Earnings Read and the American Consumer Picture
META: Loses $3.99 billion this quarter on Metaverse division— Genevieve Roch-Decter, CFA (@GRDecter) April 26, 2023
ALSO META: Stock up 12% after hours because they beat earnings by a few pennies. pic.twitter.com/xVkemFcTWF
As the first quarter earnings season unfolds, it’s clear that most companies are beating the Street’s expectations. While it’s too early to tell how the earnings season will end, there are two possible explanations for this trend. Firstly, companies might be navigating the uncertain economic times more effectively than expected. Alternatively, CEO guidance from prior quarters, along with analyst expectations, may have been overly cautious and conservative.
It’s no secret that substantial cost-cutting measures, including layoffs, have helped to trim top-line cash burn for expected recessionary conditions. But while the US economy and American consumers have demonstrated stubborn resilience, there is a record-high level of consumer debt to consider. With over $4.8 trillion in overall consumer debt in February, including nearly $1 trillion in credit card debt alone, banks are anticipating delinquencies and charge-offs that will eventually impact the bottom line of banks and consumer-dependent companies.
Another Bank Bites the Dust
In other news, the Feckless Fed has stepped in to shutter another regional bank, First Republic. Bidders have been directed to provide “last and final” takeover offers by the end of the day today. While primary bidders include BAML, JPM, and PNC, Goldman and Wells Fargo are staying on the sidelines.
JPMorgan is ineligible to acquire First Republic Bank.— Genevieve Roch-Decter, CFA (@GRDecter) April 30, 2023
It controls +10% of U.S deposits.
Too big to fail.
This ends well. pic.twitter.com/X9jqhx4bTW
This news has investors questioning whether we have systemic risk in the US banking system, with other “shoes to drop” as US regulators follow a familiar pattern of ignoring emerging trends and market risks and then overreacting with heavy-handed and often unnecessary action that ultimately harms American investors and depositors. The shuttering of First Republic comes on the same day that the Fed admitted its role in the SVB collapse, highlighting the destructive pattern of the US regulators.
OpenSea on the Discount Rack
Think your bags are bleeding?— nooman.eth (@n01man) April 21, 2023
Tiger Capital just announced that they've downgraded their Opensea investment from $126.8m to $30.2m
That implies that Opensea is down -76.2% & a likely a valuation reduction from $13.3B to $3.2B pic.twitter.com/tkWVx0fnk6
Lastly, Tiger Global has marked down the valuation of OpenSea, the number one NFT trading platform, to just $3 billion – a 76% reduction in the valuation on Tiger’s books. Other VCs with a stake in the struggling platform point to competition from Blur and plunging NFT sales. According to data from crypto analytics platform Nansen, OpenSea’s weekly trading volumes on Ethereum, the most popular blockchain for trading NFTs, hit $1 billion shortly after the Series C raise. However, one year later, weekly volumes have dropped to just $91 million.
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