Thursday Morning Reads

Thursday Morning Reads







Fickle crypto

The crypto community is once again divided on how to digest the latest Bitcoin (BTC-USD) crash, with the digital currency falling as much as 30% at one point on Wednesday to as low as $29,000. Some are attributing the crash to China's crackdown on crypto transactions, Tesla's (TSLA) recent decision to stop vehicle purchases with the crypto and J.P. Morgan citing moves by institutional investors that have swapped their Bitcoin positions for gold. Others in the FUD crowd (fear, uncertainty and doubt) say the finger pointing is not of much use, as the crypto scene is generally a volatile environment, and traders must be prepared to buckle up once there is a shift in sentiment.

The bulls: "For investors that are thinking long term, this is actually a great opportunity to buy at prices you may not see for a while," said Delano Saporu of New Street Advisors. "Seeing these big drops is common," further explained Ganesh Swami, CEO of blockchain data provider Covalent. "The last time we saw a bull run, bitcoin dropped at least half a dozen times by 20-30% before it went to the then all-time high."

The bears: "The high volatility of cryptos makes them an unreliable store of value. Weekly moves of more than 10% in Bitcoin are common. In the week to 14 May, Bitcoin fell 24%, which would be a high level of volatility for a small-cap stock, let alone a currency," wrote Mark Haefele, CIO of UBS Global Wealth Management. "A more than 50% decline from the highs within a month is certainly damaging the outlook for Bitcoin," added Julius de Kempenaer, senior technical analyst at

At the time of writing, Bitcoin is currently holding steady at $39.6K, but it's worth mentioning the crypto's long history of volatility.

2011 - Bitcoin soars from $1 in April to a peak of $32 in June. By November it's worth $2.
2013 - Starting the year at $13, Bitcoin jumps to $220 by April, only to change hands at $70 two weeks later. The crypto then climbs from $123 in October, to $1156 by December, then tumbles to $760 in three days.
2017 - Trading around $1K in January, Bitcoin reaches nearly $20K by the end of the year.
2018 - Prices steadily decline, eventually tracking back to the $3,500 level.
2019 - Bitcoin tops $10K again over the summer, but ends the year at $7K.
2020 - Dropping to a low of $5,200 as the pandemic set in, the crypto goes on to reach $30K.
2021 - Momentum picks up as Bitcoin breaches $40K, $50K and $60K, before the most recent crash.

Also get used to hearing about the Proof-of-Work (PoW) vs. Proof-of-Stake (PoS) debate in coming months. The Cliff's Notes: PoW (think Bitcoin) uses massive amounts of energy, while PoS does not. To Bitcoiners, massive use of energy is a feature not a bug, while PoS collapses the whole idea of decentralization. (9 comments)

Another day of losses

The selloff in high-flying assets (like growth stocks and crypto) continues to extend to the broader market, with U.S. stock index futures falling overnight by 0.6%. While the major averages pared big early session losses on Wednesday, they still registered a third straight day of declines as cryptocurrency-linked shares plunged. In fact, the Nasdaq Composite Index is off by more than 5% over the last few weeks, on pace for its worst monthly performance since September 2020. Sell in May?

Taper talk: In a move that did not help sentiment, the Federal Reserve's minutes from April hinted at the possibility of tapering QE in upcoming FOMC meetings. "A number of participants suggested that if the economy continued to make rapid progress toward the Committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases."

Yesterday's session also raised doubts about prospects of a commodity "supercycle." Silver, copper, oil, and soybeans all traded to the downside amid growing fears about inflation, as well as a risk-off mindset among traders. There's further concern about the resilience of demand in China, where officials are trying to temper prices after sounding off about the cost of raw materials.

On tap for today: Kohl's (KSS), Ralph Lauren (RL), Ross Stores (ROST) and Petco (WOOF) release quarterly results in the latest slew of retail earnings. The latest weekly jobless claims numbers will also be released, providing an insight into the labor market recovery. New claims for unemployment benefits are forecast at 450,000 for the week ending May 15, continuing a steady decline from the 473,000 figure seen in the prior week.

Electrifying the Blue Oval

Ford (F) showed off its new electric F-150 Lightning model during a live event last night after giving President Biden a sneak preview on Tuesday. Pricing for the vehicle will range from about $39,974 for a work truck version to $52,974 for a consumer version that runs all the way up to $90K for the fully-loaded model. Tax credits can also be applied to the EV purchase.

Specs: The F-150 Lightning will be able to travel up to 300 miles per battery charge and race from zero to 60 mph in 4.5 seconds. Ford executives also highlighted the truck's towing capabilities and the ability for the vehicle to provide charging capabilities on worksites, campgrounds or for homeowners that might lose electricity. The truck is said to be "Ford tough" and the most technically advanced truck ever produced by the automaker.

Fine print: The automaker expects to produce 40K electric F-150s or more when production ramps up in 2023. Crucially for investors, Ford anticipates the new electric F-150 Lightning pickup will be profitable when it arrives at U.S. dealerships next year (online reservations are available with a $100 deposit). During the previous session, Ford also warned on production cuts due to the global chip shortage and caught a new analyst upgrade. (60 comments)

'Wow No Cow'

Oatly priced its highly-anticipated IPO at a top-of-range $17/share late Wednesday, valuing the firm at more than $10B. The plan calls for the stock to begin trading this morning on the Nasdaq under ticker symbol "OTLY" after raising $1.43B in the offering. The Swedish-based company produces a variety of vegan foods with oats, including milk, yogurts and spreadable cheeses, and its products are available in more than 20 countries.

