SoftBank Makes First Saudi Deal Together With Wealth Fund’s Unit

SoftBank Group Corp. has made its first investment in a company based in Saudi Arabia, partnering with a unit of the kingdom’s sovereign wealth fund to lead a $125 million financing for customer communication platform Unifonic.

Proceeds will be used to fund growth in the Middle East and expansion into Asia and Africa, Unifonic co-founder and Chief Executive Officer Ahmed Hamdan said in an interview. The company will also look at acquisitions in those regions to help it expand faster, he said.

The Unifonic deal is funded through SoftBank’s Vision Fund 2, and follows on from July’s $415 million fundraising by Dubai-based cloud kitchen startup Kitopi, which was SoftBank’s first in a business based in the United Arab Emirates and took that company’s valuation past $1 billion. Last month, it also co-led a financing round for Turkish e-commerce company Trendyol.

SoftBank’s foray in the Middle East comes with a growing number of so-called unicorn businesses worth at least $1 billion. More investors from outside are looking to bet on a shift to online services that has lagged other regions.

Read more on SoftBank’s deals in Middle East and Africa:

Swvl, a Dubai-based provider of mass transit solutions, said in July it expects to list on Nasdaq in a combination with special-purpose acquisition company Queen’s Gambit Growth Capital, with an implied equity value of about $1.5 billion.

Unifonic provides cloud-based software to send automated messages. As the pandemic spread, businesses turned to these services to send one-time passwords or shipping updates to customers. The company processed 10 billion transactions last year, charging a small fee for every message it sends to customers.

Hamdan declined to comment on the latest valuation, but said the company is forecasting sales for the year of more than $100 million and will start planning a listing on a global exchange in the next three years.

“Being able to attract one of the top international funds to invest in Saudi Arabia is a big milestone that will encourage more foreign direct investment to come into the digital and technology space,” Hamdan said. “We will optimize to list on a global market that can provide the best valuation.”

STV, Sanabil

Founded by Ahmed and his brother Hassan Hamdan in 2006, Unifonic was largely self-funded for the first decade. It raised $21 million in 2018 led by STV, a $500 million venture fund established by Saudi Telecom Co.

Sanabil, a unit of Saudi Arabia’s Public Investment Fund, was also an investor in the company. The PIF, as the wealth fund is known, put $45 billion into the first Vision Fund, which backed many of the largest technology startups including Uber Technologies Inc., Opendoor Technologies Inc. and DoorDash Inc.

“Over the next five years, we see the business growing by 10 times,” Hamdan said. “So we could process 100 billion transactions, impact 400 million people, and potentially be working with 50,000 companies.”

The valuation of Twilio Inc., which operates a similar business and is listed on the New York Stock Exchange, has more than tripled to almost $60 billion since the pandemic forced more transactions to move online.

By:

Source: http://bloomberg.com

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Asian Stocks Mixed as Data Show Delta Sapped China: Markets Wrap

Asian stocks were mixed Tuesday as weaker economic activity in China and the latest escalation in Beijing’s crackdown on private industries overshadowed another record close on Wall Street.

Equities slipped in China, where data signaled that an outbreak of the delta virus variant led to a service-sector contraction for the first time since February last year. Hong Kong slid as Beijing’s stepped-up curbs on video-gaming firms weighed on Chinese technology stocks.

U.S. futures edged up after the S&P 500 hit its 12th all-time high in August and the Nasdaq 100 rose. Treasuries held gains made following Federal Reserve Chair Jerome Powell’s measured comments about a possible reduction in stimulus and any future interest-rate hikes. The dollar dipped.

Oil declined, with traders assessing the prospect of additional OPEC+ production. Aluminum and nickel advanced as Goldman Sachs Group Inc. raise target prices. In cryptocurrencies, Bitcoin fell to about $47,000.

Global stocks overall are set for a seventh monthly advance on strong company profits, expanding vaccinations to underpin economic reopening and supportive Fed policies. At the same time, the decline in Treasury yields from a March peak may partly reflect concerns of a slower recovery ahead on risks such as the impact of the delta strain.

“The bond market is getting a little nervous about the economic outlook,” Priya Misra, head of global interest rate strategy at TD Securities, said on Bloomberg Television. But she added the U.S. economy is “strong” and that “by year end, if the economy holds up, which we forecast it will, that’s when we expect rates — especially in the long end — to start to edge higher.”

In the latest U.S. data, pending home sales fell in July. Traders are awaiting key payrolls figures Friday for further guidance on the economy’s strength.

Here are some key events to watch this week:

OPEC+ meeting on output WednesdayEuro zone manufacturing PMI WednesdayU.S. jobs report Friday

Some of the main moves in markets:

Stocks

S&P 500 futures climbed 0.2% as of 1:42 p.m. in Tokyo. The S&P 500 rose 0.4%Nasdaq 100 futures increased 0.1%. The Nasdaq 100 rose 1.1%Japan’s Topix index rose 0.7%Australia’s S&P/ASX 200 index rose 0.6%South Korea’s Kospi added 0.8%Hong Kong’s Hang Seng index fell 1.4%China’s Shanghai Composite index retreated 0.8%

Currencies

The Bloomberg Dollar Spot Index shed 0.1%The euro was at $1.1818The Japanese yen was at 109.88 per dollarThe offshore yuan was at 6.4660 per dollar

Bonds

The yield on 10-year Treasuries held at 1.28%

Commodities

West Texas Intermediate crude was at $68.90 a barrel, down 0.5%Gold was at $1,815.12 an ounce, up 0.3%

By:

Source: Stock Market Today: Dow, S&P Live Updates for Aug. 31, 2021 – Bloomberg

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Italy’s Supercharged Bond Market Is All About Faith in The ECB

One of Europe’s riskiest bond bets is a sign of how much investors are confident in the central bank’s ability to recover from the pandemic smoothly.

Italian benchmark yields are near a six-month low and the government is so short of liquidity that it canceled last week’s loan auction. With the number of outstanding positions in bond futures since March, the market is beginning to look like a crowded trade.

This is the latest evidence of the bullish momentum that is prevailing across European markets. Italy is one of the region’s most indebted nations, yet has seen unprecedented stimulus from the European Central Bank to dent lending costs that are reducing volatility and driving investors into the highest-yielding corners of the market. .

“The PEPP expansion could be important in that regard,” said Christoph Rieger, head of fixed-rate strategy at Commerzbank AG, referring to the ECB’s pandemic bond-buying program, which is due to end in March, but which many investors Now the bet will go on for a long time.

Against this background, Rieger expects Italy’s 10-year yield premium to fall to 75 basis points from its German counterpart – the security sector paradigm – currently around 100 basis points.

Meanwhile, Italian stocks are on a tear after a blockbuster earnings season in Europe, and the ECB recently changed its forward guidance to signal a longer period of ultra-lax policy, adding fuel to the rally.

Last week, the number of outstanding Italian 10-year bond futures contracts rose nearly 60,000 to more than 360,000. The increase as the underlying securities increased, indicating that investors are adding rather than consolidating their positions.

Giles Gail, still head of European rates strategy at NatWest Markets Plc, is starting to consider what might happen if everyone rushes to exit at the same time.

“It will be perverse, but possible in this market,” he said. For now, he also expects the Italian-German bond to expand by 75 basis points in the coming months.

