Shoppers Are Flocking to Walmart in 2022 (Sorry Target)
August 22nd, 2022
Last week’s market summary (August 15th-August 19th, 2022):
- S&P 500: –0.96%%
- Dow: -0.01%
- Nasdaq: -2.24%
- Bitcoin: -12.76%
So let's start with the biggest news of the week. House of the Dragon (the much-anticipated Game of Thrones prequel) premiered last night. I'm writing this on Friday, so don't worry, I won't be giving away any spoilers.
However, there are plenty of lame Game of Thrones puns, metaphors, and quotes scattered below. So if you're not a fan of the show and something doesn't make sense, just “assume it was something clever.”
Alright with that out of the way, here's what we're covering today.:
- Why Walmart and Target's Earnings Reports Were So Different.
- Bed, Bath, and Beyond Has Been Getting the Meme Stock Treatment.
- The Ethereum Merge is Right Around the Corner.
- Disney+ (And ESPN+ and Hulu) is Getting More Expensive.
- Hodlnaut is “Hodling” on for Dear Life.
Finally, I'll explain why I'll be keeping my eye be on the consumer discretionary sector this week before recommending three recent articles that I found interesting (or at least amusing).
What Everyone’s Been Buzzing About
1. The War of the Two Retailers
Walmart and Target are both dominant forces in the retail space, but they've taken different paths to building their kingdoms. While Walmart has always focused on trying to offer the lowest actual cost, Target has spent more time marketing the overall value that it provides to customers.
Both models have worked over the long haul. But it appears that Walmart is edging out its rival in 2022 as inflation causes more consumers to laser-focus on their bottom lines. In its latest earnings report, Walmart reported that sales grew 8% last quarter and it kept its second-half outlook unchanged. Walmart is proving yet again that when you're a discount brand, inflation “isn't a pit; it's a ladder.”
Target, meanwhile, liquidated a glut of unsold inventory as it works to stock its shelves with products that consumers want post-COVID. Target's profits plummeted by 90% in Q2. Brian Cornell, their CEO, expects the company to rebound in the second half of the year. But that profit slide still stings.
So which big box retailer should you invest in right now? Honestly, we still say both. Learn why:
5 Best Retail Stocks to Buy During This Inflationary Environment
2. Meme Traders Zero In on Bed, Bath, & Beyond
Bed, Bath, and Beyond (BBBY) has been a meme trading darling in August. At one point last week, the stock had risen well above 400% for the month. A 20-year-old USC student made $110 million on the stock before exiting his position so that he could focus on…you know…going back to school.
Got FOMO? Don't. Bed, Bath, & Beyond has just as quickly been cascading back to earth. And many meme traders who jumped in too late are now sitting on huge losses.
Still, is it ever ok to invest small amounts of money in YOLO stocks? Here's what we think:
Do YOLO Stocks Deserve a Place in Your Portfolio?
3. Ethereum 2.0 Is Coming…And Sooner Than Expected.
Ethereum's merge to Ethereum 2.0 is currently scheduled to take place on September 15th or 16th (moved up a few days from its last expected date of September 19th). Once completed, Ethereum will use a proof-of-stake mining model instead of proof-of-work.
This changes promises to massively improve the throughput of the Ethereum blockchain while also drastically reducing its power consumption. Investors seem excited about the upcoming changes. Ether (ETH) is up approximately 70% over the past two months.
What could the launch of Ethereum 2.0 mean for its rival, Solana? Check out our recent article to learn more:
Solana vs. Ethereum: Which Is the Better Investment Today?
4. Disney Is Raising Its Streaming Prices
Last week, Disney reported that when you combine all three of its streaming platforms (Disney+, Hulu, and ESPN+) it has now has more subscribers than Netflix. But…these three services lost a total of $1.1 billion last quarter. And as Jon Snow would say, “Everything before the word ‘but’ is horsesh*t.”
However, Disney has a plan to fix its streaming profitability problem — price hikes.
Disney+ with no ads is increasing by 38% (the company is also launching a new ad-supported tier), Hulu's two plans are going up by $1 and $2 respectively, and ESPN+ is getting a 43% price bump. You can check out all the details of the upcoming pricing changes in this CNET article:
Disney Streaming Price Hike: How to Get the Best Deal With and Without Ads
5. Hodlnaut Laid Off 80% of Its Staff
The layoffs came just days after Hodlnaut became the latest crypto lending platform to block user withdrawals. The company also announced that it has submitted to judicial management in Singapore in hopes of avoiding bankruptcy.
Lending companies have been hit hardest by the crypto downturn in 2022. And while some coins have rebounded a bit since June, we've been warning for months that this year's pullback is more likely to result in an extended crypto winter rather than a quick recovery. Find out why:
What To Keep Your Eye on This Week
1. Consumer Discretionary Stocks
Consumer discretionary companies sell things that people want, but may not necessarily need. That includes products like: clothing, electronics, jewelry, luxury items, and restaurants. People tend to cut back on these types of items during inflationary periods, which is why consumer discretionary stocks have been hit hard in 2022.
However, with inflation showing signs of slowing down, could it finally be time for Wall Street to show consumer discretionary stocks some love? This week will be an interesting test as many companies that fall into this category will be reporting earnings, including: Dick's Sporting Goods, Macy's, La-Z-Boy, Victoria's Secret, and Gap.
2. Real Disposable Income for July (Released on Friday, August 26th)
To spend money at any of the stores listed above, consumers will need disposable income. Disposable income is the amount of money left over from a person's paycheck to spend after their taxes and other mandatory deductions have been taken out.
Real disposable income also accounts for inflation and it's been going down since March 2021. But with inflation dipping last month, retailers and investors alike are hopeful that we'll see a corresponding uptick in real disposable income in the BEA's latest release.
Here are three stories from around the web that I felt were worthy reads:
The Other Reason Why Food Prices Are Rising (CNBC). Did you know that we're in the middle of a fertilizer crisis? Yeah, neither did I.
The Inflation Reduction Act: Should Truth in Labeling Be Expected? (The Hill) I thought this was a fun thought experiment on what would happen if the FTC held politicians to the same standards of true vs. false advertising that it holds businesses to.
Investing in Flow (Andreessen Horowitz). This is a personal note from Marc Andreesen explaining why his venture capital firm is investing $350 million in Flow — a new company founded by Adam Neumann.
If that name sounds familiar, it's because Neumann was the key figure behind the rise and fall of WeWork. The note indicates that Neumann's new company is looking to revolutionize the rental real estate market and seems grandiose in scope…but it provides precious few details as to how. (I will resist the urge to use that Jon Snow quote again.)
As a huge fan of the WeWork podcast and Hulu documentary, let's just say I'm skeptical about this new Neumann project. But I also know that Neumann could care less about my doubts or anyone else's. “A lion doesn’t concern himself with the opinions of a sheep.”
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