Weekly Recap | September - W3
Macro & Interest Rates, Selling Palantir, Olo's Workforce Cut, Nike Looking for the Right Shoe & PayPal's New Partnership.
Macro.
We will start here today, although I usually don't bother much with it. As Peter Lynch says:
“If you spend 13 minutes a year on economics, you've wasted 10 minutes.”
And he’s right. Thankfully, we have some great analysts on X helping us and summarizing the important things.
Joke aside, let's not spend more than 3 minutes on this and simply say that finally, the FED has reduced interest rates, by 50bps. Although I thought the market would see this as a sign that they are rushing by necessity to stabilize the economy, the press conference following the decision showed the contrary.
J. Powell seemed very confident about the actual situation and anticipates a slow & steady decrease of those rates, as the dot chart shows. We should even expect another cut this year.
This, plus numerous confident comments, probably made the market realize that these 50bps were not by necessity but by choice. And as this means liquidity flowing back into risky assets, we had big green candles.
Soft-Landing or no Soft-Landing.
The question remains, will we hit a recession or will the FED realize their soft-landing and beat inflation without breaking anything… Lots seem to see this as an already won battle. I don’t. I personally believe we're entering the eye of the cyclone and things can still get very ugly on the other side.
For now, data is promising, but I intend to grow my cash pocket during the next months, in case - and maybe even take some profits. But I'm getting ahead of myself, let's see how things go!
For now, things are well, and our three minutes are done. Moving on.
Selling Palantir.
Yes, I have sold a bit of Palantir this week slightly above $36 - about 20% of the position, for different reasons, starting by the actual valuation. I have detailed how I work here.
At $36, we'd need to hold strong ratios up to 2026, ratios I do not think reasonable at all while my 25% CAGR seems to honestly be a bull case.
Secondly, the pump the stock known those last days wasn't due to any business fundamental but to a market hype, triggered by the inclusion into the SPY & by a $50 price target given by Bank of America.
It's hard from here to imagine more positive catalysts, strong enough to bring always more inflows to sustain the actual share price or pump it. We might go a bit higher. But I believe we'll go back to retest at least the last breakout around $30. The only thing which could avoid that to my opinion would be an astonishing Q3-24 with a guidance over 26%/27% of growth.
I intend to buy back there if it happens. Not that $30 is a proper entry price but buying at this price wouldn't push my average above what I consider Palantir's fair value, so that's all good.
Olo Saying Goodbyes.
Noah Glass announced this week that Olo would cut 9% of its workforce to "drive efficiencies and align our costs with the current pace of profitable growth". This will have short-term implications as this is should cost between $2.2M & $2.6M during Q3-24.
9% is a lot and a lot of economies over the long term. This won't boost growth but it will boost margins & profitability, assuming those layoffs are in teams the company can to layoff without impacting growth.
The market might misunderstand the results during Q3-24 with stronger expenses but we'll have to look at how this affects the company long term.
Nike’s New Boss.
We already talked about Bill Ackman buying Nike’s shares some weeks ago and I wondered if it was as an investor or as an activist. Turns out he probably had the second hat on for this move as we learned this week that Nike had a new CEO: Elliot Hill, a hardcore who knows everything there is to know as he's part of the company since… 1988.
Stock jumped 10% following this news but the truth is, nothing changed for the brand, and it will take time to cultivate it again - although they do not start from nothing. To keep an eye on, but Nike doesn't deserve a buy - yet.
PayPal, Again.
I know, you're tired. I am too. And I might not continue to detail every partnership PayPal does as we understood by now that this new management is killing it, but this one is worth talking about.
This isn't as big as Shopify or Adyen though to my opinion as this concerns only a small portion of Amazon: the portion of merchants which integrated Buy with Prime’s API, and not a global partnership with Amazon itself. It still is significant and we might see things go further if this works well.
Another example of how PayPal is changing under Alex Chriss.