Meanwhile, Rohan Khanna, a strategist at UBS AG, points to the risk of Snap elections, which he says are “highly likely” in the first quarter of 2022, if Mario Draghi decides to run for president, Although the probability of that is low. But for now, it all seems like a distant possibility.

On Wednesday, Italy paid less than the ECB’s own deposit rate to borrow for the first time in 12 months. This is an anomaly that highlights the scale of distortion in the region’s currency markets as well as the bullish trend of traders.

“An ECB that is in volume-control mode, prolonging its QE program with a clear commitment to financial stability, is clearly supportive of sovereign spreads,” Gayle said.

What’s Happening With Peloton Stock?

 stock has had a relatively tough year, declining by about 20% since early January and remains down by almost 33% from its all-time highs, as investors expect that higher vaccination rates and a continued re-opening of the gyms and in-person fitness classes would hurt demand for the company’s fitness equipment and subscriptions. However, there have been a couple of positive developments for the company over the last several weeks.

In July, UnitedHealthcare indicated that it was working with Peloton to provide members with access to fitness classes for a year. The deal, which marks Peloton’s first collaboration with a health plan, could prove an attractive avenue for subscriber acquisition for Peloton, considering that UnitedHealth has roughly four million commercial members. For perspective, Peloton had a total of about three million subscribers for its connected fitness and digital offerings as of the last quarter. UnitedHealth should also stand to benefit, as having healthier and more active customers could help to lower its healthcare costs. Peloton could expand with similar partnerships with other healthcare and insurance companies.

Moreover, it doesn’t look like we are done with the Covid-19 pandemic just yet. Daily new infections in the U.S. have been on the uptrend over the last few weeks, driven by the spread of the highly infectious Delta variant of the virus. The seven-day average case rate has risen from 22,000 in early July to over 100,000 cases presently. This could delay the re-opening of workplaces and keep people at home for a few more quarters, bolstering demand for Peloton’s products. The company might also be in a better position to cater to demand now, considering that it has taken steps to address supply chain bottlenecks.

That being said, the near-term trajectory for the stock will depend significantly on the company’s guidance for FY’22 (fiscal years end June), which is likely to be provided during its Q4 FY’21 earnings due later this month. We value Peloton stock at about $130 per share, slightly ahead of the current market price. See our analysis on  for more details.

[6/23/2021] Peloton’s Corporate Wellness Program

 stock has rallied by almost 11% over the last five trading days and remains up by around 16% over the last month. A part of the gains was driven by analyst upgrades and anticipation surrounding the re-launch of its treadmills following a recall last month. However, the bulk of the gains came on Tuesday after Peloton announced a new corporate wellness program that offers employees subsidized access to Peloton’s digital fitness membership and its fitness equipment, along with tailor-made features such as team tagging and group exercises.

Peloton will also assist its corporate partners with setting up workout spaces in offices. The offering could be a big win for Peloton as investors have been concerned about the company’s growth prospects following its Covid-fueled surge over the past year. By partnering with large corporations, Peloton could get more high-value customers to sign up for its services while possibly seeing lower customer acquisition costs. Corporates also stand to benefit as they look to bring talent back into the workplace after over a year of remote working. Health and fitness-related benefits, particularly from a buzzy brand like Peloton, are likely to be sought after by employees following the pandemic.

We remain bullish on Peloton’s stock, with a price estimate of about $130 per share, about 10% ahead of the current market price of about $117. See our interactive analysis for a detailed look at Peloton’s valuation and financials. See our updates below on our outlook for Peloton stock.

[6/17/2021] What Will Peloton Look Like In 2025?

At-home fitness major  has been one of the big winners through the Covid-19 pandemic, with its stock up by over 5x since the first set of Covid-19 lockdowns back in March 2020. The stock now trades at about $105 per share, or almost 6x projected FY’22 revenues (fiscal years end June) and 200x FY’22 EPS. Is this expensive? Probably not, considering that sales could potentially grow almost 2.4x over the next four years (FY’24), with the company also expected to improve its profitability considerably from FY’22 onward.

We believe Peloton’s revenues could potentially rise close to 2.4x from the levels of $4 billion in FY’21 to $9.5 billion by FY’25, representing a compounded annual growth rate of almost 24%. For context, that’s still well below the solid 145% CAGR the company is on track to post between FY’18 and FY’21. Although the end of Covid-19 – a big tailwind for Peloton – appears to be in sight, there are multiple secular trends that should help to grow sales post the pandemic. The economics of owning a Peloton compare favorably with gym memberships and spin classes, and the added convenience of working out from home should give customers a reason to buy Peloton.

Moreover, Peloton should benefit from the easing of current supply chain bottlenecks, with the company planning to build out its own U.S. factory, which is likely to commence operations from 2023. Peloton’s international expansion – which is just getting started – is also likely to drive sales growth. Sure, revenue growth could be still higher if we consider Peloton’s possible push into commercial-fitness applications post its acquisition of Precor, but 2.4x growth in the top line over the next four fiscal years looks very much achievable as a base case.

Combine revenue growth with the fact that Peloton’s net income margins (net income, or profits after all expenses and taxes, calculated as a percent of revenues) are on an improving trajectory. Net margins rose sharply from -13% over the first nine months of FY’20 to almost 4% over the same period in FY’21. Margins probably have a lot more room to expand as revenues increase, given Peloton’s solid unit economics.

Peloton has a vertically integrated model which includes hardware, software, and subscription services, somewhat similar to tech titan Apple. Gross margins stood at about 39% for the first nine months of FY’21, just a hair below Apple’s 40% odd margins. It’s probably not far-fetched to assume that net margins could approach 20% by FY’25. Considering our revenue projections of roughly $9.5 billion and 20% margins, almost $1.9 billion in net income is possible by FY’25.

Now, if Peloton’s revenues grow 2.4x, the P/S multiple will shrink by almost 60% from its current levels, assuming the stock price stays the same, correct? But that’s exactly what Peloton’s investors are betting will not happen! If revenues expand 2.4x over the next few years, instead of the P/S shrinking from around 6x presently to about 2.5x, a scenario where the P/S metric falls more modestly, perhaps to about 5x looks more likely, considering the fact that profitability is also projected to see sharp improvement.

This would make a 50% plus growth in Peloton’s stock price a real possibility in the next four years. This would likely take Peloton’s market cap from about $31 billion currently to almost $48 billion by FY’25. Although the stock is likely to remain somewhat volatile through the post-Covid reopening, as investors cycle into value and commodity stocks to ride the economic upturn, we think Peloton should deliver solid returns for investors in the medium term.

See our analysis on  for an overview of Peloton stock’s recent performance and where it could be headed over the next month.

[6/3/2021] What’s Happening With Peloton’s Stock?  (NASDAQ: PTON) is up by almost 9% over the last week (five trading days) outperforming the S&P 500 which has remained roughly flat over the same period. The recent gains are driven by favorable views from brokerages, and also as investors likely see increasing value in the stock following its almost -30% decline this year. So how is Peloton stock expected to trend in the near term?

Is the stock poised to decline further or is a recovery looking likely? Based on our machine learning engine, which analyzes Peloton’s stock price movements post its 2019 IPO, the stock has a 64% chance of a rise over the next month, after rising by about 9% over the last five trading days. See our analysis on for more details.

We also think the longer-term outlook for Peloton’s business is solid. We expect demand to remain strong even post Covid-19, as the economics of owning a Peloton compare favorably with gym memberships and spin classes. Moreover, Peloton’s business should continue to benefit from supply chain improvements with the company planning to build out its own U.S. factory, which should commence operations from 2023.

Peloton also recently closed its acquisition of Precor, a company that caters to commercial-fitness applications such as gyms and hotels and this could help to expand the Peloton brand and product range. Peloton’s international expansion is also just getting started, and this could also help the stock. While Peloton trades at a relatively lofty 6x projected FY’22 revenues (fiscal years end in June), this is justified by its high growth rates and thick margins. Consensus estimates point to a healthy 30% plus growth in revenues over FY’22 and gross margins have typically come in at about 40%.

[5/6/2021] Peloton’s Tread+ Recall An Buying Opportunity? (NASDAQ: PTON) fell by almost 15% in Wednesday’s trading, after the company said that it would be carrying out voluntary recalls of its treadmill machines – the Tread+ and Tread over safety issues, offering users a full refund. The Tread+ treadmills were reportedly responsible for dozens of accidents and the death of at least one child. Peloton stock is now down by close to 50% from all-time highs seen in January, as it has also been hurt by a broader rotation out of growth and “at home” stocks, with the Covid-19 pandemic receding in the U.S. So is Peloton stock worth a look at current levels of about $82 per share? We think it is.

Now, the current recall marks a PR setback for Peloton, which initially brushed off concerns that the U.S. Consumer Product Safety Commission (CPSC) raised about its treadmills in April. The financial impact of the recall could also be somewhat meaningful. The recall is likely to involve over 125,000 Tread+ machines which cost about $4,300 each, and a small number of Tread machines that have seen a very limited roll out in the U.S.

If we assume that 70% of customers opt to return the Tread+ (customers also have the option of keeping their treadmills and having Peloton relocate them to rooms not accessible by children), that would translate into refunds to the tune of over $375 million, excluding logistics and other costs. For perspective, Peloton’s revenues stood at about $1.1 billion last quarter. The company has also stopped the sale and distribution of Tread+ as it works on hardware modifications and this could also impact revenues this fiscal year.

That said, a majority of Peloton’s hardware sales come from its exercise bikes and we think the demand is likely to remain strong even as Peloton fixes its treadmills. Treadmill-related accidents are also not unique to the company. Per the CPSC, there were 17 deaths related to treadmills in the U.S. (across manufacturers) between 2018 and 2019. As Tread+ sales eventually resume, the company should see volumes pick up. Moreover, Peloton’s business should continue to benefit from supply chain improvements, the launch of new and lower-priced products, and its international expansion, which is just getting started.

So is Peloton stock expected to decline further in the near term or is a recovery looking likely? Based on our machine learning engine, which analyzes Peloton’s stock price movements post its 2019 IPO, there is a strong chance of a rise over the next month, after declining by about 17% over the last five trading days. See our analysis on  for more details.

[4/20/2021] How Peloton’s Treadmill Safety Issues Impact Its Stock (NASDAQ: PTON) fell by over 7% on Monday and remains down by around 9% over the last week (five trading days) compared to the S&P 500 which is up by about 1% over the same period. The sell-off comes as the U.S. Consumer Product Safety Commission (CPSC) said that the company’s Tread+ treadmills were responsible for dozens of injuries and at least one death.

The Commission also asked people with young children or pets to stop using the Peloton treadmills, while urging the company to carry out a recall of the product. So how will this impact Peloton? Now, treadmill-related accidents are not unique to the company. Per the CPSC, there were 17 deaths related to treadmills between 2018 and 2019. However, we think Peloton may need to respond with some safety-related software updates or possibly hardware enhancements in the future. The recent events could create some image-related issues for Peloton, which has been one of the pandemic’s biggest winners.

So how is Peloton stock expected to trend? Is the stock poised to decline further or is a recovery looking likely? Based on our machine learning engine, which analyzes Peloton’s stock price movements post its 2019 IPO, the stock has a 64% chance of a rise over the next month, after declining by about 9% over the last five trading days. See our analysis on  for more details.

[2/16/2021] What’s Happening With Peloton Stock?

Connected fitness company  (NASDAQ: PTON) has risen by about 10% over the last week (five trading days). The recent gains come on the back of a rally in the broader markets, with the S&P 500 is up 3% over the same period, and also due to positive views in recently initiated sell-side coverage on the stock. That said, Peloton stock remains down by about -19% year-to-date, driven by the broader correction in growth stocks and pandemic winners such as “at home” stocks.

So is Peloton stock poised to rise further or is a correction looking imminent? Based on our machine learning engine, which analyzes Peloton’s stock price movements post its 2019 IPO, the stock has a 77% chance of a rise over the next month, after rising by about 10% over the last five trading days. See our analysis on  for more details.

So what’s the longer-term outlook for the company? We think Peloton looks like a good bet for long-term investors for a couple of reasons. The stock trades at close to 9x projected FY’21 revenues (fiscal years end in June). Although that looks somewhat high for a company that sells fitness equipment, Peloton justifies this for a couple of reasons. Firstly, Peloton is growing fast, with revenues on track to more than double in FY’21 driven by Covid-19 related demand.

Growth should remain strong in the medium term as well, on account of supply chain improvements, the launch of new and lower-priced products, and international expansion. For perspective, Peloton’s revenues are projected to rise 35% in FY’22 per consensus estimates. Secondly, Peloton’s unit economics also look solid, meaning that it should become quite profitable as revenues continue to scale up. Gross margins stood at almost 40% as of the last quarter, with roughly 35% margins for products and 60% margins on connected fitness subscriptions. That’s even higher than consumer technology behemoth , which has gross margins of about 39%.

[2/16/2021] What’s Happening With Peloton Stock? stock has gained about 5x over the last year, making the at-home fitness company one of the biggest winners through Covid-19. Here’s a quick rundown of the recent developments for Peloton’s stock.

Firstly, Peloton published a strong set of Q2 FY’21 results (quarter ended December 31, 2020), beating market expectations. Revenue grew 128% year-over-year to $1.06 billion and the company also posted a small profit. Connected fitness subscribers grew to 1.67 million at the end of the quarter, marking an increase of 134% year-over-year, and the number is expected to grow to 2.28 million by the end of the fiscal year. Connected fitness subscribers pay about $40 per month to access and sync classes to their Peloton equipment.

One of Peloton’s biggest issues has been that it isn’t able to fulfill demand quickly enough. Although this might seem like a nice problem to have, Peloton risks alienating potential customers and hurting customer experience. This has been a factor holding the stock back since the holiday quarter, with Peloton underperforming the S&P 500 year-to-date. However, the company says that it now plans to invest over $100 million in air freight and expedited ocean freight over the next six months to help speed up its deliveries.

Separately, Peloton recently raised about $875 million in capital via a convertible debt offering at a 0% rate. The company will not pay any interest on the notes till they mature in 2026 and the conversion price stands at about $239, about 55% ahead of the stock’s current market price. This looks like an attractive deal for Peloton, enabling it to invest in its fast-growing business without immediately diluting existing shareholders. []

See our interactive analysis for a detailed look at Peloton’s valuation and financials.

