💥Peloton Crashes. Planet Fitness Soars💥
Turns out the fitness world is not that different than it was pre-pandemic!
There was a lot that happened this week so buckle up folks…
👍 Winners of the Week👍
1. Job Seekers. The US added 531k new workers in October against 450k estimates (and August and September figures were revised upward by 235k jobs), and the unemployment rate fell to 4.6%, an all-time pandemic-era low. Leisure and hospitality saw particular gains (up 164k jobs) followed by professional and business services (+100k), with recent grads finding work. Interestingly, the percentage of workers who “teleworked because of the coronavirus pandemic” dropped from 13.2% in September to 11.6% in October.
2. NYC Taxi Drivers. We’re going to caveat this by highlighting that we haven’t seen the actual agreement here and there is always fine print. That said, it looks like a cohort of NYC medallion owners went on hunger strike in protest of crushing medallion debt and that helped drive the NYC government and Marblegate Capital, as the largest holder of taxi loans, to the bargaining table. That led to a meaningful debt relief agreement that will benefit taxi holders burdened by unsustainable debt loads. Per The New York Times:
Under the agreement, Marblegate will reduce the amount that each cabdriver owes to $170,000, from an average of about $500,000 per driver. It agreed to terms that will lower each driver’s payments to a maximum of $1,122 per month.
In return, the city will give the lender a cash payment of $30,000 for each driver and also guarantee every loan, agreeing to repay if the driver ever defaults.
Don’t worry about Marblegate: it’ll still make money and now its loans are credit enhanced by a City guarantee! It seems that they were buying medallions years back for around $170k a pop with the expectation of $1k-$1.2k in monthly payments from drivers. This, therefore, looks like a guaranteed ~20%+ return. And they get to look magnanimous while doing it.
3. Avis Budget Group Inc. ($CAR). 🤷♀️Markets🤷♀️. The company reported net income of $674mm on $3b of revenue — double what it did in 2020 (when, to point out the obvious, nobody was going anywhere). Revenue was a beat by 8% but the kicker was a staggering 60.9% beat on earnings per share. Suffice it to say, the shorts lost their shorts on this one (the estimated short interest on the stock was 28.8% of the float…YIKES). To top things off, the company implied that it intends to go balls to the wall into electric vehicles because, like, why not say that? Tying your go-forward business plan to EVs is a sure-fire way to get the meme-mob all hot and horny for your sh*t. Did it work here? Well…
LOL. WTF. Is this price discovery on an under-appreciated stock? Not likely. Again, 🤷♀️Markets🤷♀️.
4. Lyft Inc. ($LYFT). Yes, ride-sharing fares seem WAY high as a supply/demand imbalance from the pandemic continues to level out. Still, that didn’t stop Lyft. The company reported $864.4mm in revenue (up 73% YOY off awful ‘20 comps and 13% QOQ) and net income of $17.8mm, marking only the second profitable quarter in company history. Average revenue per rider beat analyst expectations, proving, for sure, that fares are through the roof (this also happened to make up for a 800k miss on the number of active riders). The other good news? Supply. Drivers are coming back. The stock was up 17% on the week.
5. AMC Entertainment Inc. ($AMC). CEO Adam Aron continues to (cynically AF) play chess while the rest of us are playing checkers. Capitalizing on AMC’s newfound meme-caused “brand” recognition, the theater chain is planning a series of initiatives to diversify its income streams in what some might call a “pathetic and desperate” corporate strategy (as one reader emailed us this week) and others might call a “brilliant albeit contemptuous showing of capitalism at its finest.” Others = PETITION. Just saying. Per Deadline:
AMC said the U.S. multibillion-dollar popcorn market is expected to grow significantly over the next several years. “With the popularity of AMC Theatres’ Perfectly Popcorn, and given AMC’s current position as the largest freshly popped popcorn provider in the United States, AMC believes that an expansion into the sale of popcorn on a retail basis outside of theatres is a natural extension of AMC’s core business.”
AMC initially plans to launch up to five popcorn stores, counters and/or kiosks in shopping malls around the country in the first half of 2022. These initial locations are likely to be in malls without an AMC theatre location. AMC plans to have up to 15 retail stores open by the end of 2022 with more opening in 2023 and beyond and also selling candy, Coca-Cola options and bottled water.
“The announcement that AMC will become a competitor in the multi-billion popcorn market is so natural and logical, one wonders why the idea has not been tried before,” said Aron. (emphasis added).
Well … perhaps the answer is that one was too busy scratching and clawing to survive but now thanks to a literal irrational miracle of epic proportions the company has some latitude to think outside the (popcorn) box. Even that thinking curiously leads AMC to … gulp … the mall. Ok, fine, whatever.
One reader — a senior guy at a restructuring advisory shop — wrote us:
…has any company (or CEO) ever failed-up so spectacularly? This POS was on its way to the courthouse prior to COVID and now has a valuation that’s a multiple of the pre-pandemic North American box office. Dalian [Wanda] cashed out with a tidy profit and is still pinching themselves at their good fortune.
There are lots of absurd, inexplicable valuations these days, but watching Aron shamelessly kowtow to his Reddit masters is particularly galling—and forces him to pull a rabbit out of his hat every six months or so, hence ideas like AMC popcorn for the masses.
Our reply: don’t hate the player, hate the game. Mr. Aron, as a player, is the Lebron James of Reddit manipulation. Anyway, we’re here for it: we very well may fire up some AMC popcorn for a team viewing of the new Matrix movie come December (if the at-home option is available then). To. The. F*cking. Moon. Baby. 🚀
👎 Losers of the Week 👎
1. The Ad Hoc First Lien Notes Group in Mallinckrodt. Ouch. A group of holders of $495mm 10% ‘25 first lien notes including the likes of Aurelius, Boundary Creek Advisors, Capital Research & Management Co., CTC Alternative Strategies, Moore Global Investments, Stonehill Capital, Third Point, Two Seas Capital and VR Global Partners, had objected to the Mallinckrodt debtors’ plan of reorganization, arguing that they were entitled to a ~$100mm make-whole payment even in the context of reinstatement of their notes. Judge Dorsey orally ruled that a make-whole payment in the context of reinstatement would be a “windfall” for the noteholders since (i) said noteholders have been paid interest during the cases, (ii) all other interest will be paid going forward and (iii) the event of default was merely triggered by the filing itself.
2. Zillow Group Inc. ($ZG). A few years ago when Zillow Group Inc. ($ZG) indicated that it was going into the home flipping business, the naysayers came out in force saying that this was bull market froth to the utmost. Turns out the haters were right. The company’s “iBuying” business — a tech-enabled home-flipping segment — was supposed to generate $20b a year in revenue. Instead its generating a 25% workforce reduction within the company. The stock got absolutely pummeled this week:
👍 A Fitness Winner and a Fitness Loser👎
What a year it’s been for COVID lockdown stocks!
Peloton Interactive Inc. ($PTON) reported its Q1 FY 2022 earnings after the close on November 4, 2021 and to say the performance was a dumpster fire might be understating things. To recap: