Weekend Update #87
Welcome to Blue Room's Weekend Update. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.
The rebound in the stock market has been strong as of late with the S&P 500 finishing up for its fourth straight week, gaining over 10% in that time frame as it heads for its longest weekly winning streak since November 2021. This week’s gains were largely driven by a rollover in the Consumer Price Index, which came down from its high of 9.1% to 8.5% in July, and the Producer Price Index which came down from 11.3% to 9.8%. A drop in fuel prices from June were the main contributor to the decreases, as core CPI stayed flat at 5.9% year-over-year. Michigan Consumer Sentiment rose for the second month in a row. The NFIB Small Business Optimism Index also saw an increase — its first increase in seven months — as expectations that the economy will improve rose month-over-month.
On the policy side, the Inflation Reduction Act is expected to pass, which aims to lower healthcare costs and give a boost to the electric vehicle industry, among other items on the climate side. This comes only two weeks after the CHIPS Act, which will help drive domestic growth in the semiconductor industry.
Crypto has also been rebounding from its lows in June, fueled by the successful completion of Ethereum’s final testnet for the Merge, which is now expected to take place around September 15th. The announcement regarding Coinbase’s partnership with BlackRock, the largest asset management firm in the world, also generated some excitement in the crypto sector.
MAJOR INDICES - PERFORMANCE THIS WEEK
S&P 500 — +3.25%
NASDAQ — +3.08%
DOW — +2.92%
Thank you Blue Room Analyst NICK PEART
Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described in Chegg's annual report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2022, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.
During the call, we will present both GAAP and non-GAAP financial measures. Our GAAP results. and GAAP to non-GAAP reconciliations can be found in our earnings press release on the investor slide deck found on our IR website, investor.chegg.com. We also recommend you review the investor data sheet, which is also posted on our IR website.
On August 4th, 2022, aluminum packing provider Ball Corporation hosted its second quarter 2022 earnings call. The company stated that it recorded a non-cash long-lived asset impairment charge of $435 million related to its Russian operations, which contributed to the company’s first quarterly loss in recent memory. The company reported revenues of $4.1 billion, a 19.5% year-over-year increase, generated gross and operating profit margins of 16.7% and -2.6%, respectively, and a net loss of $165 million.
Ball management highlighted several headwinds impacting the business, including inflation, currency translation, and regional demand volatility stemming from North American customers’ price-over-volume pricing strategies. To wit, in the pre-pandemic period, customers typically passed along 1%-2% price increases to end-consumers. Some costumers have been increasing their prices by 20%, while margining up, while others have been increasing prices more modestly, and it appears the former have been losing demand while the latter have seen it remain flat.
Other key updates included the shuttering of two facilities—Phoenix, Arizona, and St. Paul Minnesota—as well as “rephasing previously announced North American projects” as the company assesses near-term demand needs in the region. South America also saw softness—2.9% volume declines, while EMEA volumes showed promise, growing 7.7%.
The company anticipates a long-term global growth CAGR of 5% but acknowledged its long-term diluted earnings per share growth goal of 10% to 15% had been impeded by the recent deceleration in volume growth and other headwinds, and further stated “it’s going to be tough to match last year’s comparable operating earnings in 2022.”
After experiencing above-average growth in the post-pandemic period, the company is now navigating a “return-to-normal” but believes it is positioned for success in the long-term as it pursues cost-savings measures throughout its operating cost structure, renegotiates customer agreements to better implement PPI and CPI escalators, and captures share in certain beverage categories, including energy drinks and ready-to-drink cocktails.
U.S. PASSES CHIPS ACT (H.R. 4346) INTO LAW
On Tuesday of this week, U.S. President Joe Biden signed the CHIPS Act of 2022 into law. The law provides over $52 billion for semiconductor manufacturing incentives, research and development investments and investments in tax credits for semiconductor manufacturing.
The passing of the CHIPS Act of 2022 is seen as monumental because it incentives domestic semiconductor research and manufacturing. According to the Semiconductor Industry Association, “the share of modern semiconductor manufacturing capacity located in the U.S. has decreased from 37.0% in 1990 to 12.0% today.” More specifically, the production of leading edge semiconductor nodes are dominated by companies in Asian regions, leaving United States manufacturing at a significant disadvantage.
Corporate Profile:
Coinbase, Inc. was founded in 2012. The Company operates globally and is a leading provider of end-to-end financial infrastructure and technology for the cryptoeconomy. The Company offers retail users the primary financial account for the cryptoeconomy, institutions a state of the art marketplace with a deep pool of liquidity for transacting in crypto assets, and ecosystem partners technology and services that enable them to build crypto-based applications and securely accept crypto assets as payment. In May 2021, the Company became a remote-first company. Accordingly, the Company does not maintain a headquarters.
Consumer sentiment surpassed expectations and moved up very slightly to 55.1 in August — to about 5 index points above the all-time low reached in June. All components of the expectations index improved this month, particularly among low and middle income consumers for whom inflation is particularly salient.