[12/31/2020] Peloton Stock Updates

While Peloton’s (NASDAQ: PTON) stock saw a big sell-off after news of Pfizer’s Covid-19 vaccine in early November 2020, the stock is now up a solid 50% since then and is up by roughly 35% over December alone. So what are the trends driving Peloton’s surge? Firstly, the workout-from-home trend has continued to rise, and demand for Peloton’s products continues to significantly outstrip supply.

For example, the premium Bike+ exercise bike has seen delivery timelines slip to 10 weeks currently. Secondly, Peloton was recently added to the Nasdaq 100 stock index. This move results in higher demand for the stock from index funds tracking the Nasdaq. Thirdly, the company announced last week that it would be acquiring Precor – one of the world’s largest commercial fitness equipment suppliers. This is being viewed very positively for a couple of reasons.

Precor has deep relationships with gyms, fitness centers, and hotels and this could also help Peloton expand its reach to these sectors, as they recover post the pandemic. Peloton could also integrate its digital and connected fitness capabilities with Precor equipment. Peloton is also likely to leverage Precor’s expertise and expand beyond its core offerings of bikes and treadmills to other equipment such as ellipticals and climbers. Precor has a total of about 625k square feet of manufacturing space located in the United States. With these facilities complementing Peloton’s existing manufacturing infrastructure in Asia, it should eventually ease manufacturing constraints.

[12/7/2020] Is Peloton A Fad?

Connected fitness company Peloton’s (NASDAQ: PTON) stock is up almost 4x this year, trading at levels of about $115 or about 8x projected FY’21 Revenues. Peloton’s recent growth partly justifies these valuations – it has effectively at least doubled Revenues each year over the last three years and is on track to double Revenues again in FY’21 (fiscal years end in June).

However, as the early phase of growth dies down and Covid-19 related demand declines, could the company’s success be a flash in the pan? Or is Peloton building a sustainable competitive advantage? While it’s still too early to tell, we think that Peloton’s business model has a lot going for it.

High Switching Costs: Peloton’s business model focuses on building commitment via its pricey, but high-quality exercise bikes and treadmills. Once customers invest in its high-cost hardware, it’s likely that they will continue to pay for the monthly connected fitness subscription service (about $39 per month) to get the most out of their equipment. This is evident from the fact that churn rates stood at just 0.65% in Q1 FY’21 – well below most subscription-based digital services. [] The company is also looking to significantly broaden its reach, by launching slightly lower-priced equipment and indicating that it could eventually sell pre-owned bikes.

Favorable Experience For Users: The overall experience of spin classes and fitness lessons are highly dependent on the quality of instruction, and Peloton’s team of instructors have obtained celebrity-like fame. This is a big positive, as Peloton’s model scales well compared to physical fitness classes. The economics of owning a Peloton also compare favorably with gym memberships and spin classes. The average monthly cost of just a gym membership was about $58 in the U.S. in 2018, while Peloton’s connected program costs $39 a month and can also be shared among family members.

Brand Buzz, Social Features: Being one of the first movers in the connected fitness space, Peloton has built significant brand value. The company is also building social features that could help to engage users and build a sense of community around its platform. This network effect could also help to prevent customers from churning out of its platform. Peloton is also counting on its lower-priced digital fitness subscription ($13 per month) as an acquisition channel for its pricier equipment and connected fitness offering. The company said that Digital Subscriptions grew 382% to over 510,000 over Q1.

[9/11/2020] Peloton’s Valuation

Peloton (NASDAQ: PTON) is an at-home fitness company that sells connected exercise bikes and treadmills and related fitness subscriptions. The stock is up over 4x year-to-date, as the Covid-19 pandemic and related lockdowns caused people to stop going to gyms and fitness centers and work out from home, causing demand for the company’s products and services to soar.

Peloton now trades at about 8x projected FY’21 revenues, ahead of  which trades at about 6.5x. Does this make sense? We think it does. In this analysis, we take a look at the company’s financials, future prospects, and valuation. See our interactive analysis for more details. Parts of the analysis are summarized below.

An Overview of Peloton’s Business

Peloton Interactive sells connected fitness equipment including bikes (starting at about $1,900) and treadmills (starting at about $2500) with a monthly Connected Fitness Subscriptions ($39 per month), which streams and syncs instructor-led boutique classes to users bikes and the Peloton Digital Membership ($13 per month) which streams classes to mobile devices and smart TVs.

The company’s Product and Service bundle is positioned as an alternative to not just other exercise equipment, but to gyms and fitness center memberships. Although the company’s products are priced at a premium, the ecosystem – which combines hardware, software, and content – compares quite favorably in terms of price versus fitness classes and subscriptions. For perspective, the average monthly cost of just a gym membership was about $58 in the U.S. in 2018. [] While Peloton sells primarily to individuals, it also has some exposure to the commercial and hospitality markets.

Peloton’s Financials 

Peloton has been growing quickly. Revenues rose from about $440 million in FY’18 (fiscal year ends June) to about $1.83 billion in FY’20, – an annual rate of over 100%. Equipment sales rose from about $350 million in FY’18 to $1.46 billion in FY’20, with the company delivering 626k Bikes and Treads over 2020 alone. Subscription Revenues grew from about $80 million to $360 million, as the company’s base of connected fitness subscribers rose from 246k in FY’18 to about 1.09 million in FY’20.

Peloton’s total membership base rose to 3.1 million as of the end of FY’20, including users who only pay for its digital subscription (not connected to its equipment). Over FY’21, we expect Peloton’s Revenues to grow to almost $3.6 billion, driven by continued growth in equipment sales and a growing base of subscribers.

While Peloton remained loss-making as of last year, the economics of its business look favorable. Overall Gross Margins are thick at about 47% in FY’20 with hardware margins standing at 43%. In comparison, even Apple – an icon of hardware profitability – posted Gross Margins of less than that at 40% over its last fiscal. While Peloton’s Operating Costs have been trending higher, they have been growing slower than Revenue. With Revenue projected to double this year, Peloton appears to be on track to turn profitable.

Peloton’s Valuation

Peloton stock currently trades at levels of close to $130 per share, valued at about 8x projected FY’21 revenues. While the valuation multiple might appear rich, considering that Apple – the most established hardware/software/services play – trades at about 6.5x – we think it is largely justified. Peloton’s Growth has been solid – with Revenues doubling each year over the last two years and sales are likely to double in FY’21 as well.

Margins also have scope to improve meaningfully, considering the company’s high gross margins and low customer acquisition costs. Moreover, the company’s lucrative connected fitness subscription revenues are likely to be very sticky, as users who have invested in high-cost hardware are less likely to stop paying for its monthly service. Given the buzz surrounding the company’s brand, there may also be scope to double down on lifestyle and apparel products, taking on the likes of Lululemon and Nike.

That said, there are risks as well. Firstly, Peloton faces significant supply constraints at the moment. While a new manufacturing facility in Taiwan is likely to begin production at the end of the year, the company is still likely to miss out on some potential holiday demand. Secondly, as the Covid-19 pandemic eventually ends, investors could re-think the valuation of “at-home” stocks and this could at least temporarily impact Peloton’s valuation.

Separately, tech giants – with their deep pockets and software ecosystems – could play a bigger role in the connected fitness space, challenging Peloton. For instance, Apple recently launched its at-home workout app, Fitness Plus, which provides guided workouts and connects with Apple devices such as the Apple Watch.

