer from the bear markets and Information will be impacted by the tech slowdown.
The ECI for Q3 will be out in 2 weeks and, if in sync with hourly wages, it should decelerate to the 5% YoY range. If so, September could be the peak in core services inflation unless energy prices shot up again.
Amazon Workers in Southern California Strike for $5 Hourly Raise
The Inland Empire Amazon Workers United group said 100 employees participated in the strike, with more expected to join during the Friday night shift. The group hasn’t petitioned to form a union.
Amazon workers at facilities near Atlanta and Chicago staged similar protests earlier this week demanding better pay. (…)
The Seattle-based e-commerce giant is fending off union campaigns around the country. Earlier this week, Amazon workers at a warehouse in Moreno Valley, California — about 20 miles from the San Bernardino air hub — filed paperwork to join the upstart Amazon Labor Union. Workers at a Staten Island warehouse in New York voted in April to join the union, but the company is seeking to overturn the results. On Tuesday, the National Labor Relations Board is scheduled to tally votes to determine if workers at an Amazon warehouse near Albany, New York, will form a local affiliated with the Amazon Labor Union.
Apple Workers in Oklahoma City Vote to Unionize The employees become the second group at one of the iPhone maker’s U.S. stores to organize officially.
Meet the Army of Robots Coming to Fill In for Scarce Workers Robots are spreading at a record pace, from their traditional strongholds like making automobiles into nearly every other human endeavor
A combination of hard-pressed employers, technological leaps and improved cost effectiveness has fueled a rapid expansion of the world’s robot army. A half-million industrial robots were installed globally last year, according to data released Thursday by the trade group International Federation of Robotics—an all-time high exceeding the previous record, set in 2018, by 22%.
The total population of industrial robots in the world has now also reached an all-time high, 3.5 million (…).
China, which established itself as the world’s factory floor on the backs of the world’s biggest human workforce, has been by far the largest adopter of robots in recent years, and was responsible for half of all industrial-robot installations in 2021. There were 62,000 robots installed in its automotive industry last year, double the number of the year prior.
In Japan, one of the world’s most advanced economies, the ratio of robots used in manufacturing to the number of humans in that industry—a measure called “robot density”—grew almost 30% between 2017 and 2020, after being nearly flat for more than a decade, according to data from the International Federation of Robotics and an analysis by the equity research firm Bernstein. (…)
Driving that adoption is the spread of robots from longtime uses like welding in automobile manufacturing into more challenging tasks. These include picking parts and operating other machines, tasks that require more dexterity, flexibility, and a dollop of artificial intelligence and machine vision.
The “service” robot industry, which basically encompasses every kind of robot that isn’t bolted to the floor, is also growing at a rapid pace, and shows signs that it could soon eclipse traditional industrial robots in rate of growth as well as annual sales.
These service robots include everything from autonomous cleaning robots scouring the floors of your local grocery store—nearly every Sam’s Club and Walmart in America already has one “on staff”—to delivery robots and mobile robots taking over jobs like unloading trucks.
(…) there are more than 1,000 companies worldwide manufacturing them, 10 times the number making industrial robots. At least 121,000 service robots were installed in 2021, though that is surely an underestimate, says Susanne Bieller, general secretary of the robotics federation. Between 2020 and 2021, the number of service robots installed annually worldwide increased 37%, exceeding the 31% growth in the annual number of industrial robots installed in the same period. (…)
Worldwide, there are more than 20,000 autonomous cleaning robots running Brain Corp.’s software, twice the number in January 2020, says Michel Spruijt, the company’s chief revenue officer.
(…) across countries, an aging workforce drives adoption of robotics—and the faster that workforce ages, the faster robots are adopted. (…)
This new generation of robots have mobility and vision, and are capable of flexibility in their behavior that simply hasn’t been possible with the kinds of industrial robots that have been in use in manufacturing since the 1960s.
