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Hi All - Happy Monday, we hope you had a wonderful weekend. Believe it or not, it’s almost August, which means that our two-month trial of “The Midday Trade” is coming to an end.
First of all, I want to thank you for allowing us to test new products with you. You’re an incredibly receptive audience, which means the world to us. All we want to do is build a newsletter that you can’t wait to open every day.
With that said, we’ll be pausing Midday Trade next week in order to discuss it internally, but before we do that, we need your input. Here’s a poll, please let us know what you think:
What did you think of "The Midday Trade"?
With that out of the way, here's a snapshot of where markets ended the trading session, plus tomorrow's trade idea delivered to you today.
🟨 | US Stocks Were Mostly Flat on Monday. The S&P 500 and Nasdaq Composite saw marginal gains as investors sat on the sidelines ahead of this week’s major tech earnings.
🔬 | Tomorrow's Trade: This Stock Is Under the Microscope. Scroll down for more.
Plus, today’s partner offers high-yield cash accounts that earn up to 11X the national average.
YESTERDAY’S POLL RESULTS
🟩🟩🟩🟩🟩🟩 Bullish 🐂
🟩🟩🟩🟩🟩🟩 Bearish 🐻
S&P 500 Heatmap. Credit: Finviz
All Stock Heatmap. Credit: Finviz
Global ADR snapshot. Credit: Finviz
MARKET MOVERS
OXY (-1%) Occidental Petroleum plans to sell certain Delaware Basin assets to Permian Resources for about $818 million (MW)
MCD (+4%) McDonald’s stock rose despite missing Q2 estimates as investors are likely optimistic about its plans to bring back low-income consumers (CNBC)
DXCM (+5%) Shares of Dexcom rose after the company announced its latest insulin pump software has been authorized for sale by Health Canada (MS)
ARM (-5%) HSBC downgraded Arm Holdings from Hold to Reduce, citing a lack of visibility on the total addressable market for AI chips for PCs (MW)
RMD (+6%) Shares of ResMed rose as analysts believe the company will announce a 27.5% earnings increase in its forthcoming financial results (YF)
TOGETHER WITH BETTERMENT
We put your money to work
Betterment’s financial experts and automated investing technology are working behind the scenes to make your money hustle while you do whatever you want.
OVERHEARD ON THE STREET
Bloomberg: Cocoa futures fell to the lowest in over four months as traders weigh next season’s improved supply against weaker demand expectations.
CNBC: Swiss pharma giant Roche said it is accelerating the development of its Wegovy rival weight loss drugs following promising early-stage trial data.
NBC: Apple has reached its first-ever union contract with store employees in Maryland.
USA Today: BMW recalled over 290k vehicles due to an interior cargo rail that could detach in a crash.
The Guardian: The price of bitcoin hit a six-week high after Trump said he will end persecution of the crypto industry if he wins the US election in November.
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TOMORROW’S TRADE IDEA, TODAY
An Optimistic Metric
CrowdStrike (CRWD) shut down the world earlier this month with a failed software update. Now the cybersecurity company’s services and financials are under the microscope.
One profitability metric the company uses to determine executives’ pay is under particular scrutiny. Many SaaS companies report annual recurring revenue or ARR as a metric for stakeholders, but CrowdStrike emphasizes this figure as one for analysts and investors to watch.
Pinning Down ARR
ARR is a self-defined metric that doesn’t utilize generally accepted accounting practices to measure revenue. It’s not standardized across the industry. Some companies only include contracts currently in place for their ARR totals, and others include expired contracts.
According to CrowdStrike, its ARR is the “annualized value of CrowdStrike’s customer subscription contracts as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms.”
Bold Assumptions
With this definition, CrowdStrike could assume that all expiring contracts will be renewed with the same terms. This is a bold assumption following its recent disaster. Historically, the company’s reported ARR has always been higher than actual revenue. The metric also directly impacts the funds executives receive in bonuses and stock awards.
Coincidentally, CrowdStrike doesn’t factor stock awards or litigation settlements into its ARR figure. Financial metrics like this make it difficult for investors and analysts to accurately value a company. In this case, the unclear nature of CrowdStrike’s reporting is increasing skepticism.
TOGETHER WITH BETTERMENT
We put your money to work
Betterment’s financial experts and automated investing technology are working behind the scenes to make your money hustle while you do whatever you want.
ON OUR RADAR
Fortune: Federal officials claim that TikTok employees used Lark to send sensitive US user data to its parent company ByteDance in China.
CNN: A movie-going comeback… “Deadpool & Wolverine” opening weekend surpassed $200 million, marking the biggest R-rated debut.
Bloomberg: Germany’s solar power generation is set to rise 34% this summer and surged to a fresh record of 48,681 megawatts at midday in Berlin.
Fortune: Restaurants sit half-empty in Turkey this summer as inflation reaches 91%, sending tourists and locals flocking to neighboring Greece.
Bloomberg: The private equity bubble is about to deflate. Whether valuations fall suddenly or gradually, the industry is due for a reckoning.
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