Snoop Dogg Buys into Ice Cube’s Big3 League Basketball Team With NFTs

Key Insights:

  • Snoop Dogg and Ken Howery plan to buy into Ice Cube’s BIG3 basketball team with NFTs.
  • Last week, DeDogsDAO, a Solana NFT project, purchased 25 NFTs to buy BIG3 team, the Killer 3s.
  • Basketball’s love affair with NFTs continues to blossom, supported by the NBA and the BIG3 League.

Snoop Dogg and Ken Howery, co-founder of PayPal, jump into Ice Cube’s BIG3 league with plans to purchase Bivouac. In partnership, they will buy 25 Fire-Tier NFTs to acquire the team.

Basketball is at the forefront of innovation and Web3 adoption. The NBA’s Top Shot was among the first sports NFT marketplaces launched in 2020.

Snoop Dogg is particularly active within the NFT space, which continues to draw in big names.

Snoop Dogg and Ken Howery buy Ice Cube’s Big3 team Bivouac

On Saturday, BIG3 announced the news of Snoop Dogg and Ken Howery’s plans to purchase all 25 Fire-Tier NFTs of Big3 League team Bivouac.

According to the announcement, “today, the BIG3 announced that Snoop Dogg – the legendary entertainer and member of Mt Westmore – and Ken Howery – co-founder of PayPal and successful venture capitalist – have teamed up to purchase 25 Fire-Tier editions of Bivouac, receiving ownership-like value and utility in the team.”

Ice Cube said:

“We are absolutely thrilled to have Snoop, Ken, and their communities on board with the BIG3.”

Adding:

“Having someone with Ken’s knowledge and experience wanting to be a part of our league demonstrates that we are moving in the right direction. Snoop is an undisputed legend who has jumped headfirst into the Web3 space and clearly understands the importance and the value of what we are trying to create.”

Snoop Dogg hit Twitter, saying:

“BREAKING: @SnoopDogg AND PAYPAL CO-FOUNDER @KenHowery TO PURCHASE ALL 25 FIRE-TIER NFTS FOR BIVOUAC BIG3 TEAM.”

On April 23, Big3 tweeted a Whitepaper on Big3 team ownership.

The announcement said:

“The owners of Big3 Ownership NFTs will receive rights and deliverables of high actual value and utility in five areas: Ticketing, Merchandise, Experience & Activations, Direct Communication, and Voting Rights.”

Snoop Dogg and Ken Howery form part of a growing list to purchase teams in the BIG3 League.

Ice Cube’s BIG3 League draws in a big crowd of Web3 advocates

Following the news, Ice Cube announced another group buying all 25 Fire-Tier NFTs for the BIG3 League’s TriState.

Taking to Twitter, Ice Cube tweeted:

“Group led by @sundeep @VunnyLingham and @Kevinrose have purchased all 25 Fire-Tier NFTs for @BIG3_TriState and have secured @moonbirds as the community sponsor behind it.”

Last week, Solana blockchain NFT project DeGods purchased the Big3 basketball team, the Killer 3s. DeGods bought the team for around $625,000, by purchasing 25 “fire tier” NFTs.

Through BIG3, Ice Cube is building an even stronger link between basketball, fans, and Web3.

Market Volatility – Traders Must Adapt Or Risk Losing Their Shirts

Global money is continuing to flow into the US Dollar making it one of the primary safe-haven trades.  This may eventually trigger a broader and deeper selloff in U.S. stocks. As the USD continues to strengthen corporate profits for US multinationals will begin to disappear.

It’s imperative to assess your trading plan, portfolio holdings, and cash resources. Experienced traders know what their downside risk is and adapt as needed to the current market environment.

If you still have money invested in Amazon, Netflix, PayPal, or one of the many other stocks that are sinking fast there is no easy way out. Your options are:

  1. Hold tight and “hope” for a rally to recover part of your money.
  2. Reduce some of your position to “limit your downside” in case the bottom really falls out, and then sell the balance after a bounce of 5-8%.
  3. Move to cash, “bite the bullet”, get a good night’s sleep, take a break, reassess, and live to come back and trade another day.

NASDAQ Enters Bear Market Territory

The NASDAQ peaked at around 3.1618% of its Covid 2020 high-low range the week of November 21, 2021.

  • THEN – the QQQ ETF’s first swing down was -21% over a 16-week period (4 months).
  • THEN – a brief 3-week rally, retraced around 61.8%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: QQQ – 23.32% from its peak and -21.27% YTD is in a bear market.

QQQ • Invesco QQQ ETF Trust • NASDAQ • Weekly

market volatility - QQQ chart

AMAZON Breaking Down -35%

Amazon AMZN peaked at around 3.1618% of its Covid 2020 high-low range the week of July 12, 2021.

  • THEN – AMZN made a double top the week of November 15, 2021.
  • THEN – the first swing down was -28.91% over a 16-week period (4 months).
  • THEN – after a brief 4-week rally, retraced a little more than 61.8% of its initial downswing.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: AMZN -35.74% from its peak and -25.39% YTD is in a bear market.

AMZN • AMAZON.COM, INC. • NASDAQ • Weekly

market volatility - amazon chart

Netflix Plummets -72% In 5 Months

Netflix NFLX peaked at around 2.382% of its Covid 2020 high-low range the week of November 15, 2021.

  • THEN – NFLX’s first swing down was -17% over a 5-week period.
  • THEN – a brief 3-week rally, NFLX retraced only 25%.
  • THEN – the second swing down was -43% over a 4-week period.
  • THEN – only less than a 2-week rally retraced around 33%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: NFLX – 72% from its peak and -68.40% YTD is most definitely in a bear market.

NFLX • NETFLIX, INC. • NASDAQ • Weekly

market volatility - netflix chart

PAYPAL Drops -73% In 9 Months

PayPal PYPL peaked at around 5.1618% of its Covid 2020 high-low range the week of February 16, 2021.

  • THEN – PYPL put in a double top the week of July 26, 2021.
  • THEN – the first swing down was -14% over a 4-week period.
  • THEN – a brief 4-week rally, retraced about 61.8%.
  • THEN – the second swing down was -39% over a 14-week period (3.5 months).
  • THEN – a 6-week sideways rally retraced only around 10%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: PYPL – 73% from its peak and -53.39% YTD is most definitely in a bear market.

PYPL • Paypal Holdings, Inc. • NASDAQ • Weekly

market volatility - paypal chart

Drawdowns Have a Critical Impact

We need to remember the larger the loss the more difficult it is to make up. A loss of 10% requires an 11% gain to recover, however, a 50% loss requires a 100% gain to recover, and a 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or a few months while a 50% drawdown may take several years to recover. Depending on a trader’s age they may not have the time to wait on the recovery nor the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason as most of them this principle the hard way!

Prepare yourself for Market Volatility

Especially in times like these, traders must understand where opportunities are and how to turn this knowledge into profits. As our models generate new information about trends or a change in trends, we will communicate these signals expeditiously to our subscribers and to those on our trading newsletter email list. Our core objective is to protect our valuable capital while identifying suitable risk vs reward opportunities for profits in new and emerging trends.

What Strategies Can Help You Navigate the Current Market Trends?

Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.

Historically, bonds have served as one of these safe-havens, but that is not proving to be the case this time around. So if bonds are off the table, what bond alternatives are there and how can they be deployed in a bond replacement strategy?

We invite you to join our group of active traders and investors to learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Binance Calls Out Reuters with False Claim Narrative

Key Insights:

  • On Friday, news hit the wires of Binance sharing user data with Russian authorities.
  • Overnight, Binance responded to a Reuters report, stating that the news was “categorically false.”
  • Before the user data story, Binance had announced limited services to Russians in response to the latest EU sanctions.

World-leading crypto exchange Binance has had plenty of news coverage in recent months.

In February, crypto exchanges were back in the spotlight following the Russian invasion of Ukraine.

In response to Ukrainian government calls to freeze all Russian crypto accounts, Reuters reported that Binance would block Russian client accounts targeted by sanctions but not freeze all accounts.