E-commerce is eating into retail sales, but this might be an investment opportunity. See our theme onfor a diverse list of companies that stand to benefit from the big shift.

See all  and Download  here

Led by MIT engineers and Wall Street analysts, Trefis (through its dashboards platform dashboards.trefis.com) helps you understand how a company’s products, that you touch, read, or hear about everyday, impact its stock price. Surprisingly, the founders of Trefis discovered that along with most other people they just did not understand even the seemingly familiar companies around them: Apple, Google, Coca Cola, Walmart, GE, Ford, Gap, and others. This might include you though you may have invested money in these companies, or may have been working with one of them for years as an employee, or have consulted with them as an expert for a long time. You can play with assumptions, or try scenarios, as-well-as ask questions to other users and experts. The platform uses extensive data to show in a single snapshot what drives the value of a company’s business. Trefis is currently used by hundreds of thousands of investors, company employees, and business professionals.

Source: What’s Happening With Peloton Stock?

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Crypto Investors Get Ready for More Taxes But Clearer Rules

Sure, you might have to actually pay U.S. taxes on those crypto trades. But at least it will be easier to figure out how much you owe.

A new push by Congress to require crypto brokers to report transactions to the Internal Revenue Service could create some unwelcome tax bills but could clarify rules for traders and users of Bitcoin and other digital tokens, potentially strengthening the system in the long run, people in the industry say.

The new rules — a last-minute addition to the $550 billion bipartisan infrastructure package now being considered by the U.S. Senate — would also force businesses to disclose trades of digital assets of more than $10,000. The provisions are designed to raise $28 billion.

The measures add to increased scrutiny the IRS has recently applied to traders of Bitcoin, Ethereum and other digital assets. The agency has promised it will issue new rules that clarify how those virtual currencies should be taxed.

People who trade digital currencies must pay income taxes on any gains, even if some crypto investors have been ignoring their tax obligations. But even for those who want to follow the law, it can be difficult to keep track of what’s owed.

Filing taxes on crypto trades can create huge headaches, especially for those who conduct multiple transactions each year. While traditional stock brokerages are already required to send detailed tax forms to clients, crypto exchanges aren’t. Even if firms wanted to help their clients file taxes, it’s not always clear how to do that under the current regulations.

In addition, tax obligations can pop up in surprising places. People who use digital currencies to pay for things — like, say, a Tesla, or a pizza — are supposed to pay taxes on any increase in value of the crypto they spend. It’s a key difference between using digital “currencies” and actual, fiat currencies such as the U.S. dollar to conduct commerce.

Andrew Johnson, a project manager at a large national bank, has invested tens of thousands in crypto and uses a dedicated service to figure out what he owes in taxes. He’s been using CoinTracker, which he learned about though a YouTube channel that he trusts.

“Most would benefit from a tracking service to help with taxes,” he said. “For me, I decided it was worth the cost to not have to manually track all the trades I did — which could take hours or days.”

Read more from Bloomberg Opinion: How Can I Lower My Taxes on Bitcoin?

Cryptocurrency exchanges and others in the industry have raised concerns that the U.S. Senate is rushing the rules into effect without consulting them first.

Some wondered whether the new rules and regulatory attention would encourage mainstream investors to join the space — or hurt the appeal of cryptocurrencies by killing its anything-goes ethos.

“Some portion of crypto investors may start to have second thoughts about the tax consequences,” said Michael Bailey, director of research at FBB Capital Partners. “It’s almost like crypto is a really fun party, but it’s getting late and a few people are starting to look at their watches as they think about the next morning.”

For years, the IRS has been warning taxpayers to report cryptocurrency transactions on their tax returns. More recently, the agency has made clear that fighting tax evasion through digital currencies is a top priority.

The IRS has started collecting vast amounts of data on blockchain transactions, has subpoenaed crypto exchanges and worked on coordinating enforcement with foreign governments. Last year, the IRS added a yes-or-no question to the front page of the 1040 income tax form asking whether filers had sold or exchanged virtual currencies.

The jurisdiction of U.S. law enforcement only reaches so far, and crypto traders who prize secrecy could flee to offshore exchanges, or take other measures to avoid being spotted by the IRS. However, the U.S. has already shown it can crack down on foreign tax evasion by, for example, forcing banks in Switzerland and elsewhere to divulge details on American clients.

Even if parts of the crypto universe remain hidden, it may be difficult to move those assets onshore and turn them into legitimate wealth.

“If a U.S. taxpayer is into crypto for the ability to underreport income from sales or transfers, chances are someone in a chain somewhere may have to disclose it,” said Julio Jimenez, an attorney who is principal in the tax services group at Marks Paneth LLP.

All this isn’t necessarily a bad thing for law-abiding investors in digital assets if they end up with clearer rules and easier-to-understand annual statements from crypto firms.

“I think it will have a positive effect on the industry,” said Brett Cotler, an attorney at Seward and Kissel LLP in New York who specializes in blockchain and cryptocurrency. While exchanges and fintech firms that deal in digital currencies may have to spend money upgrading reporting and compliance systems, it will improve customer service, he said.

Johnson, the crypto trader, said he thinks the new rules will help legitimize the crypto ecosystem and foster international growth.

“While at its heart, crypto assets have been a means of moving value outside of government-controlled rails, I still understand the need for regulation in the crypto space in order for wider adoption to take place,” he said.

— With assistance by Natasha Abellard, and Laura Davison

By ,  , and

Source: Bitcoin (BTC): What Is Impact of Government Plan to Tax Crypto Trades? – Bloomberg

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Trillions of Negative-Yielding Debt Redeem Europe’s Bond Bulls

A deep pool of debt with below-zero returns is increasingly betting on European bonds. In a matter of weeks, German 10-year bond yields fell to the most in July from flirting with zero for the first time in two years, going back to minus 0.46% since the start of 2020. That fall – which has propelled bond prices – has helped push negative-yield debt volumes in Europe to a near six-month high of 7.5 trillion euros ($8.9 trillion).

Traders were alerted by the inflation bet, which initially raised borrowing costs, but lost heights after major central banks insisted on continued support. At the same time, the spread of Covid-19 variants stoked demand for the safest government loans, reviving a business that dominated global markets last year amid the pandemic.

Strategists at HSBC Holdings plc and ABN AMRO Bank NV never shied away from their call for benchmark bond yields at minus 0.50% by the end of 2021, which has been in effect since the first half of last year. That will erase a large portion of this year’s 54-basis point trough-to-peak advance.

The European Central Bank said last month that current inflation is driven by temporary factors, and any change in stance would depend on hitting the new 2% inflation target.

HSBC’s forecast was “based on the assumption that there will be no rate hikes before the end of 2023,” said strategist Chris Atfield. “It is mostly market priced now, helped by the new ECB forward guidance.”

Money markets have quickly cut back on policy tightening after the ECB revised guidance on interest rates, saying it would not react immediately if price hikes exceed that target for a “transient” period.

According to swap contracts, in July, traders wiped out 20 basis points more from rate-increasing bets. This is the biggest decrease in nearly two years, and they suggest they expect the ECB deposit rate to be below zero in five years.

HSBC’s Attfield said that “the new forward guidance criteria for rate hikes since 2008 will not have been met at any point,” highlighting the challenging task facing the ECB as it seeks to open up record monetary stimulus.

