MarketBites Daily Investment Commentary: GameStop Ready To Cash In I Google Ditches Oracle

Stock Market Commentary for 4/6/2021:
  • Stocks surged on Monday, as a strong jobs report and data showing a rebound in the services sector, strengthened the bullish “economic recovery” trade.
    Stocks that were hammered by the pandemic, like airlines and cruise-line operators, were among Monday’s strongest performers.

    – On Monday, the yield on the 10-year Treasury note slipped to 1.716% from Friday’s 1.721%. The fear of rising yields and inflation continues to inject great uncertainty into the stock market.
    – Energy stocks underperformed, as oil futures slumped 4.3% on news that India and China reported a spike in coronavirus cases that could lead to another drop in global oil demand.


  • Stock Talk:
    The Winner of the Day: Norwegian Cruise Line
    Norwegian and other similar stocks rallied Monday, after continuous progress with vaccinations. Additionally, the firm announced a July re-launch, including mandating vaccine proof from travelers.What’s Moving Pre-Market: Illumina Inc.
    $ILMN is up nearly 10% during Monday’s after-hours session. The firm announced it expects revenues to top $1B Monday, much to the pleasure of analysts and investors alike.

    The Loser of the Day: Enphase Energy
    Despite recent positive sentiment for the solar battery maker, the market soured on Enphase on Monday. Analysts upgraded the stock to a more bullish outlook upon hearing progress on the firm’s latest generation battery.


  • The Data Room:
    – Per the CDC, 107.5 million Americans have received their first round of vaccinations.
    – Employers added a seasonally adjusted 916,000 jobs last month, the best gain since August.
    – The ISM’s services index rose to an all-time high of 63.7 in March from 55.3 in February. This is ahead of economists’ forecast of 59.2. Any reading above 50 indicates an expansion.

– By Raymond Kanyo

 


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Top Investment Story #1: Gamestop Cashes In

What is Happening?

GameStop is finally ready to cash in on the Reddit-fueled trading frenzy, and is issuing up to 3.5 million new $GME shares.

Why does this Matter?

The stock offering is a mixed-bag for GameStop shareholders. Let’s break things down into positives and negatives.

The Negatives:
If GameStop issued 3.5 million new shares, it would dilute existing shareholders by roughly 5% (Theoretically, your $GME shares should be worth 5% less – but we all know that $GME stock can stay irrational longer than short-sellers can stay solvent). The added 3.5 million shares would increase the number of shares available to short. This would lower the chances of a short-squeeze happening.

The Positives:
At its current share price of $182.8, the company could raise $639 million of cash. If you add that to GameStop’s current $508 million cash reserve, you’ve got yourself a $1.15 billion war chest to transform the company.

The transformation plan in a nutshell:
GameStop is replacing brick-and-mortar stores with e-commerce capabilities to better compete in the digital age. The company has already hired several executives from Amazon and Chewy.com, and it plans to completely reshuffle its board of directors to align with the new plan.

The Takeaway:

The capital raise possesses good and bad outcomes for investors. While $GME can potentially have $1.15 billion in cash to transform the firm, the plan remains rather broad with a lot to prove.

Liked this story? Forward it to your friends 

– By Raymond Kanyo

– Published in MarketBites Daily Newsletter


Meet the Authors
Top Investment Story #2: Oracle & Google Get Snippy
What is Happening?

Google will be moving its payments and financial transactions away from Oracle and on to SAP.

Why Does This Matter?

Google has opened the door to strategically removing itself from Oracle services, as the two tech giants become competitive in the cloud computing space.

Google has only announced the move off of Oracle’s financial systems. While the firm has not announced other moves away from Oracle, analysts and pundits have started to speculate that such moves are a very real possibility, and a business risk for Oracle.

The firms have started to build a history of bad blood. Outside of becoming cloud competitors, Oracle took Google to court over using Java code within its Android interface. While the Supreme Court dismissed the case, Oracle found the practice to be unfair. Additionally, Oracle has fought back on allowing clients to store data on Google’s cloud by stating, “We don’t partner with Google, because we are trying to compete with Google.”

Google finished Monday’s session up 4.19%. Oracle posted similarly positive results despite the news, closing 3.27% higher.

The Takeaway:

Google took a step towards alienating Oracle, since the two compete for cloud users. Expect this competition to become even more ferocious, as the two go head to head in hopes of becoming the next public cloud computing giant.

 

By Jack Dunne

– Published in MarketBites Daily Newsletter


Raymond grew up in Budapest, Hungary, where he played tennis for the Hungarian Junior Davis Cup team. At the age of 16, he received the Davis United World College Scholarship, which was established by legendary investor Shelby Cullom Davis, allowing him to attend the Taft Boarding School in Watertown, CT. After Taft, Raymond received a Presidential Scholarship to the Robins School of Business at the University of Richmond, where he studied Quantitative Economics and Finance. Raymond is a CFA Level III Candidate. Prior to joining Taylor Hoffman, Raymond worked at various financial institutions in the insurance, asset management, and financial consulting space. Outside of the office, Raymond enjoys playing tennis at ACAC and Westwood Country Club.

Raymond Kanyo
Product Manager & Investment Analyst

Jack graduated from the Robins School of Business at the University of Richmond with concentrations in Marketing and Finance in 2019. Prior to joining Taylor Hoffman, he worked in high-growth B2B SaaS marketing; assisting Fortune 100 firms to improve their web performance experience. A Long Island New York native, Jack’s hobbies include passionately supporting the Mets and Islanders, and he enjoys skiing whenever he can.

Jack Dunne
Investor Education Specialist
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