Binance was not alone in its position on account freezes, with several other leading exchanges choosing a similar path.

Binance Calls Out Reuters with False Claim

On Friday, news hit the wires of Binance sharing client data with Russia. According to a Reuters Special Report, Binance’s regional head met with Russia’s financial intelligence unit in April 2021. Reportedly, Russian intelligence wanted Binance to share client data to help the fight against crime.

Reuters went on to say that Russian intelligence was trying to trace Russian opposition leader Alexei Navalny’s Bitcoins (BTC) amounting to millions of dollars.

Binance’s head of Eastern Europe and Russia, Gleb Kostarev, reportedly consented to the request, saying to a “business associate that he didn’t have much choice in the matter.”

Reuters noted that Binance has continued to operate in Russia since the invasion of Ukraine. This is despite other payment platforms, including PayPal ceasing operations in the country.

In response to the Reuters report, Binance has denied that it helped Russian intelligence track down donations to Alexei Navalny.

On Friday, Binance posted,

“Suggestions that Binance shared any user data, including Alexei Navalny, with Russian FSB controlled agencies and Russian regulators are categorically false.”

Binance added,

“On the specific matter of not sharing data – today, any government or law enforcement agency in the world can request user data from Binance as long as it is accompanied by the proper legal authority. Russia is no different. Fulfilling disclosure obligations to the authorities in each jurisdiction is a large part of becoming a regulated business and Binance fulfills its legal obligations.”

Binance stated that it plans to lodge a formal complaint to Reuters. The exchange also shared a full email exchange with Reuters on Binance operations in Russia.

Binance Announces Limited Services to Russian Users

On Thursday, Binance announced that it will restrict the Russian account holders with more than €10,000 to withdrawal-only mode.

According to the announcement,

“Following the EU’s fifth package of restrictive measures against Russia, Binance is required to limit services for Russian nationals or natural persons residing in Russia, or legal entities established in Russia, that have cryptos exceeding the value of 10,000 EUR. As such, we require you to complete your proof-of-address verification.”

Binance added,

“Accounts that classify under this restriction will be put into withdrawal-only mode. No deposits or trading will be permitted on these accounts. The limit also covers all spot, futures, custody wallets, and staked and earned deposits. In addition, all deposits to accounts for Russian nationals or natural persons residing in Russia, or legal entities established in Russia with over 10,000 EUR will be restricted.”

The latest announcement comes despite Binance CEO Changpeng “CZ” Zhao reportedly stating that his exchange “would resist calls to limit services to normal people,” calling such a move unethical.

Paxos Gets Monetary Authority of Singapore Approval

Key Insights:

  • Crypto trading and custody platform Paxos gets MAS approval.
  • Paxos becomes the first platform to receive licenses in New York and Singapore.
  • The latest approval further cements Singapore’s status as Asia’s crypto hub.

Launched in 2012, Paxos is a trading and custody services provider. As a crypto exchange, Paxos also supports Binance USD (BUSD) and Pax Dollar (USDP) and also offers users PAX Gold (PAXG).

Each PAXG token is backed by one fine troy ounce of a 400 Oz London Gold Delivery gold bar. PAXG holders own the underlying physical gold held in custody by Paxos Trust Company.

Paxos also builds blockchain solutions for institutional customers. These include Bank of America, Credit Suisse, Interactive Brokers, PayPal, and Société Generale.

Paxos has had a presence in Singapore since 2012, while also regulated by the New York Department of Finance Services.

Monetary Authority of Singapore Gives Paxos Coveted License

On Thursday, Paxos announced in-principal approval for a Major Payments Institution license from the MAS.

According to the announcement, Paxos became the first blockchain infrastructure platform to secure regulatory oversight in the financial hubs of New York and Singapore.

As a result of the MAS license, Paxos can offer its digital asset and blockchain products and services to Singaporean domiciled customers.

 

Co-Founder and CEO, Paxos Asia said,

We’re excited to have MAS as our regulator, and with their oversight, we’ll be able to safely accelerate consumer adoption of digital assets globally by powering regulated solutions for the world’s biggest enterprises.”

MAS sets a High Bar for Crypto-Related Firms

The MAS does not readily hand out licenses, as Binance discovered in 2021. Last year, Binance reportedly withdrew its Singapore license application for failing to meet MAS AML and KYC requirements.

A small number of other crypto-related shops have been more fortunate, however. In October, DBS Vickers obtained a license to offer digital payment token services.

At the time, the Australian crypto exchange Independent Reserve was reportedly the only foreign entity to hold a Singapore license to allow digital payment token services.

Before this week, only FOMO Pay and TripleA had obtained digital payment token services licenses alongside DBS Vickers and Independent Reserve.

This week, Swiss crypto bank Sygnum received in-principal approval to expand Singapore Capital Market Services (CMS) license. The Swiss crypto bank had previously held a Singapore Capital Markets Services (CMS) license for asset management since 2019.

The in-principal approval will allow Sygnum Bank to provide corporate finance advisory services, deal with capital market products, and provide custodial services.

Paxos and Sygnum Approvals a Boost for Hub Aspirations

Singapore and the MAS have been particularly active in the digital asset space. The Republic’s status as a global digital asset hub continues to evolve despite a high bar for platforms to meet.

Singapore’s high bar is evident in the number of applications the MAS has rejected. According to media reports, the MAS turned down 103 of 176 by December 2021.

In 2021, Binance withdrew its Singapore application for reportedly failing to meet MAS KYC and AML requirements. Since then, the MAS has also banned crypto exchange advertising in public.

This week’s news could be a shift in attitudes towards crypto-related firms. News of Singapore’s sovereign wealth fund Temasek making strategic investments into the space could support such a view.

Temasek reportedly led a fresh fundraising round for the Australian NFT startup Immutable. A $200m funding round took the value of Immutable to $2.5bn, with investors including Tencent Holdings, Mirae Asset, and Declaration Partners, among others.

In February, Temasek had led a $200m round for Amber Group, a global digital assets platform.

PayPal Excludes NFT Transactions Over $10K, Following Various Scams

Payment giant PayPal has excluded NFT transactions above $10,000, effective March 21.

Per a revised seller protection program, PayPal laid out its amendments, affecting non-fungible tokens (NFTs). It stated that items represented by NFTs including art, collectibles, and media both physical and digital that are over $10K in transaction amount are ineligible under the program.

The merchant-focused program aims to protect online sales transactions from chargebacks, reversals, and fraud. The seller protection boots if a transaction gets reversed due to successful chargeback by a buyer.

The new norm follows a number of instances of NFT thefts and scams that cropping up recently. Many NFT buyers think that there might be previous instances of NFT frauds on the payment platform, which has led to this amendment.

As NFT Craze Increases, So Does Scams

The revision of seller protection norms come at a time when tax authorities in the U.K. seized NFTs linked to an alleged $1.8 million NFT fraud case. With increasing NFT scams, several sites have cautioned consumers to check if they are legit.

The U.S. Treasury also revealed that the burgeoning NFTs can be used for money laundering.

Some of the common NFT scams are fake minting, deadlinks, and discord hacks, where fraudsters gain administrator-level access to a discord server and post a fake minting link.

“Having a system that is managed with professional validators makes it feasible to fully protect consumers from NFT frauds,” Tom Anderson, CEO Devv.io, a blockchain and NFT security company, told FXEmpire.

PayPal’s move restricting NFT transactions that are beyond $10,000, not only prevents buyers from losing money in a lump in case of fraud but also helps cut scammers.

PayPal’s Pro-Crypto Moves

PayPal has been one of the early adopters in the crypto space. The payments platform announced the inclusion of cryptocurrencies such as Bitcoin and Ethereum for purchases.

The new crypto-friendly feature allowed U.S. PayPal account holders to hold cryptocurrencies and shop with them at its 26 million merchants. The California-based company also extended the service to its peer-to-peer payment app – Venmo in 2021.

This means that customers can buy and sell Bitcoin and other digital assets such as Bitcoin Cash (BCH) and Litecoin (LTC) and convert them into real-world currencies to pay for items during checkout.