(…) the amount of time it takes a new robot to pay for itself is shrinking, according to research by Dr. Huang of Bernstein. In China, for example, a robot that can operate a machine tool in a factory can do the work of two or even three humans, and can pay for itself in less than two years. (…)
Stretch is a large, four-wheeled robot sporting a crane-like arm with a vacuum-powered gripper at the end, capable of unloading boxes from shipping containers or trucks. (…) Logistics is an industry where pandemic-fueled growth, rapidly appreciating wages and high turnover have forced employers to battle one another for workers willing and able to do these jobs. (…)
One unresolved issue in negotiations between terminal operators and the trade unions representing longshore workers on the West Coast is which terminals will be automated, and what will happen to the truck drivers and other port workers who will lose their current jobs as a result. (…)
Rail companies have proposed eliminating train conductors entirely, and fully automating their trains. (…)
Roboticists say realizing a roboconomy will require meeting the robots in the middle: Robot makers will continue to improve their products’ ability, while we also remake our world in ways that accommodate these robots. (…)
The WSJ article omits to point out the slow adoption of robots in America. From the IFR:
In 2021, the operational stock of industrial robots was computed at 3,477,127 units (+15%). Since 2016, the operational stock of industrial robots had been increasing by 14% on average each year. China’s operational stock of industrial robots had been growing impressively by 28% on average each year and exceeded the one-million-unit mark in 2021 with a total of 1,224,236 units (+27%). The Japanese operational stock increased by 5% to 393,326 units in 2021. The European operational stock of robots was computed at 678,706 units and the Americas held a stock of 451,400 units (+10%). (…)
China has been the world’s largest industrial robot market since 2013 and accounted for 52% of total installations in 2021. (…) The United States accounted for 7% of robot installations in 2021.
In fact, the Americas installed 51k robots in 2021, fewer than in 2018. Meanwhile, Europe had 10.5% more installs and Asia/Australia 34% more.
In 2021, the average robot density in the manufacturing industry was 141 robots per 10,000 employees. Driven by the high volume of robot installations in recent years, Asia’s average robot density had been growing by 18% CAGR since 2016 to 156 units per 10,000 employees in 2021. The European robot density had been growing by just 8% CAGR since 2016 and was 129 units per 10,000 employees in 2021. In the Americas, it was 117 robots per 10,000 employees (+8% CAGR since 2016).
One could translate the above with Asia manufacturing being 33% more productive than the Americas.
The IFR estimates that 2022 robot installations will “exceed the 50,000-unit mark” (51k in 2021) in North America while “more than 400,000 units is expected for 2022 in Asia” (381k).
The IFR reports include special sections on service robotics, a fast growing segment that will help alleviate the shortage, and the rising cost, of service workers.
In close cooperation, Fraunhofer IPA and IFR are observing more than 1,000 companies worldwide offering service robotics solutions (amongst them are about 12% startups). Both, the professional and the consumer service robotics domain benefit from recent technical innovations: Fundamental developments in the fields of digitization, cloud technologies, 5G and artificial intelligence, specifically in machine learning, are leading to a technology push in service robotics. The free Robot Operating System ROS continues to be extremely popular and enables a quick start to the development of service robot applications even with few own resources. New virtual market places enable ease of deployment and use, more standardization (…).
On the other side, we see a strong market pull, specifically for professional service robots. New business models at the same time significantly lower the financial barriers to decide for the use of a service robot in volatile markets. A prominent example is “Robot-as-a-service” which means that the user only pays for the tasks the service robot fulfilled successfully. (…)
Interestingly, the U.S. is home of most service robots suppliers with 225 service robot manufacturers. China: 104 and Europe: 184.
Drying Mississippi River Threatens U.S. Supply Chain Shipping and tourism businesses that rely on the river are seeking alternatives as barges are grounded and prices skyrocket as water levels haven’t been this low in more than three decades.
China Abruptly Delays GDP Release During Communist Party Conference China abruptly delayed the publication of its third-quarter gross domestic product data, a day before it was set to be released, an unusual move as the country’s ruling Communist Party stages a key political gathering this week
EARNINGS WATCH
From Refinitiv/IBES:
Through Oct. 14, 35 companies in the S&P 500 Index have reported revenue for Q3 2022. Of these companies, 60.0% reported revenue above analyst expectations and 40.0% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 74% of companies beat the estimates and 26% missed estimates.
