The Best One Yet - Uber doesn’t want its IPO to be like Lyft’s, Netflix’s unprecedented comedy move, and Delta’s 2 “profit puppies”

Episode Date: April 11, 2019

Lyft shares have fallen 25% since their first day of trading — And things got worse yesterday because of what Uber revealed. Netflix is partnering with another subscription service for the first time, and this one’s all about comedy. And Delta jumped 2% on more details about (what we’re calling) its two “profit puppies.”Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is Snacks Daily. It's Thursday, April 11th. And this is the best one yet. T-B-O-Y, Jack. Markets Rose. Very nice.

Because the U.S. and China agreed on an enforcement mechanism for a future trade deal. Doesn't sound appropriate. Yeah. It sounds kind of noddy. It sounds a little naughty. How am I going to get punished if I break the trade rules? It's just you want clarity. Mom, Dad, am I going to lose TV or am I going to lose dessert?

Now, we got three great stories today. First, Lyft shares fell 10% yesterday because Because Uber has done a big move and made it look bad. And this was, guys, this was a passive-aggressive pre-IPO move by Uber. Second story is Delta. Everyone's least hated airline. Shares jump 2% thanks to its two profit puppies. Can we name the puppies?

The profit puppies? Yeah, name one. One is business class. And the other, let's go with credit card. Nick, I was trying to save that punchline for later. The people deserve the name. Third and final story, Netflix has hooked up with serious XM radio doing something it's never done before.

Best part about this, Jerry Seinfeld is part of the key. Now, before we get to those stories, we have to describe some universal news. Scientists have taken a photograph of a black hole and let us look at it. You were wondering what was happening in Galaxy M87?

Boom. Black hole. This black hole is 55 million light years away. Give a take. Its gravitational force is so strong. Nothing can escape it even light. Yeah, ironic. That's why it's called a black hole.

Did they use a flash with a camera? camera. They used eight telescopes with it. We can tell you that. Yes. This is the culmination of work by 200 researchers over 10 years using eight telescopes. Now, some people criticized it. They said the photo looked, I don't know, looked donut-y. It looks like a glazed donut. It looks like an eye of Sauron. Nonetheless, tremendous accomplishment, and I'm sure we're going to take some great learnings from it. Yeah. But first, listen to these important words. You're tuned in the snacks daily. We spoke to the lawyers. The snacks about to hear rain food and said candy. They don't reflect the views of the Robin Hood family. It's all informational just so.

You know, we're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Right. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC. For our first story, Uber's getting ready to IPO. And it just made Lyft kind of like that. Classic older, bigger brothers. situation like Uber. He's like throwback, bringing Jack back to Thanksgiving where he got like the small turkey light. Lyft is smaller, it's younger, it's trying really hard to impress its parents, and then Uber

comes in and does this. Boom, shows up with a perfect report card. So here's what happened. Thanks to a Reuters exclusive report, we know that Uber plans to file for its IPO today at a valuation of $100 billion. It's pick that number, and it means shares are going to be priced in a nice little range of $48 to $55 when it offers them on the. public markets. Uber is planning to issue $10 billion worth of new shares, and with that money,

it's going to, you know, take over the world. Keep on taking over the world. What are we going to do, Pinky? And we also know that the IPO is expected to be an early May now. Circle your count. But let's get back to that number, $100 billion. Really important. Because when we thought about it, we like, we wrote it down on a whiteboard. We were staring at it. We were like, this number, it looks different than we expected. Yeah. We are in a privileged position that we can complain 100 billion isn't enough for Uber, but it's because we were anchored to 120 billion. I love that word anchored, by the way. Because that's what Goldman Sachs and Morgan Stanley told Uber it was worth a few months ago. Exactly. Those investment banks come in. They say, hey, Uber, we want your

business. We want to help you IPO. And by the way, you look amazing. Total brown-nosing situation. Incredible. You look like, I don't know, worth your $120 billion. Uber was swooned by all that nice speak from Goldman, and it picked $120 billion. But now, after, what happened with Lyft the past couple weeks, the number has come down to $100 billion. And guess what? It kind of makes sense because Uber is about four times bigger than Lyft. Very true. Uber has global aspirations and Uber does more than just ride hell. So it makes sense. It's bigger. My Monday night Uber eats ramen bowl can tell you all about it. Great food delivery. So Jack, what's the takeaway for our buddies over at Uber and Lyft? Lyft is struggling and Uber's