Additionally, PayPal and Venmo have let their users who dabble in cryptocurrencies, move their digital coins to third-party wallets such as Coinbase.

Earlier this year, PayPal announced plans to launch its own stablecoin dubbed ‘PayPal Coin’ backed by the U.S Dollar. The company also formed an advisory council for cryptos and blockchain, involving six individual experts in the industry.

Coinbase and Cardano Call on Hackers to Plug Security Gaps

Cybercrime surged in 2021 and hackers and other cyber criminals are looking for another bumper year this year. As cyber criminals become more sophisticated, crypto platforms need to be even smarter to protect investors and users from hacks and other types of criminal activity.

Ransomware, Hacks, and other Illicit Activity Hurt Digital Asset Value

Late last week, we reported on prelim ransomware numbers for 2021 and likely finalized numbers. Based on prelim figures and upward revisions to 2020 numbers, ransomware alone could hit more than $1bn in 2021. There was also news of North Korea funding its missile program with stolen crypto.

With the likes of North Korea actively hitting the crypto market for source of funds, government scrutiny has also increased. In late January, the White House announced an imminent crypto executive order to task agencies with crypto oversight in the interest of national security.

As governments and regulators look to take a more active role in the crypto market, crypto platforms will also need to step up or face the wrath of regulators.

The issue doesn’t just lie with crypto exchanges, however, with the NFT marketplace and the Metaverse also considered as a medium for illegal activity. China, India, the UK, and a number of other governments have highlighted the need to clamp down on illicit activity.

Cardano and Coinbase Look Outside to Tighten Security

This week, the Cardano Foundation (ADA) announced a 6-week promotion running from 14th February to 25th March. The Foundation doubled its bounty amounts for the period. Hackers can earn up to $20,000 for identifying critical Cardano Node security vulnerabilities. The security community can also earn up to $15,000 for identifying critical Cardano-Wallet security vulnerabilities.

Coinbase was also in the news this week, with a lone hacker reportedly assisting Coinbase with a security flaw. A hacker going by the name Tree of Alpha tweeted over the weekend of a “potentially market-nuking” security flaw. Tree of Alpha tweeted a submission of a hacker1 report but also the pressing need for direct contact with the Coinbase team.

Hackerone is a platform started by hackers and security experts with the aim of making the internet a safer place. The platform partners with hackers to uncover security issues for customers before they are exploited by criminals. Users include Starbucks, Nintendo, PayPal, Spotify, Toyota, the European Commission, among others.

The collaboration and effectiveness of Hackerone was evident in the Coinbase fix. Brian Armstrong himself replied directly to Tree of Alpha to give thanks.

Apple To Enable Crypto Payments With ‘Tap To Pay’ by the End of 2022

In a press release yesterday Apple announced the new Tap to Pay feature for the iPhone. This feature enables millions of Apple Pay merchants to easily facilitate transactions using a simple tap regardless of the payment method.

Apple announced that apart from Apple Pay itself, contactless credit and debit cards as well as other digital wallets will also be able to make the transactions without the need of any third-party hardware or payment gateway.

Apple Takes a Bite of Crypto

Using the NFC technology the company will be providing its iPhone XS and higher model holders, the opportunity to conduct their transactions entirely wirelessly. In line with the announcement, Apple Pay and Wallet’s Vice President Jennifer Bailey stated:

“As more and more consumers are tapping to pay with digital wallets and credit cards, Tap to Pay on iPhone will provide businesses with a secure, private, and easy way to accept contactless payments and unlock new checkout experiences using the power, security, and convenience of iPhone”

She further added:

“In collaboration with payment platforms, app developers, and payment networks, we’re making it easier than ever for businesses of all sizes — from solopreneurs to large retailers — to seamlessly accept contactless payments and continue to grow their business.”

Now how this translates into crypto payments is that recently, Coinbase and Crypto.com both launched their own debit cards. The Coinbase Card and the Crypto.com Visa Card allows user to basically use their acquired cryptocurrencies as payment methods. 

Both the companies further integrated with payment giants Apple Pay and Google Pay. This enabled users to facilitate payments using their cryptocurrencies via either of the two apps. On the process of these transactions, Coinbase said:

“Coinbase will automatically convert all cryptocurrency to US Dollars and transfer the funds to your Coinbase Card (less conversion fees) for use in purchases and ATM withdrawals.”

Thus with Apple now activating the Tap to Pay feature, accepting said payments directly to and fro an iPhone will become easier for every business or retailer.

At the moment more than 90% of all US retailers accept Apple Pay and with this feature pretty much any business or retailer with an iPhone can accept payments with Tap to Pay. Put simply crypto can be used as a transaction method virtually any and everywhere in the US.

The Competition

In today’s world, contactless payments have become a necessity as well as a preferred option by millions around the world. And that industry is severely dominated by Apple Pay.

The only other player in this industry to challenge payments with crypto is Google Pay, but it sadly only has a 3% domination in the American markets. Apple Pay on the other hand holds a colossal 92% domination.

However, that hasn’t stopped Google from trying. Recently, Google hired a PayPal veteran in order to begin testing payments with crypto. On the same Google’s president of Commerce told Bloomberg:

“Crypto is something we pay a lot of attention to. As user demand and merchant demand evolves, we’ll evolve with it.”

So with Apple preparing to roll out their Tap to Pay feature by later this year, not only are they pushing crypto adoption into the mainstream, but they are also providing Google some time to pick up the pace and gain a foothold in the market.

PayPal Forms a ‘Crypto, Blockchain & Digital Currencies Advisory Council’

Fintech giant Paypal in their recent press release introduced their first-ever advisory council of blockchain, crypto, and digital currencies.

The council includes leading experts from the fields of distributed technology, as well as specialists of the economic and regulatory understanding pertaining to blockchain and crypto.

PayPal’s New Council

The payment processing giant stated that in order to provide better digital financial services in the future, they have acquired ‘world’s best leaders’ in order to better understand the opportunities and challenges this field presents. 

In addition to the same PayPal stated:

“To support not only our current and future products in the space but our broader mission of leading the way towards a more affordable, efficient and inclusive digital financial system, we have established a cross-disciplinary advisory council on Blockchain, Crypto and Digital Currencies (BCDC) comprised of some of the world’s leading experts in cryptography, distributed technology, regulation, economics, and capital markets.”

The six members that make up the advisory council include Peter L. Briger, Jr. – Co-CEO of the Fortress Investment Group; Chris Brummer – Faculty Director, Institute of International Economic Law; Dr. Shafi Goldwasser – winner of the Turing Award and the Director of Simons Institute for the Theory of Computing, UC Berkeley.

Along with them the team also has Timothy Massad – Former Chairman of the U.S. Commodity Futures Trading Commission from 2014-2017; Dr. Neha Narula – Director, MIT Digital Currency Initiative; as well as Antoinette Schoar – Stewart C. Myers-Horn Family Professor of Finance and Entrepreneurship at the MIT Sloan School of Management.

Whether the council will be directly responsible for the expansion of PayPal’s crypto crusade is uncertain as well as what next step the fintech giant will be making in regards to crypto.

Last year the company enabled its customers to buy, hold and sell cryptocurrencies from their accounts as well as make transactions across its 26 million merchants.

The PayPal Slip

In the midst of their crypto expansion, PayPal recently suffered a major blow in the stock market when its shares slumped by over 25% last week. The mixed earnings it suffered in the final quarter of 2021 ended up disappointing investors.

This even led to many analysts slashing their predictions for PayPal’s price targets by as much as 40%

If their crypto move pays off then the same targets could be revived provided their council proves to be successful.

Why Snap Stock Is Up By 47% Today

Snap Stock Rallies After Strong Quarterly Report

Shares of Snap jumped after the company released its fourth-quarter report. Snap reported revenue of $1.3 billion and adjusted earnings of $0.22 per share, easily beating analyst estimates on both earnings and revenue. Snap stated that 2021 was its first full year of positive operating cash flow and free cash flow.