In aggregate, companies are reporting revenues that are 0.8% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.2% and the average surprise factor over the prior four quarters of 2.7%.
The estimated earnings growth rate for the S&P 500 for 22Q3 is 3.6% [4.1% last week]. If the energy sector is excluded, the growth rate declines to -3.1% [-2.6%].
The estimated revenue growth rate for the S&P 500 for 22Q3 is 10.1% [9.7%]. If the energy sector is excluded, the growth rate declines to 6.5% [6.4%].
The estimated earnings growth rate for the S&P 500 for 22Q4 is 5.0% [5.2%]. If the energy sector is excluded, the growth rate declines to 0.8% [1.3%].
Revisions have turned mostly negative:
155 S&P 500 companies report this week.
Trailing EPS are now $221.23. Full year 2022: $222.58. Forward 12-m: $233.02, full year 2023: $239.80
The Rule of 20 P/E is 22.9 at 6.7% core inflation (fair value at 2950). Conventional P/E is 16.2x trailing.
As of Friday’s close:
- The S&P 500 median trailing P/E is now 17.3 (17.4 last week, 17.7 three weeks ago). On forward: 15.1 (15.3 and 15.7).
- The 6 largest stocks by weight (24.2% of the index) have an average P/E of 41.6 (44.0 and 47.0). On forward: 26.8 (29.0 2 weeks ago).
- 41% of the companies have a P/E below 15.0 (39% two weeks ago). On forward: 48.4% (49%).
- 19.4% (21.6% and 19.6%) are below 10x. On forward: 21.0% (22.2%).
Goldman Sachs:
Despite the S&P 500 having declined by 23% from its peak in January, most absolute valuation metrics show that US stocks remain expensive vs. history. The S&P 500 started the year at 21x NTM P/E, a 91stpercentile valuation since 1980. Today, the P/E multiple of 15.8x appears less stretched than other absolute metrics, but still stands at the 66thpercentile. On top of this, many investors are skeptical about the EPS forecasts that underlie that metric.
US stocks also remain expensive relative to interest rates. Despite elevated recession risk, geopolitical tension, and a generally murky macro outlook, the earnings yield gap –a common proxy for the equity risk premium –trades close to the tightest levels in 15 years. Relative to both real 10-year Treasury yields and investment-grade corporate bonds, the S&P 500 index valuation ranks above the 75th%-ile since 1980.
Factset:
At this point in time, 9 companies in the index have issued EPS guidance for Q4 2022. Of these 9 companies, 5 have issued negative EPS guidance and 4 have issued positive EPS guidance. The percentage of companies issuing negative EPS guidance for Q4 2022 is 56% (5 out of 9), which is below the 5-year average of 60% and below the 10-year average of 67%.
At this point in time, 247 companies in the index have issued EPS guidance for the current fiscal year (FY 2022 or FY 2023). Of these 247 companies, 128 have issued negative EPS guidance and 119 have issued positive EPS guidance. The percentage of companies issuing negative EPS guidance is 52% (128 out of 247).
MARKET STUFF GALORE!
The options elephant in the room
One explanation for this apparent headless hen of a market:
This market is becoming more and more broken by the day. A month ago we referred to Goldman’s latest observation on just how extreme short term options trading had become. We wrote: “Close to 50% of options volumes are in contracts with a maturity of less than 24 hours. The greeks that arise from such short term options are very hard to hedge given the current liquidity in the underlying market. Erratic markets at its best…” This is a massive problem for any market, but especially for a market where underlying liquidity is evaporating (chart 2). The options monster has become huge and you can’t tame it…. (The Market Ear)
GS
SentimenTrader is full of interesting stats:
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“As a percentage of the total market capitalization of U.S. stocks, last week’s put buying was still quite a bit below October 2008. But when we net out the speculative activity and express it relative to market capitalization – the most honest, objective way to view this data – it’s on par with the week ending October 10, 2008.