The euro area pulled out of recession in the second quarter, and headline inflation climbed to 2.2% last month. According to Mayva Cousin of Businesshala Economics, while rising pressures could push the annual CPI rate to more than 3% in the coming months, the increase will prove to be temporary and inflation is expected to decline sharply in early 2022.

According to a Businesshala survey, strategists see the German 10-year yield as low as minus 0.14% by the end of the year, down from minus 0.035% nearly a month ago. ABN AMRO strategist Flortje Merten sees a drop to minus 0.5%, given the balance between rate expectations and the state of the euro-regional economy.

“Further rate hikes and more optimistic sentiment would be two opposing factors and could keep Bund yields around these low levels,” Merton said.

This week

  • The Bank of England will meet with investors on Thursday to discuss the possibility of a split vote on bond purchases, given recent sharp remarks by some members of the Monetary Policy Committee.
  • European sovereign supplies should remain moderate at around 17.5 billion euros, according to Commerzbank, with auctions in Germany, Austria, France and Spain.

Source: Trillions of Negative-Yielding Debt Redeem Europe’s Bond Bulls

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Critics:

Historically, people give the government their money, instead of spending it, with the promise of being paid back, with interest. Now, governments are essentially getting paid to borrow money, as people become increasingly desperate for a safe haven for their wealth. The cycle becomes self fulfilling as negative rates raise further concerns about the economy.

“Bonds are supposed to pay the owner of capital something to pry the money out of their hands. But no … ” said co-founder of DataTrek, Nicholas Colas. Central banks often lower interest rates to grow the money supply in the economy, fuel demand and provide growth momentum. Other key drivers for monetary policy easing are weakening domestic outlooks, falling annual growth rates, low inflation and weakening business and consumer confidence. And in Europe’s case, make up for the lack of a coordinated fiscal response.

Another reason for negative yielding debt worldwide could be that institutional investors, like pension funds, are forced to keep buying bonds because of liquidity requirements. PIMCO’s global economic advisor Joachin Fels said there are also secular factors like demographics and technology that drive rates lower.

“Rising life expectancy increases desired saving while new technologies are capital-saving and are becoming cheaper – and thus reduce ex ante demand for investment. The resulting savings glut tends to push the “natural” rate of interest lower and lower,” said Fels.

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Chinese Developer Woes Are Weighing on Asia’s Junk Bond Market

https://images.wsj.net/im-189934?width=620&size=1.5

Financial strains among Chinese property developers are hurting the Asian high-yield debt market, where the companies account for a large chunk of bond sales.

That’s widening a gulf with the region’s investment-grade securities, which have been doing well amid continued stimulus support.

Yields for Asia’s speculative-grade dollar bonds rose 41 basis points in the second quarter, according to a Bloomberg Barclays index, versus a 5 basis-point decline for investment-grade debt. They’ve increased for six straight weeks, the longest stretch since 2018, driven by a roughly 150 basis-point increase for Chinese notes.

China’s government has been pursuing a campaign to cut leverage and toughen up its corporate sector. Uncertainty surrounding big Chinese borrowers including China Evergrande Group, the largest issuer of dollar junk bonds in Asia, and investment-grade firm China Huarong Asset Management Co. have also weighed on the broader Asian market for riskier credit.

“Diverging borrowing costs have been mainly driven by waning investor sentiment in the high-yield primary markets, particularly relating to the China real estate sector,” said Conan Tam, head of Asia Pacific debt capital markets at Bank of America. “This is expected to continue until we see a significant sentiment shift here.”

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Such a shift would be unlikely to come without a turnaround in views toward the Chinese property industry, which has been leading a record pace in onshore bond defaults this year.

But there have been some more positive signs recently. Evergrande told Bloomberg News that as of June 30 it met one of the “three red lines” imposed to curb debt growth for many sector heavyweights. “By year-end, the reduction in leverage will help bring down borrowing costs” for the industry, said Francis Woo, head of fixed income syndicate Asia ex-Japan at Credit Agricole CIB.

Spreads have been widening for Asian dollar bonds this year while they’ve been narrowing in the U.S. for both high-yield and investment grade amid that country’s economic rebound, said Anne Zhang, co-head of asset class strategy, FICC in Asia at JPMorgan Private Bank. She expects Asia’s underperformance to persist this quarter, led by Chinese credits as investors remain cautious about policies there.

“However, as the relative yield differential between Asia and the U.S. becomes more pronounced there will be demand for yield that could help narrow the gap,” said Zhang.

Asia

A handful of issuers mandated on Monday for potential dollar bond deals including Hongkong Land Co., China Modern Dairy Holdings Ltd. and India’s REC Ltd., though there were no debt offerings scheduled to price with U.S. markets closed for the July 4 Independence Day holiday.

  • Spreads on Asian investment-grade dollar bonds were little changed to 1 basis point wider, according to credit traders. Yield premiums on the notes widened by almost 2 basis points last week, in their first weekly increase in six, according to a Bloomberg Barclays index
  • Among speculative-grade issuers, dollar bonds of China Evergrande Group lagged a 0.25 cent gain in the broader China high-yield market on Monday. The developer’s 12% note due in October 2023 sank 1.8 cents on the dollar to 74.6 cents, set for its lowest price since April last year

U.S.

The U.S. high-grade corporate bond market turned quiet at the end of last week before the holiday, but with spreads on the notes at their tightest in more than a decade companies have a growing incentive to issue debt over the rest of the summer rather than waiting until later this year.

  • The U.S. investment-grade loan market has surged back from pandemic disruptions, with volumes jumping 75% in the second quarter from a year earlier to $420.8 billion, according to preliminary Bloomberg league table data
  • For deal updates, click here for the New Issue Monitor

Europe

Sales of ethical bonds in Europe have surged past 250 billion euros ($296 billion) this year, smashing previous full-year records. The booming market for environmental, social and governance debt attracted issuers including the European Union, Repsol SA and Kellogg Co. in the first half of 2021.

  • The European Union has sent an RfP to raise further funding via a sale to be executed in the coming weeks, it said in an e-mailed statement
  • German property company Vivion Investments Sarl raised 340 million euros in a privately placed transaction in a bid to boost its real estate portfolio, according to people familiar with the matter

By:

Source: Chinese Developer Woes Are Weighing on Asia’s Junk Bond Market – Bloomberg

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Critics:

The Chinese property bubble was a real estate bubble in residential and/or commercial real estate in China. The phenomenon has seen average housing prices in the country triple from 2005 to 2009, possibly driven by both government policies and Chinese cultural attitudes.

Tianjin High price-to-income and price-to-rent ratios for property and the high number of unoccupied residential and commercial units have been held up as evidence of a bubble. Critics of the bubble theory point to China’s relatively conservative mortgage lending standards and trends of increasing urbanization and rising incomes as proof that property prices can remain supported.

The growth of the housing bubble ended in late 2011 when housing prices began to fall, following policies responding to complaints that members of the middle-class were unable to afford homes in large cities. The deflation of the property bubble is seen as one of the primary causes for China’s declining economic growth in 2012.