Daily active users (DAUs) totaled 319 million, up 20% on a year-over-year basis. This was a material success compared to the recent report from Meta Platforms, which showed a decline in DAUs and led to a major sell-off of Meta stock.

The average revenue per user (ARPU) increased from $3.49 in Q3 2021 to $4.06 in Q4 2021, serving as an additional bullish catalyst for Snap stock.

Yesterday, Snap stock was under significant pressure as traders sold the company’s shares “in sympathy” with the sell-off in Meta stock. However, Snap’s quarterly report was so strong that the stock gained more than 45% in just one trading session.

What’s Next For Snap Stock?

Snap’s gains look impressive, but traders should keep in mind that the company’s shares touched highs near the $83 level in September 2021, so the stock is still down by more than 55% from its all-time high levels.

In 2022, Snap is expected to report earnings of $0.53 per share, so the stock is trading at 68 forward P/E. Earnings estimates will likely move higher after the strong earnings report, but the stock will still remain in the high-PE zone.

In this light, the near-term performance of Snap stock will depend on whether the market is ready to buy into high-PE stocks again. Recent weeks have been volatile as traders were worried about high inflation and higher Treasury yields.

The yield of 10-year Treasuries is already close to the 2.00% level, which could put more pressure on expensive tech stocks. The recent sell-offs in high-profile names like Meta Platforms, Netflix, and PayPal have also hurt sentiment. Thus, it remains to be seen whether traders will be ready to push Snap stock higher after the strong one-day move.

For a look at all of today’s economic events, check out our economic calendar.

Why Meta Platforms Stock Is Down By 23% Today

Meta Platform Stock Falls After Disappointing Q4 2021 Report

Shares of Meta Platforms found themselves under strong pressure after the company released its fourth-quarter results.

Meta Platforms reported revenue of $33.67 billion and earnings of $3.67 per share, beating analyst estimates on revenue and missing them on earnings.

Daily active users (DAUs)  totaled 1.93 billion and also missed analyst estimates. The report indicated that the growth in DAUs has stalled, which is not good for a high-growth tech stock.

While user growth stalled, expenses increased due to active investments in the Metaverse. It should be noted that Metaverse may take years to develop, and it remains to be seen whether the market will be happy to see higher expenses in case Meta Platforms fails to show solid growth in the upcoming quarters.

The guidance for Q1 2022 was also disappointing. The company expects to report total revenue of $27 billion – $29 billion, a 3% – 11% growth on a year-over-year basis. The company added: “[…] we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories”.

Not surprisingly, the stock suffered a serious sell-off after Meta Platforms missed analyst estimates and talked about material headwinds.

What’s Next For Meta Platforms Stock?

The current analyst consensus estimate for Meta Platform’s earnings in 2022 is $14.18 per share. Analyst estimates have been moving lower in recent weeks, and they will surely take a major hit after the weak earnings report.

Currently, the stock is trading at 17 forward P/E which may look extremely cheap for a leading tech stock. However, declining earnings estimates and worries about increased competition for people’s time, as well as regulatory concerns, may continue to put pressure on Meta Platforms shares.

All in all, it remains to be seen whether speculative traders will rush to buy Meta Platforms shares after the big pullback. The recent trading action in PayPal stock shows that the market is merciless when major tech stocks miss expectations.

For a look at all of today’s economic events, check out our economic calendar.

Top 4 Things Traders Have to Know Today

What is happening with Meta, Paypal and Spotify?

Spotify didn’t actually issue annual guidance, which seems to have exacerbated worries about potential subscriber growth potential. All three were down by double-digits in after hours trading at one point last night.

Competition is clearly much more fierce as larger players are starting to dial it in and use the latest technology to gain better traction i.e. Visa, Mastercard, etc. I also read reports this week that Apple is diving deeper into the payment and banking space and will soon be able to offer all kinds of options via the smartphone.

In simple terms, I wonder if PayPal executives could see they had a “growth” problem and that’s why they took a look at Pinterest a few months back. I heard rumors yesterday perhaps they might be looking at Robinhood.

At the moment the stock market just doesn’t seem real forgiving to those who swing and miss. On a somewhat positive note, Facebook disclosed they purchased back +$20 billion of their own stock in the last quarter.

Bulls are hoping for solid results from Amazon and Snap today to help prevent sentiment in the tech sector from creating more fallout. I’m not holding my breath!

Data to watch

Results are also due from Activision Blizzard, Biogen, Carlyle Group, Check Point, Cigna, Clorox, ConocoPhillips, Deckers Outdoors, Eli Lilly, Estee Lauder, Ford, Hanesbrands, Hershey, Honeywell, Ingredion, Merck, Pinterest, Quest Diagnostics, Royal Dutch Shell, SnapOn, Wynn Resorts, and Xylem.

On the economic data front, Factory Orders, the ISM Non-Manufacturing Index, and Productivity and Costs are due today. Productivity and Costs has become a more closely watched report as worries about climbing wages have grown. In the third quarter, productivity fell -5.2% (the most since 1960) and labor costs rose +9.6%.

Obviously, weakening productivity and rising costs is a bad combo for corporate profits so reversing this trend is a high priority. It may be tough to find much relief in the near-term with the labor market expected to remain extremely tight.

The shortage of workers has also been exacerbated by the latest Covid wave. ADP’s private payrolls report yesterday showed a decline of -301,000 jobs for January versus the estimate for a +200,000 gain, the first reported net job less since December 2020 according ADP.

Covid issue

Most analysts blame last month’s Covid surge for the decline and expect it is just temporary. The official January Employment Report on Friday is expected to show a gain of around +150,000 jobs, though the government has warned that the data won’t be reliable due to Covid-related reporting problems. Hopefully we’ll soon stop hearing that excuse as the Omicron Covid wave does seem to be burning itself out in the U.S. Case numbers across the country are about half of what they were in mid-January.

Hospitalizations have finally started to come down, too, which experts say is a more reliable measure. I hate to mention it but health officials are currently monitoring a mutated strain of Omicron known as “BA.2″… when does it end?

The standoff between Ukraine and Russia

Also still on the radar is the standoff between Russia and Ukraine. The U.S. is now readying to send more than +3,000 troops to bases in Eastern Europe as new satellite images appeared to show an even further increase in Russian troop buildup on Ukraine’s borders. Whether or not war is a realistic threat or not, the climbing tensions continue to stoke the flames in the energy markets.

Brent crude futures are trading near $90 as OPEC struggles to meet production targets and global physical supplies continue to tighten. The 19 OPEC+ countries with quotas underperformed their production targets by -832,000 b/d in December. Russia is currently the top OPEC+ producer, so any disruption to those supplies runs the risk of shooting oil prices even higher. Take note the front-end of the natural gas market is up over +50% in the first month of the new year. It’s certainly going to be a wild ride in 2022!

 

Grayscale’s First Equity ETF Tracks Companies Building ‘Digital Economy’

Crypto asset manager Grayscale Investments, which has $38.2 billion in assets under management, began trading its first equity ETF.

GFOF ETF Is Listed on NYSE Arca

Announced Wednesday, the exchange-traded fund — the Grayscale Future of Finance ETF, will track the Bloomberg Grayscale Future of Finance Index. Trading under the ticker GFOF, the fund aims to invest in companies working for the advancement of the ‘digital economy.’

The index aims to track 22 companies associated with several crypto-linked equities as well as other financial institutions in the fintech space, the company announced in January.

The fund will be administered by the U.S. Bank and Foreside Fund Services will act as the Grayscale ETF’s distributor. The ETF is available on the NYSE Arca, starting today.

Dave LaValle, the firm’s global head of ETFs, calls the fund the “first step” in a  strategic expansion of Grayscale’s investment offerings.

“Through GFOF, investors now have the opportunity to receive exposure to the companies that are pivotal to the evolution of the global financial system,” LaValle said in a company release.

The Bloomberg Grayscale Future of Finance Index comprises asset managers, exchanges and brokerages, crypto mining companies and firms involved in energy management, to name a few.