By the numbers: Revenue more than doubled last year to hit $421.4M, though its net losses widened to $60.4M (compared to $35.6M in 2019) as it spent heavily on product development, new factories and marketing. During 2020, oat milk sales in the U.S. also soared over 300% to $213M, becoming the second most consumed plant milk after almond milk ($1.5B in 2020 sales). Soy milk fell down a spot, with sales declining 4.5% to $202M (a decade ago, they topped $1B).

Oatly counts TV legend Winfrey among its pre-IPO investors, along with rapper Jay-Z, actress Natalie Portman and former Starbucks CEO Howard Schultz. Institutional backers include Blackstone Group (BX) and others. The celebrity involvement has attracted lots of attention to the IPO, with analyst firm Hedgeye recently writing that the offering seemed "reminiscent of the great consumer growth stories we've seen IPO in recent decades," such as Chipotle (CMG), Lululemon (LULU) and Under Armour (UAA). Others, like Seeking Alpha contributor Noah Wilson, recently looked at the IPO and concluded that money-losing Oatly has "no clear path to profitability."

Go deeper: Pricing at the high end of the range is a positive sign for the company given the recent market environment, which has shunned growth companies, especially those that have gone public. Consumer preferences have also been shifting toward more plant-based foods, especially among the younger crowd, and could mirror the successes seen with Beyond Meat (BYND). "Generation Z and Millennials will become the dominant global generations in the coming years, bringing to the market a new set of values and expectations," Oatly wrote in its prospectus. Another theme of the company is its environmental effects compared to cow products, and it could attract some interest from ESG funds. (10 comments)

Latest contender in the chicken wars

Burger King is storming into the market with a new Ch'King item to be added to the menu in June. Popeyes, a sister chain that's also owned by Restaurant Brands (QSR), started the rage back in August 2019, with a blockbuster chicken sandwich that sold out in two weeks. The popularity of the item resulted in double-digit sales growth for Popeyes quarter after quarter, while similar successes were attempted at McDonald's (MCD), KFC (YUM) and Wendy's (WEN).

Backdrop: Burger King first announced a new chicken sandwich strategy in February and has been working on the concept since 2019. "With all the fanfare around QSR chicken sandwiches, BK took its time to get it right... so right that the brand started to see posts on social during the market tests that the Ch'King might be better than the Whopper," according to the chain.

The sandwich is being described as a freshly hand-breaded chicken filet that is crispy on the outside and juicy on the inside. It's served on a toasty, potato bun with crisp pickles and a savory signature sauce.

Outlook: All the competition in the fast-food market with chicken sandwiches is seen as a positive by some analysts for Tyson Foods (TSN) and Pilgrim's Pride (PPC). In fact, one of the reasons it took Burger King so long to roll out the sandwich was due to limited chicken supplies. "We have used the time ... to lock up our supply chain," said Ellie Doty, chief marketing officer for Burger King North America. "We feel confident in our ability to supply our launches." (10 comments)

What else is happening...

Colonial Pipeline CEO explains why he paid $4.4M ransom to hackers.

Web-hosting firm Squarespace (NYSE:SQSP) sinks after direct listing.

Apple (NASDAQ:AAPL) made over $100M off of Fortnite; Epic Games made $700M.

ByteDance (BDNCE) CEO steps down as China cracks down on sector.

Plug Power (NASDAQ:PLUG) receives expected Nasdaq notice for non-compliance.

ARK Invest buys more Coinbase (COIN) on rough day for crypto.

Tweets don't stop... Musk says Tesla (NASDAQ:TSLA) has diamond hands.

BP (NYSE:BP) sees growing investor interest in energy transition strategy.

Self-driving Waymo (NASDAQ:GOOGL) in talks to raise $4B in outside funds - Bloomberg.

Advanced Micro Devices (NASDAQ:AMD) announces $4B share repurchase program.

J.P. Morgan believes its top chip pick has locked up Google AI business.

Wednesday's Key Earnings

Cisco (NASDAQ:CSCO) -5.6% AH posting a light profitability forecast. (NASDAQ:JD) +1.2% continuing pandemic momentum.
L Brands (NYSE:LB) -1.7% AH prepping for a business split in August.
Lowe's (NYSE:LOW) -1.1% as report lacked specific guidance.
Target (NYSE:TGT) +6.1% on sizzling comp sales, market share.
TJX Companies (NYSE:TJX) -5.3% warning on an uncertain environment.

Today's Markets

In Asia, Japan +0.2%. Hong Kong -0.7%. China -0.1%. India -0.7%.
In Europe, at midday, London flat. Paris +0.6%. Frankfurt +0.5%.
Futures at 6:20, Dow -0.6%. S&P -0.6%. Nasdaq -0.6%. Crude -1.5% to $62.43. Gold -0.8% at $1867.20. Bitcoin +0.8% to $39748.
Ten-year Treasury Yield -2 bps to 1.66%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:00 Leading Indicators
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
6:05 PM Fed's Kaplan Speech

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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