2011 estimates by property analysts state that there are some 64 million empty properties and apartments in China and that housing development in China is massively oversupplied and overvalued, and is a bubble waiting to burst with serious consequences in the future. The BBC cites Ordos in Inner Mongolia as the largest ghost town in China, full of empty shopping malls and apartment complexes. A large, and largely uninhabited, urban real estate development has been constructed 25 km from Dongsheng District in the Kangbashi New Area. Intended to house a million people, it remains largely uninhabited.

Intended to have 300,000 residents by 2010, government figures stated it had 28,000. In Beijing residential rent prices rose 32% between 2001 and 2003; the overall inflation rate in China was 16% over the same period (Huang, 2003). To avoid sinking into the economic downturn, in 2008, the Chinese government immediately altered China’s monetary policy from a conservative stance to a progressive attitude by means of suddenly increasing the money supply and largely relaxing credit conditions.

Under such circumstances, the main concern is whether this expansionary monetary policy has acted to simulate the property bubble (Chiang, 2016). Land supply has a significant impact on house price fluctuations while demand factors such as user costs, income and residential mortgage loan have greater influences.

References

U.S. Economic Growth Is Peaking And That Means Stocks Could Struggle This Year, Goldman Warns

As the economic benefits of massive fiscal stimulus and businesses reopening reach their peak in the coming weeks, Goldman Sachs analysts are warning that U.S. economic growth will slow, leading to “paltry” stock returns over the next year and an end to the market’s massive pandemic rally.

U.S. economic growth will peak within the next two months, Goldman analysts said in a Thursday morning note, forecasting that gross domestic product will grow by an annualized 10.5% rate in the second quarter, the strongest expansion since 1978 aside from the economy’s stark mid-pandemic rebound in the third quarter of last year.

Economic growth will then “slow modestly” in the third quarter and continue to decelerate over the next several quarters, the analysts predicted, adding that such deceleration is typically associated with weaker stock returns and higher market volatility.

In a sign that fiscal stimulus effects and economic activity are peaking, the ISM Manufacturing index, a monthly economic indicator measuring industrial activity, registered at 65 in March—above the threshold of 60 that Goldman says typically represents peak economic growth.

Coming off the worst quarter in history, the U.S. economy grew at its fastest pace ever in the third quarter as a nation battered by an unprecedented pandemic put itself back together. Michelle Girard, chief U.S. economist at NatWest Markets, Stephanie Kelton, professor of economics and public policy at Stony Brook University, and Michael Strain, director of economic policy studies at the American Enterprise Institute, join “Squawk Box” to discuss. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi » Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision » Subscribe to CNBC: https://cnb.cx/SubscribeCNBC » Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic
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According to Goldman, the S&P 500 has historically fallen an average of 1% in the month after the ISM Manufacturing index registers more than 60, and in the subsequent 12 months, it’s gained a “paltry” 3%—significantly less than the 14% annualized return over the last 10 years.

Goldman expects the S&P will end the year at 4,300 points—implying just a 4% increase from Thursday’s close, lower than some other market forecasters who expect the index could soar to as high as 5,000 points by year’s end.

Crucial Quote

“Equities often struggle in the short term when a strong rate of economic growth begins to slow,” a group of Goldman strategists led by Ben Snider said Thursday, noting that during the last 40 years. “It is not a coincidence that ISM readings have rarely exceeded 60 during the last few decades; investors buying U.S equities at those times were buying stocks at around the same time as strong economic growth was peaking—and starting to decelerate.”

Surprising Fact

The most recent ISM reading is the highest since a level of 70 in December 1983—after which the S&P inched up just 0.2% in the following 12 months.

Key Background

Trillions of dollars in unprecedented fiscal stimulus during the pandemic have helped lift the stock market to new highs over the past year, and though President Joe Biden’s $2.3 trillion infrastructure plan could add even more fuel to the economy, Anu Gaggar, a senior investment analyst for Commonwealth Financial Network, said Thursday that “investors have been quick to recognize [that] much of the upside has already been priced.”

That’s evidenced by the growing divergence in performance between the broader market and growth stocks this year, Gaggar says, echoing the sentiment from Goldman analysts Thursday. The tech-heavy Nasdaq, which far outperformed the broader market by surging 44% last year, has climbed about 9% this year, underperforming the S&P and Dow Jones Industrial Average, which are up roughly 12% each.

Further Reading

S&P 500 Passes 4,000—And These Market Experts Think It Can Keep Climbing Higher. Here’s Why. (Forbes)

Dow Jumps 200 Points: Stocks Fend Off Third Day Of Losses Despite Biotechs, Netflix Falling (Forbes)

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.

Source: U.S. Economic Growth Is Peaking And That Means Stocks Could Struggle This Year, Goldman Warns

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Key quotes

“Economists predict 10.5% GDP growth for the second quarter, the strongest quarterly growth rate since 1978.”

“Growth in the third and fourth quarters of this year will clock in at 7.5% and 6.5%, respectively. Growth is then seen slowing in each quarter of 2022 — by the fourth quarter Goldman is modeling a mere 1.5% GDP increase.”

“Although our economists expect U.S. GDP growth will remain both above trend and above consensus forecasts through the next few quarters, they believe the pace of growth will peak within the next 1-2 months as the tailwinds from fiscal stimulus and economic reopening reach their maximum impact and then begin to fade.”

FX implications

The US dollar index drops 0.10% to trade at 91.25, as of writing. The dollar gauge resumes its downside momentum after facing rejection just below 91.50 in the US last session.

Latest Forex News

Stocks Fall Again As Experts Worry About ‘Extremely Bullish’ Market Indicators

After closing at record highs last week, stocks are falling for the second day in a row as corporate earnings—which lifted the market to new highs during the pandemic—start to show signs of weakness, all while speculative pockets of investor mania continue to rage on.

Shortly after the open, the Dow Jones Industrial Average fell 147 points, or 0.4%, while the S&P 500 also slipped 0.4%, and the tech-heavy Nasdaq, which underperformed Monday, shed 0.3%.

Far outperforming any other stock in the S&P, shares of railroad company Kansas City Southern are soaring 15% after Canada National proposed to acquire the company in a $33.7 billion deal—topping Canadian Pacific’s $25 billion bid from last month and setting the stage for a potential bidding war.

Heading up the S&P’s losses, Marlboro parent Altria Group’s stock is slumping 6% after reports that Joe Biden’s administration (which has not commented on the matter) is considering a reduction in the amount of nicotine allowed in tobacco products.

On the earnings front, shares of IBM are climbing 2.5% after the software giant surpassed first-quarter expectations with revenue of $5.4 billion—bolstered by ongoing growth in its enterprise cloud business—and adjusted earnings of $2.2 billion.

Meanwhile, medical device company Abbott, which makes Covid-19 test kits, reported worse-than-expected revenue of $10.5 billion Tuesday morning as Covid-related sales fell nearly 10% quarter to quarter, sending shares down about 3%.

Reflecting ongoing uncertainty over the economic recovery, epicenter stocks—or those belonging to companies hard-hit by the pandemic—are also driving losses Tuesday, with chemicals firms Dupont De Nemours, cruise-liner Carnival Corp. and Delta Air Lines all falling about 2%.

Crucial Quote

“The reopening news is directionally positive, but the big problem is that many epicenter stocks have already seen their enterprise values return to pre-Covid levels, while some are well beyond where they stood in 2019,” Vital Knowledge Media Founder Adam Crisafulli said in a Tuesday morning note.