Future of Finance Index Means Revenue Growth for Cryptos

The Bloomberg Intelligence strategists projected the securities within the index in order to drive growth within the space. The fund will also play a major role in revenue growth for digital assets in the near future.

Some of the companies under the Bloomberg Grayscale Future of Finance Index include Paypal (PYPL), Coinbase Global (COIN), Block Inc (SQ), Silvergate Capital (SI) among others, a January report stated.

Grayscale has diversified its offer to remain a leader in the smart money domain. The investment giant recently added 25 new digital assets to its “under consideration” list. This includes tokens for a number of DeFi, metaverse, and NFT projects, such as Algorand (ALGO), The Sandbox (SAND), Axie Infinity (AXS), and Enjin (ENJ).

This follows the company’s application to the U.S. Securities and Exchange Commission (SEC) in October 2021, asking to convert Grayscale Bitcoin Trust (GBTC) into an ETF, but regulators have delayed a decision on a spot Bitcoin proposal from Grayscale.

PayPal Shares Sink Most in Nearly Two Years as Earnings Outlook Disappoints

PayPal shares slumped over 25% on Wednesday after the leading global payments company reported mixed earnings in the fourth quarter and its outlook for the next quarter disappointed investors.

As eBay prepares to ditch its payments services, San Jose-based company forecast revenue and profit that are well below expectations for the first quarter of 2022. The company anticipates revenue growth of 6% for the current quarter. That is well below market expectations of nearly 12%.

That prompted several equity analysts to slash their one-year price targets. D.A. Davidson cut the price objective to $166 from $275. Deutsche Bank slashed the price target to $200 from $260. BMO lowered the target price to $180 from $224. JPMorgan cut the target price to $190 from $272. Jefferies slashed the target price to $145 from $200. Cowen lowered the target price to $174 from $221.

PayPal (PYPL) reported weaker than expected 4Q21 results and provided a 2022 outlook short of our below consensus estimates. Key metrics were broadly below expectations and macro factors are affecting growth. We are lowering our estimates/PT and expect the shares to be under meaningful pressure at the open,” noted George Mihalos, equity analyst at Cowen.

PayPal stock slumped over 25% to $131.31 on Wednesday. The stock fell over 27% so far this year after plunging more than 19% in 2021. eBay stock too fell nearly 3% to $58.75.

Analyst Comments

“Following another thesis-shaking guide down, we are maintaining our BUY rating, but lowering estimates and slashing our price target from $275 to $166. PYPL was one of the pandemic’s biggest beneficiaries, but now faces brutal comps amid a painful customer loss (eBay). While the dramatic fall from grace is unnerving, we take solace in several key positives beneath the surface that suggest better trends ahead,” noted Christopher Brendler, MD, Senior Research Analyst at D.A. Davidson.

“Although we understand the temptation to give up, we continue to view PYPL as a long-term winner in an attractive sector. Maintain BUY as we see these issues as transitory and expect marked improvement by 2H22 as headwinds fade.”

PayPal Stock Price Forecast

Thirty-seven analysts who offered stock ratings for PayPal in the last three months forecast the average price in 12 months of $213.44 with a high forecast of $310.00 and a low forecast of $125.00.

The average price target represents a 21.41% change from the last price of $175.80. Of those 37 analysts, 27 rated “Buy”, nine rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley cut the base target price to $190 from $217 with a high of $274 under a bull scenario and $155 under the worst-case scenario. The investment bank gave an “Overweight” rating on the digital payments giant’s stock.

“We think investors are probably overly preoccupied by the reduced emphasis on NNA growth, and instead should focus on overall eCommerce growth. We remain Overweight while acknowledging eCommerce market growth normalization could take several qtrs,” noted James Faucette, equity analyst at Morgan Stanley.

Technical analysis suggests it is good to sell as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong selling opportunity.

Check out FX Empire’s earnings calendar

PayPal Downside Appears Limited

Fintech juggernaut PayPal Holdings Inc. (PYPL) reports Q4 2021 results after Tuesday’s closing bell, with analysts looking for a profit of $1.12 per-share on $6.9 billion in revenue. If met, earnings-per-share (EPS) will mark a slight improvement compared to the same quarter last year. The stock fell 10.5% in November after missing Q3 revenue and lowering 2021 guidance, and has shed another 21% through January, dropping to a 20-month low.

One-Time Growth Surge

The company booked historic gains during the first year of the pandemic, more than tripling in price into February 2021. It’s fallen from grace with other COVID beneficiaries since that time, fueled by capital rotating into stocks with lower valuations and higher growth potential. The company’s business model is just fine despite the downturn, but the massive baby boomer shift into paperless transactions during the crisis was a one-time event.

Jefferies analyst Trevor Williams downgraded PayPal to ‘Hold’ earlier this month, noting “With valuation still about 5x above pre-COVID averages, little room for expansion…especially with a muted growth outlook, and rising competition. To be clear, we do not believe anything is broken in the business (evidenced by the mid-20’s ex-eBay rev growth in 3Q21) or that competitive pressure has manifested in results. Our call is simply that the multiple is unlikely to expand until there is restored confidence in the med-term targets (2H, at earliest).”

Wall Street and Technical Outlook

Wall Street consensus now stands at a ‘Moderate Buy’ rating based upon 33 ‘Buy’, 5 ‘Overweight’, 6 ‘Hold’, 0 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $172 to a Street-high $342 while the stock is set to open Monday’s session about $8 below the low target. This disconnect with Main Street investors highlights extreme caution about the stock’s growth potential in coming quarters.

PayPal broke out above 2019 resistance at 121 in May 2020, entering an historic uptrend that stalled above 210 in September. It cleared that barrier in December 2020, lifting into 310 in February 2021. A failed July breakout attracted aggressive selling pressure, triggering a steep decline that’s cut the stock’s price in half. It just violated the 200-week moving average for the first time in its public history, with a successful defense of that level likely in coming weeks.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Brace Yourself For Another Wild Month In Stock Markets

For the year, the Dow is down -6%, the S&P 500 is down just over -9%, and the Nasdaq has lost -14.7%. The previous record-holder is January 2009, an ugly moment for the economy, when the stock market fell -8.6%. In addition, the VIX – aka the CBOE Volatility Index – has actually dropped back to around 31 after topping 37 earlier this week, its highest point since November 2020.

Keep in mind, the index isn’t registering anywhere close to levels reached during other periods of “extreme” volatility. For example, the index, which is measured between zero and 100, hit its highest point of almost 83 during the financial crisis in 2008. Its most extreme point during the pandemic was around 66 in March 2020. So, by comparison, this week’s volatility has been rather mild.

Federal Reserve

Some insiders equate the wild swings in stock prices to investors, particularly “big money,” trying to establish a new baseline for stock valuations minus the Fed’s easy money policies that have driven a massive amount of cash into markets since the pandemic began in 2020.

At its height, the Fed was pumping as much as +$120 billion per month into the system via its asset purchase program, ballooning its balance sheet to now nearly $9 trillion.

At the same time, the Fed has held its benchmark rate at near-zero and, before that, hadn’t even attempted to raise rates since 2018, and then only briefly. The last full-cycle of rate hikes was 2015. What’s more, investors haven’t really had to factor for inflation since the early 90s and it hasn’t been this high since the 80s.

Bottom line, whatever the new “normal” ends up looking like, it will be dramatically different from the pre-pandemic investing landscape. I’ve heard several large stock traders saying it seems to be the return of Alpha instead of the race to levered Beta. I hear others on Wall Street referencing it to a bit of league recreational youth baseball team where everybody now gets an award simply for participation, but then kids run into a rude awakening when performance really starts to matter.

It feels like we are there in the stock market; every business that was coming into the market was simply being rewarded with participation points, now people are starting to keep a real scorebook and counting the strikeouts and runs scored.

Economy still roars

The good news is that the U.S. economy continues to roar. Historically, a combination of moderate inflation and moderate interest rates has led to some of the biggest boom times for U.S. Last week, the Commerce Department said Q4 Gross Domestic Product (GDP) grew at an annualized rate of +6.9%, stronger than Q3’s +2.3% and well above Wall Street expectations of around +5.7% growth.