investment bankers are noticing. They're not just noticing. They're looking at this. They're like, you know what, we kind of want to avoid this situation in May. Yeah. So Lyft was ambitious as hell with their IPO. They set the price pretty high. Very nice. And shares rose up to $80 on the first day of trading. But then as of yesterday, they've fallen all the way down to $60 a share. That is 25% lower than day one. And then I got one more thing for you. Lyft has this whole other issue right now where Morgan Stanley, the investment bank that brought them public, has apparently been helping investors sell their shares early.

Yeah. Investors weren't supposed to be selling yet. And Lyft is not happy about it. Uber wants to avoid this whole thing by maybe being a little more conservative on the share price to prevent this fall. For our second story, please return to your seats. Delta profits just rose thanks to its two beautiful profit puppies. Business class and the Amex credit card. I love it. By the way, airline news these days is just insane. Yeah. Yesterday, JetBlue announced it's like going to London. Yeah. You got Boeing basically, canceling production of all its 737 maxes. Yeah, this is like silver medallion status. Can't avoid this thing. So here are the results from Delta's quarterly earnings report. Yes. Revenues rose by 6% from last year. I can do you one better.

Profits rose 31% from last year. Wow. Very strong. Let's talk about how investors reacted. The share price rose by 2% yesterday and shares are up 14% so far in 2019. Delta just live in the Delta the comfort plus lifestyle. Now, let's talk about profit puppy number one, business class. Oh my God. Main cabin tickets. We're talking knee-knocking in the back tickets. Only inched up like revenues inched up 2%. Right. And revenues for business in first class for Delta last quarter rose by 8%. Very nice. Now here is the wild thing about this profit puppy for Delta. You might think business class is a small part of their business. No. It's absurdly huge. It's a big part of the business. It's got plenty of egg room, its own little sweet situation.

There's only about half as many business class seats as the main cabin, but the revenues for business class make up about half of ticket sales. Let that sink in. They basically make up an equal amount of ticket sales. Business class is a very, very big deal for Delta, and fortunately for Delta, we are in an era right now. Oh, I got three reasons. Corporate profit.

Jack, they're boosting travel budgets at companies. Yep. They're boosting the number of vacation days for employees. Check, check, and then third check, they're all flying business class when they travel. Not me, but that's great. Companies that have strong corporate budgets for travel, they're going to help Delta out by giving their employees business class. And get this, since 2012, Delta shares are like six times higher driven in large part by business class. Yeah.

Corporate profits are turning into business class sales for Delta. So, Jack, what's the takeaway for our buddies down Atlanta? over Delta. Not all dollars are created equal. Profit puppy number two for Delta, let me introduce it, the partnership with American Express credit card. This is a golden goose egg of a deal for Delta. It just signed an 11-year extension to exclusively work with American Express for its credit cards. And MX pays Delta for like each swipe or like online shopping cart you're doing with that. Every single swipe, Delta is getting a little bit of money. And with this new extension, Delta is getting twice as much.

Guess how many billions this year Delta is making? I know the answer. Double as many as last year. Seven billion dollars Delta will get from American Express. From that credit card. That is wild. It's amazing. There are analysts who predict that the American Express deal

generates 35% of Delta's total profits. And that's like hardly at any cost to Delta. All it's got to pay for is when someone redeemed their Sky Miles to go down to Nashville for like Molly's last... Molly's last Follie. Bachelorette Party. So Delta is an airline or a credit card company that's also got an airline. For our third and final story, this is a big kind of celebrity hookup here.

Netflix is getting together with Sirius XM to do something it's never done before. Big week for radio. Yeah. Audio, can you hear me now? Iheart radio we covered last week. Yeah, it's going to IPO. And now Sirius XM is partnering with Netflix. And here's what Netflix is doing.

