Nike had long been one of the biggest retail industry holdouts from selling on Amazon. The Portland-based company steadfastly resisted having its merchandise sold directly through Amazon (though it was sold by secondary sellers). However, very recently it relented despite its worries over a lack of pricing control and display. For Nike, the deluge of its products being sold on Amazon through middlemen had become so strong (it is the most purchased apparel brand on Amazon), that it seemed to realize it had lost control of pricing and display in spite of its efforts. The same appears to have happened to other brands, like Patagonia, North Face, and Chanel.
FINSUM: This is a sign that Amazon is growing so dominant that it is creating its own gravity, where the site’s popularity compels retailers to give-in despite reservations.
Travis Kalanick may have departed as Uber’s CEO, but that does not mean Uber is not now a threat to the US auto industry. Silicon Valley has been taking the lead in the US car industry, which is threatening to upend the long-held dominance of American automakers in Detroit. Analysts at Guggenheim believe that Uber and other Silicon Valley companies, like Google’s Waymo, pose a threat to Ford and GM. They argue that this “secular upheaval” occurring in the car industry is weighing on the car companies’ stock.
FINSUM: The adage is that uncertainty is bad for markets, and that seems to be the case here. Our view, which contrast to most is that self-driving cars will actually favor auto companies as they will be able raise prices as the returns of renting out such automobiles push their economic worth higher. It could make cars a higher margin industry.
Big banks have been on a tear since Trump’s election, and aside from their stock prices, they seem to be emboldened in terms of business decisions. For instance, Goldman Sachs is trying to expand its business into new areas. The bank is trying to pick up more business in the industrials sector with a special focus on service firms such as consulting, staffing, and security firms. It has just hired two senior bankers from Credit Suisse to head the new charge into the sector. These types of companies are often owned by private equity firms and tend to throw off high fees to banks.
FINSUM: One of things about Goldman that we really respect is that it constantly tries to improve itself and move into new areas. This is a minor change, but over the past few years it has plowed into some major new territory, like online savings accounts.
There has been a remarkable amount of hype about the new iPhone 8, due to be released by Apple this year. Many think it will be a huge hit that will revive slumping iPhone sales and send the company’s stock surging. However, an analyst at Mizuho has just downgraded the shares because he thinks the stock will underperform expectations when the phone is released. He believes the upgrade cycle may not be as strong as expected because of the high cost of the new phones and the fact the the new OLED screen will be limited to the very priciest model. Additionally, Mizuho thinks gains are already priced in, saying “In our view, enthusiasm around the new product is largely baked into the stock at current levels”.
FINSUM: Finally, a contrarian view on the new iPhone. We do think these factors are a very real risk.
Tim Cook, CEO of Apple, just made what could turn out to be a very important announcement. After years of speculation, Cook finally acknowledged what Apple was focusing on in the car space. “We’re focusing on autonomous systems”, said Cook, continuing “It’s a core technology that we view as very important … the mother of all AI projects ... probably one of the most difficult AI projects to work on”. The comments seem to indicate that Apple is focused on creating the underlying technology which will power autonomous cars in the future.
FINSUM: Selling the system that powers the next generation of cars could, needless to say, be hugely profitable, and we have no reason to doubt Apple can pull this off.
There has been a lot of anxiety on Wall Street this year about the Trump administration’s plans for changing financial regulation. In particular, there were worries that Trump may try to bring back some form of Glass-Steagall, the rule that formerly separated retail from investment banks. However, yesterday the White House came out with its new financial overhaul plans and it is evidently very agreeable to Wall Street. Goldman Sachs, Credit Suisse, and Bank of America, in addition to others, all expressed satisfaction at the far-ranging plans.
FINSUM: This was a very good package for banks, who will be grateful for any changes given how onerous Obama-era regulations have been.