Tangent

In a break from tradition, the Bank of Japan revealed Tuesday that it opted out of buying exchange-traded funds despite weakness in Japanese stocks. Crisafulli says the move is “perhaps the most important piece of news today” because it signals the central bank is dialing back its economic support—at a time when central banks around the world, including the Federal Reserve, have revved up their accommodative policy to help the economy and usher in new stock-market highs. Japan’s Nikkei 225, the nation’s benchmark index, fell 2% Tuesday and is now down 4.5% from a February high.

Key Background

Boosted by massive fiscal stimulus, an accelerating vaccine rollout and falling unemployment, stocks have had a strong start to the year, with the S&P pulling off 23 new all-time highs in 2021, according to LPL Financial Chief Market Strategist Ryan Detrick. “Many of our favorite sentiment gauges are becoming extremely bullish, which could be a near-term contrarian warning,” Detrick says of indicators like sentiment, at a three-year high, and low cash allocations from portfolio managers increasingly piling into stocks.

Surprising Fact

The price of dogecoin is soaring Tuesday, climbing back near record territory from last week, as retail traders around the world stage a rally around cannabis holiday 4/20. The cryptocurrency, modeled after a meme and originally developed as a joke, has climbed eight-fold over the past month, nabbing a staggering $49 billion market capitalization.

Further Reading

S&P And Dow Score New Record Highs, For The Week: Health Care, Materials And Utilities Sectors Lead Gains (Forbes)

Peloton Shares Drop After It Resists Regulator Warnings About Treadmill Following Child’s Death  (Forbes)

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.

Source: Stocks Fall Again As Experts Worry About ‘Extremely Bullish’ Market Indicators

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Crypto Market Erases $200 Billion In Market Value In 24 Hours; Regulator Warns Investors Could ‘Lose All Their Money’

After a more than 100% surge over the past month, the cryptocurrency market is taking a massive hit Monday as regulators and other experts sound the alarm on bitcoin’s booming rally, but not everyone’s convinced the bearishness is warranted.

Key Facts

As of 10:30 a.m. EST, the value of the cryptocurrency market has tanked to about $900 billion from a high of $1.1 trillion early Sunday morning, according to crypto data firm CoinMarketCap.

The world’s first and largest cryptocurrency, bitcoin, is behind much of the decline, falling 17% over the past 24 hours—wiping out about $125 billion in market value.

Other top tokens are also plunging, with ether, XRP and litecoin down 21%, 16% and 25%, respectively.

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“As with all high-risk, speculative investments, consumers should make sure they understand what they’re investing in,” the United Kingdom’s Financial Conduct Authority, which regulates financials in the country, said Monday, also issuing a stark warning: “If consumers invest in these types of product, they should be prepared to lose all their money.”

The price plunge started Sunday after a report by the United Kingdom’s Sunday Times shed light on the enforcement measures banks, including HSBC, are taking to bar transfers from cryptocurrency exchanges in the country.

Venture capitalist and longtime bitcoin supporter Tim Draper railed against the measures, tweeting early Monday that “banks don’t like bitcoin because it makes them less relevant” before issuing a bullish forecast that bitcoin prices will hit $250,000 by early 2023; bitcoin is currently trading at around $32,750.

Crucial Quote 

“Bitcoin often exhibits large upside swings that tend to be followed by corrections—this is normal behavior for a new technology in the early stage of its adoption curve,” Anatoly Crachilov, the cofounder and CEO of crypto investment manager Nickel Digital, said Monday, adding that the market is positioned for expansion as institutional adoption soars. “Only professional investors with a long-term view on the underlying technology should have exposure to this asset class. They also need high-risk tolerance levels and, importantly, to never lose sight of the forest for the trees.”

Chief Critic

Bank of America Securities Chief Investment Strategist Michael Hartnett warned that bitcoin looks like “the mother of all bubbles,” on Friday, noting that its roughly 1,000% surge since the beginning of 2019 has been fueled by “violent” inflation, akin to the short-lived surges of gold prices in the late 1970s and tech stocks in the late 1990s.

Surprising Fact

Before crashing 80% by the end of 2018, the price of bitcoin, which first launched in January 2009, climbed fifteenfold in 2017 amid a flood of heightened attention and surging mainstream adoption, as retail trading became easier through pioneering bitcoin platforms like brokerage Coinbase.

Key Background

The cryptocurrency market’s massive rally has been fueled in large part by inflation concerns and institutional adoption. Investors have been eyeing regulatory approval of a bitcoin exchange-traded fund, but JPMorgan warned Friday that such a development may actually hurt bitcoin prices in the short term as investors cash out of the Grayscale Bitcoin Trust, an SEC-approved bitcoin price-tracking fund that many have turned to in lieu of an ETF. 

Further Reading

As Bitcoin, Ethereum, Ripple’s XRP And Litecoin Lose Billions, Watchdog Issues Stark Crypto Price Warning (Forbes)

SEC Charges Ripple With Selling $1.3 Billion In Unregistered Securities, XRP Loses $2 Billion In Market Value (Forbes) Follow me on Twitter. Send me a secure tip

Jonathan Ponciano

Jonathan Ponciano

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com

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Business News

After a more than 100% surge over the past month, the cryptocurrency market is taking a massive hit Monday as regulators and other experts sound the alarm on bitcoin’s booming rally, but not everyone’s convinced the bearishness is warranted.”Bitcoin often exhibits large upside swings that tend to be followed by corrections–this is normal behavior for a new technology in the early stage of its adoption curve,” Anatoly Crachilov, the cofounder and CEO of crypto investment manager Nickel Digital, said Monday, adding that the market is positioned for expansion as institutional adoption soars.

“Only professional investors with a long-term view on the underlying technology should have exposure to this asset class. They also need high-risk tolerance levels and, importantly, to never lose sight of the forest for the trees.”Bank of America Securities Chief Investment Strategist Michael Hartnett warned that bitcoin looks like “the mother of all bubbles,” on Friday, noting that its roughly 1,000% surge since the beginning of 2019 has been fueled by “violent” inflation, akin to the short-lived surges of gold prices in the late 1970s and tech stocks in the late 1990s. Before crashing 80% by the end of 2018, the price of bitcoin, which first launched in January 2009, climbed 15-fold in 2017 amid a flood of heightened attention and surging mainstream adoption, as retail trading became easier through pioneering bitcoin platforms like brokerage Coinbase.

The cryptocurrency market’s massive rally has been fueled in large part by inflation concerns and institutional adoption. Investors have been eyeing regulatory approval of a bitcoin exchange-traded fund, but JPMorgan warned Friday that such a development may actually hurt bitcoin prices in the short term as investors cash out of the Grayscale Bitcoin Trust, an SEC-approved bitcoin price-tracking fund that investors have turned to in lieu of an ETF. As Bitcoin, Ethereum, Ripple’s XRP And Litecoin Lose Billions, Watchdog Issues Stark Crypto Price Warning (Forbes)SEC Charges Ripple With Selling $1.3 Billion In Unregistered Securities, XRP Loses $2 Billion In Market Value (Forbes) All data is taken from the source: http://forbes.com Article Link: https://www.forbes.com/sites/jonathan…#bitcoin#newsheadlines#cnnnewstoday#newstodaylocal#newstodayabc#newstodaybbc #

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