Tuesday 10 December 2019

Softball with CNBC

US equity indexes closed a little weak, sp -3pts (0.1%) at 3132. Nasdaq comp' -0.1%. Dow -0.1%. The Transports settled -0.4%.




US equities saw a pre-market swing from sp' -13pts to +5pts on a WSJ report that Dec'15th tariff hikes will be delayed. The market opened a little choppy, leaned weak, but then swung upward to fractional gains. The late afternoon saw renewed weakness. Volatility churned, settling -1.1% at 15.68.

Softball with CNBC

As is the case with many things, I have a love/hate relationship with CNBC. Their news reporting is generally reasonable. What has long turned my stomach is the 'in bed with the fed and bankers' attitude they maintain, not least from the Liesman.

Anyway, this post is about yesterday's earnings from Chewy (CHWY).

First, I suggest you watch this (no jumping ahead!)...

We have Wilfred Frost and Contessa Brewer, with Chewy CEO Singh.

The CEO played it well, focusing attention on growth and the increase in gross margins. Those are positives, but what about the actual net loss? Neither Frost or Brewer brought up the EPS loss of -20cents. Seriously, did they not know, or just have an agenda to 'play nice, and not annoy the guest?'

Whilst I heard just softball questions from CNBC, yours truly would ask the following...

Q. How can you be losing money on delivering pet food?
Q. Why are you not charging enough to at least run at breakeven?
Q. You have made no mention of your continuing losses in this interview, do you think we didn't notice?

Clearly, yours truly would never get a job within mainstream TV, as I'm simply not willing to play softball, not least with the central bankers.

Lets take a look at the chart for CHWY

From an IPO price of just $22, Chewy printed $41.34, but settled with a very spiky black candle. That was indeed a clear warning of bullish exhaustion, and the stock has since been ground to $21.68. Today saw the stock catching a post earnings bounce, settling +5.7% at $25.55. The close above the 50dma leans s/t bullish.

Last evening on Twitter...

First, headline EPS of -20cents is garbage, that is an annualised -80cents. Growth was an impressive 40%. As for guidance, maybe Chewy's projections are right, and they'll improve into/across 2020.

Chewy results:

For the record, no, I didn't listen to the conf' call.

The Cramer and Chewy

*CNBC have a treasure trove of archived material at

The following unedited segment is from the Mad Money show on IPO day - June 14th 2019

Make of that what you will. I would merely note that Cramer is at least correct in saying that Chewy is NOT another Pets.com. Chewy does have a viable business, but for now, there is little sign the company believes it has the pricing power to at least charge its customers enough to run at breakeven. 

Whilst the stock settled Tuesday significantly higher, the 'lockup' expires this Wednesday, and that can't possibly help the stock into year end.

Final note

Yours truly doesn't use the term 'garbage' flippantly. Despite my quirky online moniker, I would argue I'm one of the more balanced out there. I'll be the first to tout the superb earnings of MSFT, BAC, and TGT. I'll be similarly one of the first to slam loss making garbage like UBER, LYFT, or CHWY.

Since the UBER IPO, Mr Market has shown an increasing intolerance for companies with (as Pete Najarian often says) 'no path to profitability'. I am somewhat less polite than that, and will continue to highlight companies with crazy valuations, who seemingly think running at a loss is perfectly fine for the mid, or even long term.

Ohh, and yes, that includes Tesla and Netflix. Both of those companies are very lucky the capital markets are currently still willing and able to lend billions of extra dollars each year. A recession - as is inevitable, will likely see most lenders not willing to offer new capital at ANY price. The clock for Netflix, Tesla, and a fair number of others... is ticking.

Yours... striving for balance each and every day. 

Extra charts in AH (usually around 5pm EST) @ https://twitter.com/permabear_uk

Goodnight from London
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