We’re bringing you all the news you need to know for this week. This report contains news on the most important IPO this week, the crypto world, earnings news & economic events. We’ve highlighted the most important topics in each section!
Crypto News Interpreted:
Last week the Chinese government announced that they were banning the use of any cryptocurrency within their country. Following the move, two major events occurred:
- The first was that Huobi, one of the world’s largest cryptocurrency exchanges, said that it has ceased new account openings for mainland Chinese users. They also said that they would slowly close all Chinese accounts by the end of the year.
- Additionally Binance, one of the world’s largest cryptocurrency exchanges as well, said that new account openings using Chinese phone numbers are now blocked. The Binance app is also no longer available for download in China.
While China has attempted to do this in the past, many of the exchanges moved offshore as a result of prior legislation. But many companies ended up finding loopholes that allowed people to still participate in the crypto markets. While these “loopholes” have yet to be publicly discovered for the newest regulation, we find it hard to believe that this will be fully enforceable for the world’s largest country.
The key takeaway here is that we believe this will not slow down the crypto markets at all in the long term. While the price of bitcoin took a hit in the wake of the news, we still fully believe in the underlying technology and believe this will be nothing but a speed bump.
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Most Important IPO This Week:
Warby Parker (WRBY), September 29th:
Warby Parker, the extremely popular DTC eyeglass company, is expected to list their shares on the market via a direct listing on September 29th. If you’re not familiar with the company, they’ve slowly become one of the most popular retail brands in their space over the last several years. One of the original pioneers of the DTC concept, Warby has been on a strong growth run ever since.
Looking at their financials directly we see some compelling growth in the face of a tough economic backdrop. But it is coming at the expense of increased losses. The most important metrics are:
- Their net revenue rose to $394M last year but their losses added up to $56M
- Going forward their management team warned investors that they may face headwinds as it tries to become profitable.
With losses increasing, and management warning that this will continue, we’re choosing to stay away from the most popular IPO of the month. Looking at their price tag of a minimum of $3B, we feel the stock is somewhat justified in valued (trading at 7x revenue) unless the IPO ends up going for anything more than their most recent valuation. In any case, we want to see their ability to increase their operating metrics before jumping in. While there is a lot of optimism about their future, the likelihood they become profitable anytime soon is far from likely. We’ll continue to monitor this company to see if they’re able to turn the ship in the right direction.
Most Important Companies Reporting Earnings This Week:
Micron Technology (MU), September 28th:
Micron is set to report earnings tomorrow and we’re closely watching to see how they performed over the last quarter. With the stock flat in 2021, expectations for the tech company have slidden dramatically. While we’re not calling for the bottom just yet, we do think the end is in sight. Ever since their last earnings report, the market has been pricing in a worst case scenario for their selling prices and the stock has therefore slid, even with strong numbers during their last earnings call. If MU is able to keep up the outperformance, the stock’s strong performance will just become cheaper and cheaper to own.
We therefore think at this price, that the stock is set up for a good risk/reward story. We therefore are continuing to maintain our position in the company and ride through this continued downturn.
CarMax (KMX), September 30th:
If you’ve been following us for awhile then you know we’ve bene investors in KMX for a long time. With the stock up 57% this year, we’re happy to have been right on this one. The reason is due to how hot the secondary car market is right now. With new car orders extremely backed up due to semiconductor chip shortages, many consumers have been forced to the secondary markets in order to buy used cars. The result has been stellar for companies like KMX and Carvana, with sales up tremendously.
Now with earnings to be announced later this week, we think KMX is set up to announce strong numbers. Having said that, the expectations are going to be extremely high, so we’re predicting the numbers to be largely in line with projections. Going forward, we believe KMX will continue to be a strong pick in their sector. However, Carvana continues to be our preferred online car dealer – but you can’t go wrong with either!
The Key Economic Event in Focus This Week:
There is a lot going on this week in the world economy. With multiple speakers from the FED set to give their thoughts on a wide ranging of topics, there is a lot of news to digest. This week however, we’re looking most closely at San Francisco Fed President Mary Daly. The reason is due to her district being the second largest by asset value while being the largest by geographical districts. While all of the FED speakers should be watched with scrutiny, her comments should be extremely telling into the FED’s plan regarding interest rates, inflation, growth, etc. over the next several years.
This is a can’t miss week in economics as some of the world’s most important leaders will be shedding insights into the economy that no one else has. We’ll update you on what she says but you should also be watching to be able to react in real time and learn about what is going on!
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