Consumer spending climbed at a +3.3% annual pace led by a +4.7% increase in services spending. But the real stand out was private investment which rocketed +32% higher, boosted by a surge in business inventories as companies stocked up to meet higher customer demand. Rising inventories, in fact, contributed nearly +5% to Q4 GDP growth.

On the one hand, the inventory build is positive because it indicates an easing of supply chain dislocations that should in turn help with inflation pressures. On the other hand, many economists note that the big boost from retailer and wholesaler restocking is not likely to be repeated.

Companies will also likely start to unwind at least some of that inventory in the quarters ahead, which could drag overall 2022 GDP, especially if consumer spending also drops off. And investors are more closely tracking consumer behavior as inflation continues to rise.

With consumer spending accounting for about 70% of the U.S. economy, any signs that belts are tightening or moods are getting overly pessimistic will likely set off some alarm bells.

Data to watch

Turning to next week, it will be another busy one for both key economic data as well as earnings. The main economic data highlight will be the January Employment Situation on Friday. Other key data includes ISM Manufacturing, Construction Spending, and the JOLTS report on Tuesday; ADP’s private payrolls report on Wednesday; Productivity & Costs, Factory Orders, and the ISM Non-Manufacturing Index on Thursday.

Earnings wise, results are due from NXP Semiconductor and Trane on Monday; Advanced Micro Devices, Alphabet, Amgen, Chubb, Electronic Arts, Exxon, General Motors, Gilead Sciences, Match Group, PayPal, Sirius XM, Starbucks, and UPS on Tuesday; AbbVie, Aflac, Allstate, Boston Scientific, CNH, Corteva, D.R. Horton, Ferrari, Humana, Johnson Controls, Meta (Facebook), MetLife, Novartis, Novo Nordisk, Qualcomm, Siemens, Thermo Fisher, TMobile, and Waste Management on Wednesday; Activision Blizzard, Amazon, Biogen, Carlyle Group, Check Point, Cigna, Clorox, ConocoPhillips, Deckers Outdoors, Eli Lilly, Estee Lauder, Ford, Hanesbrands, Hershey, Honeywell, Ingredion, Merck, Pinterest, Quest Diagnostics, Royal Dutch Shell, Snap, SnapOn, Wynn Resorts, and Xylem on Thursday; and BristolMyersSquibb, CBOE, Phillips 66, Regeneron, and Sanofi on Friday.

Bottom line, brace for another huge week of extreme volatility.

Choosing Between Ethereum and Bitcoin Amid Heightened Macroeconomic Risks

As for cryptos, while it’s hard to know where prices will end up over the short to medium-term, not all of them have been impacted in the same way. This is evident by comparing the one-year price performances of the two with the largest market cap, namely Bitcoin and Ethereum. For this purpose, instead of looking at individual companies, I analyze the performance of the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE).

Here, the Ethereum trust has been outperforming its Bitcoin peer by nearly 50%.

Source: Trading View

With assets under management of $23 Billion, GBTC tracks the Bitcoin (BTC) market price and charges fees of 2%. As for ETHE, it covers Ethereum (ETH), exhibits $7.5 billion of assets and carries 2.5% of fees. Both are investment vehicles which have attained the status of an SEC reporting company, with one of their advantages being ability to provide investors with exposure to BTC or ETH in the form of securities while avoiding the challenges of buying, storing, and safekeeping cryptocurrencies directly.

Coming back to the difference in price actions, this needs to be understood in the context of their individual uses, but, first, I bring some clarifications as to the concept.

Analyzing the cryptocurrency concept

Although the concept of the cryptocurrency shines with its allure, it remains obscure for many people until they hear about its aptitude at providing sky-high gains, and, conversely, also suffering from vertiginous drops. For this matter, there is also a lot of publicity around crypto being a Ponzi scheme, which is far from the truth.

Had this been true, reputable institutions would not have invested their money in digital coins. Moreover, in contrast with Ponzi schemes that require a constant flow of new money to survive, Bitcoin and Ether have not only survived several crashes but there are other new coins that are minted every single day.

Pursuing further, those who have put their money into Bitcoin in mid-2021 and before are still up, despite all the latest volatility. Still, people primarily invest in cryptocurrency due to its high-growth feature and thus its ability to multiply the value of their financial assets in terms of dollars rapidly. This said, Bitcoin still has to strike the right balance between a means of payment and a financial asset. This virtual currency is above all a potentially profitable investment.

Gauging the marketplace, Bitcoin remains very popular with retail investors who, in addition to the ETF or trust formulae, can buy it from dedicated cryptocurrency platforms or mainstream brokers, just like the purchase of shares on the stock exchange. Looking further, FinTechs like PayPal (NASDAQ:PYPL) also offer services like crypto wallets.

Scanning the corporate space, Bitcoin has been adopted by some financial institutions for boosting up their balance sheets. Aware that the risk factor is inseparable from Bitcoin as evidenced by the current volatility, these institutions including Tesla (NASDAQ:TSLA) have not sold their crypto assets. Others like MicroStrategy (NASDAQ:MSTR) have even bought the dip. This shows a high level of trust.

Now, the crypto market is a large one, and, as shown in Coinmarketcap, there are hundreds of coins, with those boasting the ten largest market cap listed below.

Source: Coinmarketcap.com

As for Ethereum, it is used for a variety of innovative applications in finance, gaming, Non Fungible Tokens (NFTs), and supply chain management.

The investment case for Ethereum

With its ability to be used in smart contracts, Ethereum enables decentralized apps which are at the base of DeFi or decentralized finance. Thus Ethereum offers more relative value compared to Bitcoin and other altcoins.

Exploring further, DeFi offers another opportunity where value-oriented, low-multiple, strong cash-flow generating financial institutions exist, with one of them being Silvergate Capital (SI) for example. This crypto bank has been out of favor over recent months but could benefit from the rising rate environment in the same way as the traditional financial sector. However, regulatory risks exist as lawmakers increasingly want to regulate the crypto space having in mind the interest of investors.

In this case, the boom in companies offering cryptocurrency loans and high-yield deposit accounts like for staking USDC and USDT is viewed as disrupting the banking industry and leaving lawmakers scrambling to catch up.

Remaining with financials, DeFi eliminates human intermediaries like brokers, bank clerks, and traders, and instead uses algorithms to execute financial transactions, such as lending and borrowing. As such, it is largely immune to the problems being faced by many Wall Street banks currently. These may have to increase fees to justify raising the bankers’ remunerations in order to hold onto talent in a labor market where inflation has made the cost of living expenses.

Now, as opposed to previous periods of high inflation when there were only banks, in the current one there are also FinTechs now using a higher dose of technology in financial transactions as well as blockchain-based solutions to reduce costs. Consequently, it would be difficult for regulators to remove them completely out of the equation, but, we cannot rule out more stringent rules.

Thinking green, with rising energy costs, crypto miners that are not highly efficient will be gradually pushed out of business. This brings us to another advantage of Ethereum: it is less energy-intensive than Bitcoin. Thus, with more uses as well as being more energy-efficient, it is Ethereum that should eventually benefit from more cryptocurrency demand in the future. For this matter, again consulting the price action, it is ETHE has shown more progress during the last five days when compared to GBTC, with some respite also observed for the wider tech sector (QQQ).

Investing In Long-Term Innovation

I see crypto innovation continuing to accelerate around Ethereum and believe that it remains in its early innings. Volatility will continue to be challenging though, but crypto investors are accustomed to wild fluctuations in prices, and know how to search for opportunities when they occur. At current levels, an investment into Ethereum through Grayscale makes sense.

As for Bitcoin, its future trajectory will depend on the Bitcoin for Corporations panel to be hosted by MicroStrategy’s CEO Michael Saylor on February 1, an event which will also include Block’s (SQ) Jack Dorsey and Silvergate Capital’s Alan Lane.