There is some evidence that the activity we’re seeing now is even more speculative (on the downside) than that from 2008. As the Wall Street Journal noted recently, much of that volume is in ultra-short-dated options.
When we see heavy activity in highly leveraged, extremely short-term instruments, it signifies excessive confidence among the traders. One thing that markets will teach all of us is that excessive confidence is a recipe for humility.”
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Dean noted that the big-picture backdrop continued to deteriorate as more and more sub-industry groups declined by a significant amount relative to their annual highs. For only the 20th time since 1929, the percentage of sub-industry groups down 40% or more from a 252-day high exceeded 20%.
When the percentage of sub-industry groups down > 40% from a 252-day high exceeds 20%, the S&P 500 typically rebounds on a medium-term basis. i.e., It’s so bad, it’s good. The signals in 1937 and 2008 were the exception, with pretty sizable drawdowns in the six-month window.
Returns and win rates deteriorate in the 12-month period, which should act as a reminder to keep an open mind concerning all outcomes.
- Ignoring the calendar, the simple fact that sellers have persisted for so long, and pushed prices so low, have tended to indicate periods of exhaustion.
- Even though indexes registered new lows, fewer individual stocks did so. Dean showed that a 21-day new low divergence signal was triggered at the close of trading on Tuesday when the percentage of S&P 500 issues registering a 21-day low contracted on the lower low in the index. (…) The 3-month window suggests one should expect a choppy bottoming process.
- With the new alerts, the Composite Washout Model count increased to 70%, representing the highest level in the current drawdown phase. For only the 36th time since 1930, the Composite Washout Model triggered a new alert when the 10-day rate of change for the S&P 500 turned positive on Thursday. The previous alert occurred in June, leading to a 13% rally when measured from the publish date to the August peak in the S&P 500. Dean created the Composite Washout Model to identify potential turning points in drawdown phases. What a trader or investor does with the market message depends on one’s investment approach and risk tolerance.
Bespoke had this interesting factoid after last Thursday’s amazing session:
Going back to 1983, there were only 9 other days where the S&P 500 was down 2%+ intraday and finished the day up over 2%. Five of those were in 2008. https://bespokepremium.com/interactive/posts/think-big-blog/bespokes-morning-lineup-10-14-22-let-the-games-begin…
@bespokeinvest
TECHNICALS WATCH
CMG Wealth’s Steve Blumenthal’s table might appeal to contrarians given oversold levels and extreme negative sentiment:
But even with a recession in almost everybody’s line of sight, the bond market keeps sinking.
The spike in 10Y Treasury yields against weakening PMIs is very unusual. It occurred 3 times between 2004 and 2006 and in 2015. Hmmm…
The 2Y Ts yield jumped from 4.27% before the CPI to 4.51% at Friday’s close. (It was 3% in mid-summer). The 2s now yield 50bps more than the 10s. The last time such a spread happened was in 1980-81 early in the recessions. It happened to a lesser extent in 1989 (32bps) and 2000 (40bps).
Also sinking after the summer head fake: S&P 500 13/34–Week EMA Trend
What I make of all that:
- The extreme volatility will continue until complete capitulation. Traders are still having fun hip-shooting.
- But we are (obviously) getting closer to the bottom. There are more and more good value stocks available.
- The bond market, generally smarter and more rational, remains bearish. Rather puzzling:
- if it were seeing a recession, it should turn bullish; long rates generally decline during recessions (though not in 1970 nor in 1974 when inflation rose through the recessions).
- if no recession, it is thus worried of inflation, showing no confidence in the Fed’s resolve and acting contrary to the PMI trend.
- One explanation is that we are living the opposite of QE which made the bond market irrational. The Fed may now be selling bonds almost regardless of the economic reality, aimed at financial tightness by all means. Irrationality on the other side.
- But this cannot go on like QE did. Rising interest rates will, sooner than later, trigger financial and economic chaos.
- Given that equity markets remain expensive overall when a potential recession could cut profits 10-15%, increasing exposure to fixed income seems a better risk/reward move at this time. The main risk is a premature Fed pivot leading to runaway inflation.
