Morning Commentary
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It was a dull day for the broad market, but there were individual winners. A resurgence of the initial public offering (IPO) market was relatively quiet, save for the high- profile debut of Box Inc. (BOX) and Shake Shack (SHAK). And until this week, with SHAK soaring, both IPOs were seen as a cautionary tale that buttresses the notion that 2014 was the top.
Last year saw the most IPOs since the year of the crash, raising almost as much money..
The following blew away the consensus:
Yesterday, high expectations on the first day of trading added to the chorus of bears and curmudgeons (the number of people that are angry about the bull market is baffling, but it is a sign of the times).
So, is this a sign of the top or something else?
Let’s look at the names:
Obviously, when a stock trades up 100% on its first day of trading, one has to conclude that it is poor work on the part of investment bankers or an atmosphere of mania. Contrary to the message of bears, we are not in the latter. Perhaps, it was the smartest guys in the room who blew it again. I’m not ready to touch the stock; however, I will say that dismissing it out of your hand could be a huge mistake.
Interestingly, some are comparing ETSY to eBay Inc. (EBAY), the peer-to-peer (P2P) marketplace founded in 1995 to trade PEZ Candy and Dispensers. The company went public in September 1998 at $18, and it closed on the first day of trading at $53.50. By April 1999, shares were up 1,280%. However, there’s another name that ETSY might aspire to become: Chico’s FAS Inc. (CHS). CHS is a clothing retailer, but when it went public, it was as much arts and crafts as dresses to be worn on a beach.
In fact, the official name of the company ‘Chico’s FAS’ means folk art store. The stock went public in 1997 and it was up 31,000% by 2006.
As I mentioned, I’m not ready to buy ETSY, but I’ve put my initial skepticism in check.
Sharing Economy
ETSY is part of the economy of the future and it is known by a variety of names: sharing, trust, a gig, and on demand, but most say it’s undeniably changing our lives. A PricewaterhouseCoopers (PwC) study underscores why it’s growing so fast, while 72% see themselves becoming consumers. Here’s why:
However, here are the following caveats:
This moment has been coming on for decades and some might say it began with the McDonald's drive- thru, then eBay and Craigslist. Then Netflix DVDs and TiVo appeared in the early 2000s, followed by iTunes, the iPhone, Uber, and Airbnb in 2007. With 3.5 billion internet-connected devices, there's no turning back.
Evolution of On Demand |
|
Breakthrough |
Years |
Convenience |
1960s -1980s |
Online Marketplace |
1990s |
Instant video on demand |
Early 2000s |
Loneliness Crisis |
2004 -2013 |
Social Network |
2007 - 2012 |
Sharing |
2010 |
Pervasive Mobile Connection |
2012 |
The big guns in this space will probably go public this year, so if you thought ETSY was impressive, wait until the Uber and Airbnb IPOs.
Today’s Session
Around the world, equity markets are under pressure with Spain and Italy off more than 2% and Germany and France more than 1.4% each. China clamping down a tad on its runaway stock market rally isn’t helping either.
Consumer prices in America were less than anticipated for the headline number was in-line with consensus ex-autos. Some see hints of inflation in the number, but it’s a long way from being a concern.
Earnings were mixed, but big names such as Honeywell International Inc. (HON) and American Express Company (AXP) are lower, while General Electric Company (GE) is talking a good game about an improving world. Mattel, Inc. (MAT) beat very low earnings estimates.
Company |
Date |
EPS |
Consensus |
Revenue ($M) |
FY EPS Guidance |
FY EPS Consensus |
AXP |
16-Apr |
1.48 |
B 0.12 |
7,950 |
- |
5.48 |
MAT |
16-Apr |
-0.08 |
B 0.01 |
923 |
- |
1.46 |
SLB |
16-Apr |
1.06 |
B 0.15 |
10,248 |
- |
3.21 |
GE |
17-Apr |
0.31 |
B 0.01 |
33,104 |
- |
1.71 |
HON |
17-Apr |
1.41 |
B 0.02 |
9,213 |
6.00-6.15 |
6.09 |
Comments |
Wouldn't say angry with the bull market. Just illogical frustration. Especially when cult growth names that have no fundamentals are going up in a flat to down economy. 2 steps forward one jump back is theme - no solid sector moves make it harder to make sense EdP on 4/17/2015 10:38:30 PM |
Tweet |
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