The year-ahead economic outlook rose substantially to just above its average reading from the second quarter 2022, while the two other expectations index components remain at or below their second quarter averages. At the same time, high income consumers, who generate a disproportionate share of spending, registered large declines in both their current personal finances as well as buying conditions for durables.
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August 4, 2022 BLUE ROOM Meeting Number 92
Thursday
August 4, 2022
12 PM Denver
__________ __________
BLUE ROOM
MEETING NUMBER 92
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Company Profile
Moderna is a commercial stage biotech company based in Cambridge, Massachusetts. Founded in 2010, the company aims to pioneer a new class of medicines made of messenger RNA, or mRNA. Moderna has an extensive development pipeline of therapeutic candidates ranging across its six modalities: Prophylactic Vaccines, Systemic Secreted & Cell Surface Therapies, Cancer Vaccines, Intratumoral Immuno-Oncology, Localized Regenerative Therapeutics and Systemic Intracellular Therapeutics. Currently, Moderna’s only commercial therapeutic is mRNA-1273 -- its COVID-19 vaccine. Moderna is traded on the NASDAQ Exchange under the ticker symbol “MRNA.”
The energy markets were relatively quiet this week, as most of the information followed by analysts focused around future guidance as opposed to events with immediate consequences. This week, the big three information disseminators – the U.S. Energy Information Administration, the International Energy Agency, and OPEC – all released their monthly outlooks on the energy markets. Furthermore, over the weekend, the Senate passed the Inflation Reduction Act, which could impact firm-level investment decisions for major U.S. oil and gas producers.
However, before we dive into the long-term outlook for the oil and gas industry, let’s look at the current narratives in global energy markets. In the United States, gas prices dipped below $4.00/gallon for the first time since March – falling 21% from their June highs. According to AAA, the average price per gallon for regular gasoline is $3.99. While this is notably lower than the more than $5.00/gallon that was seen in June, it remains significantly higher than the $3.18/gallon average for 2021. The drop in fuel prices aided the monthly decline in headline CPI while also lessening consumer expectations about inflation. While many people have noticed that the prices for their groceries, rent, mortgage and clothing have increased, it is sometimes difficult to discern individual price movements among this basket of goods; many people are not looking at the price of tomatoes every time they go to the grocery store and comparing it to the previous trip’s price. However, gasoline is the sole good whose price is posted on billboards around town. Given most people fill up their tanks at least once a week, the price of gasoline acts as an apt proxy for overall inflation in the mind of the consumer.
The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in four business segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-To-Consumer & International (DTCI). The Media Networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, radio networks and stations. The Parks, Experiences and Products segment owns and operates The Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney. The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. This segment distributes films primarily under The Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners. The DTCI segment operates international television and networks and direct-to-consumer streaming services. The Walt Disney Company was founded by Walter Elias Disney on October 16, 1923.
Corporate Profile:
At Precision BioSciences, leaders in genome editing utilize the ARCUS editing platform to eliminate cancers, cure genetic diseases, and create safer, more productive food sources.
Genome editing technologies allow us to rethink our approach to a broad array of serious challenges faced by the world today. We now have the ability to precisely edit the DNA of a living organism, opening up the possibility of correcting genetic problems at their source.
Precision BioSciences is dedicated to improving life through its proprietary genome editing platform, “ARCUS”. Precision leverages ARCUS in the development of its product candidates, which are designed to treat human diseases in three innovative areas: allogeneic CAR T immunotherapy, in vivo gene correction, and food.
CHANGING LIVES, TOGETHER
Getting ahead of cancer is crucial no matter where people are in their cancer journey. From earlier cancer detection to treatment guidance and monitoring, we are helping people get the answers they need to make more informed decisions across the cancer continuum.
With a leading portfolio of products for earlier detection and treatment guidance, we help people face the most challenging decisions with confidence.
Our dedication to taking on the impossible fuels everything we do. We are continuously innovating, combining scientific rigor with an open-minded approach to deliver the next big thing.
OUR PURPOSE: We strive to change lives through earlier, smarter answers across the cancer journey.
OUR PROMISE: We relentlessly pursue life-changing answers in cancer that give people the clarity they need to take action, earlier.
OUR PRINCIPLES
Earlier Answers
Advanced Science & Technology
Human Spirit
Visionary Collaborations
Rooted in Communities
2022 08 11 BLUE ROOM Global Meeting #92
Thursday
August 11, 2022
12 PM
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BLUE ROOM
MEETING NUMBER 93
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10% OF ALL BLUE ROOM REVENUES GO DIRECTLY TO FUND OUR NON PROFIT TOGETHERISM.
WE CAN ACCOMPLISH ANYTHING TOGETHER.
These materials do not purport to be all-inclusive or to contain all the information that a prospective investor may desire in considering an investment. These materials are intended merely for preliminary discussion only and may not be relied upon for making any investment decision. Any discussion or information contained in this presentation does not serve as a receipt of, or as a substitute for, personalized investment advice from Blueroom or your advisor.
This publication does not constitute an offer to sell or a solicitation to buy any securities in any fund, market sector, strategy or any other product. Investing is speculative and involves substantial risks (including, the risk of loss of the investor’s entire investment). Past performance is not indicative of future results, and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable.
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