Hoisington’s Third Quarter Review and Outlook quotes Paul Volcker:
“I suppose if some Delphic Oracle had whispered in my ear that our policy would result in interest rates of 20 percent or more, I might have packed my bags and headed home. But that option wasn’t open. We had a message to deliver, a message to the public and ourselves.” The message was that the Fed understood the critical role of money in causing inflation and that the Fed “could not back away from restraining money growth without risking a damaging loss of credibility, that once lost, would be hard to restore.”
He goes on to say that due to the work of Nobel Laureate Milton Friedman the public understood the relationship between money growth and inflation. He adds “To overdramatize a bit, we were doomed to follow through. We were ‘lashed to the mast’ in pursuit of price stability.”
This section of Volcker’s book concludes: “Did I realize at the time how high interest rates might go before we could claim success? No. From today’s vantage point, was there a better path? Not to my knowledge-not then or now.”
Over the past few years, I have challenged Hoisington’s bond bullishness but, this time, I agree with their conclusion:
Almost universally, the other members of the FOMC have supported the Fed chair’s position that low inflation is of paramount importance to deliver a rising standard of living for all. If the Fed were to abandon its commitment to the inflation target, the FOMC would suffer a major double blow to its integrity, which would be increasingly more difficult to restore as Volcker so cogently argued.
Failure of the Fed to achieve its target would also have the consequence of allowing an emergent money/price/wage spiral to become entrenched, causing a dismal replay of the two decade span from the early 1960s to the early 1980s.
The Fed’s mettle will be tested because highly over leveraged institutions will fail as they historically have done in such situations. Bad actors or their enablers should be directed to bring their collateral to the discount window or, if necessary, to the bankruptcy process rather than be given bailouts that have severely widened the income and wealth divides in the U.S. while causing the Fed to sacrifice price stability that’s so essential for broad-based economic gains.
These considerations suggest that the Fed’s current stance should continue. The long-term Treasury market is in the zone of digesting the rapid inflation of the past several quarters, and future Fed rate hikes. Barring any capitulation in the determination to quell inflation by the Fed, long Treasuries will increasingly reflect the looming recession and its deflationary circumstances.
Instacart Cuts Its Valuation for a Third Time to $13 Billion
Instacart Inc. is slashing its valuation to about $13 billion and steering clear of a highly anticipated public stock listing until market conditions improve, according to people familiar with the matter.
The US’s largest online grocery-delivery company set a new price of $38 a share, marking the third time it has reduced the valuation this year, said the people, who asked not to be identified because the matter is private. Instacart cut its valuation in March by almost 40% to $24 billion and again in July to $15 billion. (…)
The latest valuation represents nearly a 67% drop from the $39 billion Instacart garnered in its most recent fundraising round in 2021, when it snagged $265 million from investors such as Andreessen Horowitz, Sequoia Capital and D1 Capital Partners, as well as Fidelity Management & Research Co. and T. Rowe Price Associates Inc.
The internal share price revision was part of a 409A valuation. This process is conducted by an external, independent appraiser and determines the fair market value of a company’s stock, also considered the “strike price” at which employees can buy equity in a company. (…)
FYI, DoorDash delivered a -83% return since its November 2021 peak. It IPOed on December 2020 at $102 and opened at $182. Now $43. For the 6 months ended last June, DASH had revenues of $3.06B, up 32% YoY. It’s still not delivering any profits however. Its operating loss jumped 125% to $446M. Curiously, $154M (62%) of the $248M increase in operating loss was from “General and Admin” expense. Somebody’s cart is filling up fast!
In case you wonder, Grubhub’s results are no better: revenues of 2.8B euros in H1’22 returned -134M euros in “adjusted ebitda”. The “adjusted” was post a 3B euros “impairment loss” on its U.S. unit. JET shares are down 89% since October 2021.
Investors would have been wise to heed Domino’s Pizza CEO who said in 2021: “In 60 years, we’ve never made a dollar delivering a pizza. We make money on the product, but we don’t make money on the delivery. So, we’re just not sure how others do it.”
Well, they can’t do it either!