Finally, it is interesting to note that geopolitical risks like for Russia-Ukraine and China-Taiwan have been historically beneficial for cryptos, despite their typical behavior as risk-on assets.

Disclosure: I/We are long SI. This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.

 

Wall Street Week Ahead Earnings: Alphabet, PayPal, Exxon Mobil, Meta, Qualcomm and Amazon in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion will hit the stock market hard next week, making the big tech earnings that much more critical. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of January 31

Monday (January 31)

TICKER COMPANY EPS FORECAST
CBT Cabot $1.06
CRUS Cirrus Logic $1.91
FN Fabrinet $1.28
HLIT Harmonic $0.09
NXPI NXP Semiconductors $2.67
PCH PotlatchDeltic $0.48
RYAAY Ryanair Holdings $-0.15
SANM Sanmina $0.91
TT Trane Technologies $1.31
WWD Woodward $0.83

 

Tuesday (February 1)

IN THE SPOTLIGHT: ALPHABET (GOOGLE), PAYPAL, EXXON MOBIL

ALPHABET: The parent of Google and the world’s largest search engine that dominates internet search activity globally is expected to report its fourth-quarter earnings of $26.71 per share, which represents year-over-year growth of about 20% from $22.3 per share seen in the same period a year ago.

The Mountain View, California-based internet giant would post revenue growth of nearly 27% to $72.133 billion from $56.9 billion a year ago. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“Key Alphabet (GOOG) ’22 Ad Buyer Survey conclusions: i) Google Search remains highest ROI platform; ii) YouTube expected to gain ad share ’21-’23; & iii) GOOG Search & YouTube are the top platforms for ad buyers reallocating budget due to iOS changes. We est. GOOG’s share of WW Digital adv. (x-China) goes from 41% to 37% ’22-’27. We extended model to ’27, PT to$3,500 vs. prior $3,360, reiterate Outperform,” noted John Blackledge, equity analyst at Cowen.

PAYPAL: The digital payments company is expected to report its fourth-quarter earnings of $0.86 per share, which represents year-over-year growth of about 15% from $0.75 per share seen in the same period a year ago. The San Jose, California-based company would post revenue growth of over 12% to around $6.9 billion.

EXXON MOBIL: The oil company will see its earnings rise multi-fold in the fourth quarter thanks to higher energy prices and a waning pandemic that helped it bounce back after a tough period in 2020.

The Irving Texas-based company is expected to report its fourth-quarter earnings of $1.73 per share, which represents year-over-year growth of over 5,666%, up from $0.03 per share seen in the same period a year ago.

The U.S. largest publicly traded oil company is expected to report a 97.3% increase in revenue to $91.845 billion from $46.54 billion a year ago. On Dec 30, the Irving Texas-based company in its regulatory filing said that higher oil and gas prices would enable it to achieve annual profitability starting in 2021 with an operating profit increase of up to $1.9 billion.

The U.S. largest publicly traded oil company hinted that oil and gas earnings could decrease by up to $1.2 billion as a result of one-time charges for asset impairments and contractual costs. Exxon announced late last year announced that a sharply higher operating profit in oil and gas, prompting Credit Suisse, Scotiabank, and JPMorgan to raise their fourth-quarter earnings estimates.

“Improving FCF outlook and dividend sustainability. With a more constructive commodity price outlook, lower capital spending, and additional cash operating cost savings, the dividend is covered in 2021 and averages >100% over the next 5-years on our estimates. Improving dividend sustainability supports yield compression for Exxon Mobil (XOM) relative to CVX,” noted Devin McDermott, Equity Analyst and Commodities Strategist at Morgan Stanley.

“Cost cuts defend the dividend. In 2020, Exxon Mobil (XOM) reduced 2022-25 spending plans to $20-25B from $30-35B (recently extended to 2027), improving dividend sustainability while limiting further pull on the balance sheet. Additionally, Exxon Mobil (XOM) is targeting $6B in structural operating cost reductions by 2023 which should put upward pressure on consensus FCF estimates.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 1

TICKER COMPANY EPS FORECAST
AMD Advanced Micro Devices $0.69
AMCR Amcor $0.18
ASH Ashland Global Holdings $0.93
CTLT Catalent $0.79
CB Chubb $3.34
EA Electronic Arts $2.81
XOM Exxon Mobil $1.73
GM General Motors $0.84
NMR Nomura Holdings $0.2
SBUX Starbucks $0.8
UBS UBS Group $0.24
UPS United Parcel Service $3.05

 

Wednesday (February 2)

IN THE SPOTLIGHT: META PLATFORMS (FACEBOOK), QUALCOMM

META PLATFORMS (FACEBOOK): The world’s largest online social network is expected to report its fourth-quarter earnings of $3.78 per share, which represents a year-over-year decline of over 2% from $3.88 per share seen in the same period a year ago.

The Menlo Park, California-based social media conglomerate would post revenue growth of over 30% to around $33.04 billion. The social media giant has consistently beaten consensus earnings estimates in most of the quarters in the last two years, at least.

QUALCOMM: The world’s biggest mobile phone chipmaker is expected to report its fiscal first-quarter earnings of $2.77 per share, which represents a year-over-year decline of over 40% from $1.97 per share seen in the same period a year ago.

The chip manufacturer would post revenue growth of nearly 27% to $10.45 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

Qualcomm forecasts GAAP revenue in the first quarter of fiscal 2022 to be between $10 billion and $10.8 billion. On a non-GAAP basis, earnings will likely range from $2.90 to $3.10 per share, while GAAP earnings will likely range from $2.53 to $2.73 per share, according to ZACKS Research.

“After underperforming the SOXX for most of 2021 until a sharp rally late in the year, we see a strong setup for a now Apple-overhang-free Qualcomm in 2022 as investors begin to appreciate the diverse revenue drivers beyond Wireless. Expect solid print and guide, with focus on execution and growth in the connected intelligent edge and update our estimates accordingly,” noted Matthew Ramsay, equity analyst at Cowen.

“We reiterate our price target of $210 based on 17.5x our F2023 EPS estimate of $12.0 and our Outperform rating.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 2

TICKER COMPANY EPS FORECAST
EAT Brinker International $0.5
CHRW C.H. Robinson Worldwide $1.85
CPRI Capri Holdings $1.67
CTSH Cognizant Technology Solutions $1.03
RACE Ferrari $1.08
FB Meta Platforms $3.78
MET MetLife $1.63
TMUS T-Mobile $0.2

 

Thursday (February 3)

IN THE SPOTLIGHT: AMAZON

The e-commerce leader for physical and digital merchandise, Amazon, is expected to report its fourth-quarter earnings of $3.9 per share, which represents a year-over-year decline of over 70% from $14.09 per share seen in the same period a year ago.

However, the Seattle, Washington-based multinational technology giant would post revenue growth of about 10% to around $138 billion. The company has beaten earnings per share (EPS) estimates most of the time in the two years.

“We are reiterating our BUY rating and our price target to $3,900. Our price target is based on our updated discounted cash flow model, including our long-term adj. EBITDA margin forecast of 22.0% versus 13.7% in 2020,” noted Tom Forte, MD, Senior Research Analyst at D.A. DAVIDSON.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 3

TICKER COMPANY EPS FORECAST
ABB ABB $0.38
ALL Allstate $2.72
COP ConocoPhillips $2.23
LLY Eli Lilly $2.37
HON Honeywell International $2.09
PRU Prudential Financial $2.44
SU Suncor Energy $0.95
SYNA Synaptics $2.63

 

Friday (February 4)

TICKER COMPANY EPS FORECAST
APD Air Products & Chemicals $2.51
AON Aon $3.33
BMY Bristol Myers Squibb $1.85
CBOE Cboe Global Markets $1.41
ETN Eaton $1.73

 

Blockchain.com Adds a Former Walmart Director to its Board

The cryptocurrency and blockchain industry has seen an influx of experts from traditional financial institutions over the past few years, and the trend could continue.