It's offering its content on another subscription service for the first time. ever. Here's the show. It's going to be called Netflix is a joke. Great name. Channel 93 on Sirius XM Radio, starting April 15th, I think. That was great. It almost sounded like an ad. Now, we are not getting paid for this. No, we are definitely not. Now, stand-up specials on this show are going to include fantastic names. We're talking like Sarah Silverman, Adam Sandler, Amy Schumer, Ellen, Dave Chappelle, Jerry Seinfeld. So these are all of the comedians who have video specials on Netflix, they're basically just turning off the video and keeping the audio. Yeah.

And putting it on the radio. They can't do any like prop jokes, I guess. You know, it's all going to be, you know, have you, you hear the one about the, the, the. Right. So the physical comedians like Chris Farley, rest in peace. Yeah. They wouldn't do great in the second. No, this would not work for them.

Audio only. Are on it. Now, here are a couple other things that Netflix decided to throw in there strategically. Exclusive new content before you get it anywhere else. Okay, so before you can get it on Netflix. Right. So you know, like comedians like, spoiler alert, they tell the same jokes over and over. So every now and then they come out with fresh material.

Netflix had this contract saying, you know what? You can only do that fresh material in our audio special with Sirius. Okay. So this hits two key parts of growth for tech, growth and revenue. So true. Netflix is going to engage new customers through Sirius XM who are flipping through the dial, going up to station 93 and say, you know what? I kind of like what I'm hearing.

Let's be honest. Series XM radios, they're probably commuters. They may be a little older, and they may not have Netflix yet. So you might hear that Netflix is a destination for comedy. And then what about revenue? In revenue, I mean, we got to assume Netflix is getting paid for this. Terms of the deal weren't disclosed, but Netflix is probably getting a nice little syndication revenue from Series XX. A couple other things we thought were interesting.

This is Netflix embracing the rerun for the first time. This is an old-school rerun. Totally. Basically, they're taking what they already have on video and saying, you know what, we're just going to prepackage it with less visual. This is like dumb and dumber being, you know, shown on TV. You're making money long term. The other thing is they're embracing multitasking because you're going to watch it on TV and then, you know what? I kind of want to finish the episode, so I shall do so in the car.

Exactly. So, Jack, what's the takeaway for our buddies over at Netflix and Series X-Six? Comedy is how Netflix is beating cable. A surprising way. It is outpaying cable channels like Comedy Central to get the... exclusive hits with your Amy Schumer's out there. Comedy Central has had these exclusive stand-up comedy specials for decades. Oh my God. But now Netflix is totally monopolizing the category because it can spend more. Also, they always have these like weird titles for the comedy specials.

What do they have? I don't remember any. They're so weird. I don't even remember. I do know Amy Schumer, big listener to snacks daily. So $13 billion Netflix spends every year on original content. A lot of that's going to comedy and it's becoming the place for comedy. Jack, can you whip up The takeaways for us, please? Uber's bankers are noticing what's happening to lift right now, and they're changing their ways. Yeah, they're basically going to set Uber's IPO bar a few billion dollars lower. And then for Delta, not all dollars are created equally. It loves its profit puppies.

Because Delta is basically almost a credit card company now. And third and final story, comedy is how Netflix is beating cable. And it's pretty much how it's going to get you through your commute now. Time for a snack back to the day. This one, get your house plant game on. The number of Google searches for succulence has risen 10-fold since 2010. We were super curious about this. I don't know why this is.

I've got two answers for you. What? It's a lot easier to water that thing every three weeks than a kid or a pet. Don't water it too much. I've been there. I've done that. It's a bad story. They don't like it.

Now, a couple other big stories happened yesterday. You should check out the Snacks Daily newsletter. To learn more, in Europe, they set a deadline for Brexit. They pushed it all the way back to October. And then over at Amazon, 3,500 employees sent a letter to CEO Jeff Bezos saying they want something done about climate change. Snackers, we loved having you on the pod. I cannot wait to spend another day with you tomorrow. Can't wait.

The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc. or any of its subsidiaries or affiliates. The podcast is for informational purposes only, is not intended to serve as a recommendation to buy or sell any security, and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC member FINRA SIPC.