Horton Joins the Blockchain.com Team

Cryptocurrency startup Blockchain.com has announced the addition of Tom Horton to its board. Horton is an independent director from Walmart and has become the latest executive from a traditional company to join a crypto startup.

The Walmart director now joins a host of other executives on Blockchain.com’s board. The company recently added Marcie Vu, former head of consumer Internet banking at Morgan Stanley, to its board.

Other financial backers of the company include Google Ventures, Sir Richard Branson, and Lightspeed Commerce Inc.

Blockchain.com is one of the leading cryptocurrency companies planning to conduct an initial public offering (IPO) in the near to medium term. However, there is no set date regarding the company’s planned public listing.

Horton’s addition to the Blockchain.com board highlights a growing trend in the cryptocurrency and blockchain industry. The past few years have seen numerous mainstream financial institutions and businesses enter the blockchain space.

Visa, one of the leading payment facilitators in the world, launched a cryptocurrency advisory forum towards the end of last year. BlackRock is another traditional financial institution that is currently involved in the crypto space.

MasterCard, PayPal, MoneyGram, Morgan Stanley, Goldman Sachs, and several other traditional financial institutions are currently involved in various crypto-related activities.

The Crypto Market is Slowly Recovering

The cryptocurrency market suffered huge losses over the weekend, but it is now slowly recovering. The total cryptocurrency market cap has climbed above $1.6 trillion again after dropping towards $1.5 trillion yesterday.

Bitcoin declined towards the $33k level but has added more than 8% to its value in the last 24 hours and is now trading at $36,402 per coin. Ether is currently targeting the $2,500 psychological level after rallying by more than 7% in the past 24 hours.

Google Partners with Crypto Exchanges to Allow Digital Asset Cards

Google Pay, the firm’s payments division, is seeking to partner with crypto exchanges and companies to expand payments options for the platform.

According to a Jan. 20 Bloomberg article, Google has partnered with firms such as Coinbase and BitPay, to “store crypto assets in digital cards, while still having users pay in traditional currencies.”

The search giant has yet to fully embrace digital assets and does not accept them but said it was seeking more of these types of partnerships in an effort to entice more users to its payments app. Bill Ready, Google’s president of commerce commented:

“Crypto is something we pay a lot of attention to. As user demand and merchant demand evolves, we’ll evolve with it.”

Big Hire From PayPal

In an additional effort to bolster its payments platform, Google (GOOG) has hired former PayPal (PYPL) executive Arnold Goldberg to run its payments division.

Ready added that the hire is part of a “broader strategy to team up with a wider range of financial services, including cryptocurrencies.”

Google has spent several years developing the payments side of the business and planning a digital checking and savings service with a number of banking partners. However, Ready confirmed that the firm has no intentions of becoming a bank.

The firm lags way behind its competitors Apple on the payments business side of things so this latest shakeup and pivot towards crypto appears to be a drive to reverse this trend. According to research in 2020, Google accounted for just 4% of contactless payments in the U.S. for that year.

Google Pay takes no fees on transactions and this will not change according to Ready who added that more payment features within search and its shopping service will be added to show users “the entire array of financial services out there.”

Targeting Searchers and Shoppers

Google, which spent $1 billion on a new London property last week, aims to become the network linking all payment options, including crypto, rather than a dedicated payments platform. The move to accept digital cards with crypto from various exchanges is evidence that it is finally warming to the nascent decentralized financial ecosystem.

The firm wants to keep web searchers and shoppers on Google, “helping more activity occur on a free and open web – that naturally pays dividends to our overall business,” added Ready. The company makes billions through targeted advertising so it does not necessarily need to take commissions on payments as crypto exchanges do.

QQQ: The Downside Risks on the Nasdaq Seem Exaggerated

The performance of the Nasdaq now encompasses a higher degree of volatility as seen by the 5.5 to 9% corrections in the Invesco QQQ Trust (QQQ) which has now become the new normal in a macroeconomic environment where hawkish Fed hiking interest rates is seen as being unfavorable to high-valued and unprofitable tech stocks.

Source: Initial chart from Trading View

For investors, QQQ tracks the Nasdaq-100 Index which features Apple (APPL), Alphabet A (GOOGL), Alphabet C (GOOG), Microsoft (MSFT), NVIDIA (NVDA), Meta labs (FB), Amazon (AMZN), Tesla (TSLA), Adobe (ADBE) and PayPal (PYPL). These are the main holdings out of a total of 102.

Assessing the risks

There are certainly risks in 2022 in the context of being invested in tech equities, but, I would like to bring to the attention of investors that despite all the volatility, QQQ has gained 6%, and this shows that the market’s repositioning (amid the rotation from growth to value names) does not seem commensurate with the forthcoming pace at which interest rates will increase.

Exploring further, trades are no longer crowded as in 2021 as people look for income or other asset classes to diversify. However, this diversification away from tech seems not to have hit QQQ’s main holdings which constitute 52.73% of the portfolio. As per my observation, this has been the case from April through December this year when most of the market gains were just from AAPL, MSFT, NVDA, TSLA, and GOOGL.

Source: Ycharts.com

Given the fact that the rotation has lacked in breadth, I see the corrections in tech as a rather muted market reaction, and this also prompts me to discard fears that tech stocks will suffer in the same way as during the bursting of the Internet bubble back in 1999-2000. At that time, in the first phase of the bear market, the large-caps names were doing fine but a large percentage of Nasdaq’s other components crashed by more than 50%. Ultimately, all the components crashed.

However, that was a completely different Nasdaq with the top stocks of the time being Cisco (CSCO) followed by Microsoft then Intel (INTC), or from the networking, software and semiconductor sectors respectively. Today, it is more about social media, online advertisement, internet marketplaces, electric cars, the cloud, smartphones, and virtual reality. In short, tech is now fully integrated into all spheres of economic and social life compared to twenty-two years ago.

Considering the inflation factor

Moderating slightly, QQQ’s other holdings seem to be impacted as investors become more selective, putting more emphasis on quality (free-cash-flow, balance-sheet, economic moat, etc) and valuations. Still, here also, rising inflation, currently at above 7% compared to 3.75% in 1999-2000 could prove to be more difficult for value stocks like banks as their customers suffer from rising prices and are faced with the rising cost of doing business. For this matter, as shown in the chart below, Bank of America (BAC) and Berkshire (BRK.B) saw a more pronounced dip in their total return level in August 2008 than Apple or Microsoft when inflation was above 5%.

https://static.seekingalpha.com/uploads/2022/1/14/49663886-16421719831560977.png

Source: Ycharts.com

Industrials are also likely to suffer from soaring raw material and labor costs. As for tech, they should better withstand high inflation with their ability to make use of software, AI, and automation tools more rapidly than companies from other sectors of the economy. These tools enable them to reduce operating costs and better circumvent wage inflation. Examples are FinTechs like PayPal’s (one of QQQ’s current underperformers) ability to reduce money transfer fees for customers compared to traditional banks and companies making use of cloud-based collaboration instead of having to invest in costly infrastructure.

Tech should continue to outperform as digital transformation enablers

Furthermore, with relatively less dependency on physical interactions caused by variant-related uncertainty, tech stocks are less likely to see a reduction in profitability. Here, some will note that Apple’s revenue share from its App Store ecosystem is increasing more rapidly than for devices and Tesla is considered as an internet-of-cars company.

Historically, as shown in the chart below, big tech’s gross profit margins have either increased or remained constant during the last five years, which include 2021, a year characterized by rapidly rising inflation.

https://static.seekingalpha.com/uploads/2022/1/14/49663886-16421723117351067.png

Source: Ycharts.com

Thus, inflationary pressures grappling the economy as from 2022 is likely to put valuations on the backstage, with tech, especially the more profitable ones, likely to continue seeing positive returns. This said tech remains highly dependent on semiconductors, a sector that needs to be watched closely for some short term pain when some of the big names report earnings on the last week of January. Finally, looking at the performance of the Nasdaq in 2020 and 2021 when it gained 43.64% and 21.39% respectively, even a 10-12% gain in 2022 would put it in positive territory.

Disclosure: I am long Apple. This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.