The Best One Yet - Zoom surges 72% on IPO, T-Mobile jumps into banking, and tobacco/vaping stocks drop on “T21”

Episode Date: April 22, 2019

Out of last week’s 8 IPOs, we’re focusing on Zoom — The shockingly profitable tech company with a fascinating CEO. T-Mobile gets into banking with a 4% checking account (it comes with a couple asterisks). And tobacco stocks dropped on a major proposal to up the legal age to 21 – And that’ll cover vaping, too.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. This is Snacks Daily. It is Monday. April 22nd. Jack, is this the best one yet? This is the best one yet. Best one we've ever whipped up.

Markets inched up last week, close to a record high. Very nice. You look, did you get 10 this weekend? I did. I was national parking this week. Very nice. That's a new verb. Thank you, Teddy Roosevelt.

So we got three wonderful stories. First one. First is IPOs. We got to cover IPOs today because last week there were eight big IPOs. Count them on two hands. Thursday, there were two big IPOs. We broke it down even further. We're covering one of them.

It's the most interesting. Zoom video communication. Second. Second story is T-Mobile. They're pivoting from phones to banking. Did I hear you right? This is a true story. No typo.

Except there's one giant asterisk. We're going to jump into that asterisk. Third and final story, tobacco stocks. Yes. Having a rough day. They need a shoulder to lean on because Mitch McConnell has proposed legislation to up the legal age from 18 to 21. They're calling it T-21.

It sounds like a new workout. It is not. but it's wild. Sean T. Get on this T-21 work out. Now, before we go into all that, happy Earth Day to everyone out there. Happy Earth Day, everybody. You look great, everyone. I feel like an expert.

I'm back from Yellowstone. It's basically a veteran. You got any questions? Come to me. Go to this guy. But before we jump into that, we've got to talk about what Jack and I found on this Earth Day a fascinating fact. If you Googled bananas this weekend like we did, you may have been disturbed by some

sensationalist headlines. We're talking like bananas going extinct. Yeah, that's probably an overstatement. But there's a certain type of banana that sort of is going extinct. Right. We dove into the snack style. It's called the Cavendish. The Cavendish banana was selected in like the 70s by scientists.

To be the banana. It's a certain strand of like banana DNA that is particularly tasty. Right. And basically every banana you eat or anyone in Russia or Australia or any company. Exactly. They are genetically the same. But there's a new fungus that is actually threatening the Cavendish banana in particular. It's the worst.

Now, that sounds scary, but this has actually happened before. Yes, in the 60s, your parents' banana. It wasn't the cabin dish. It was called the Gross Michael. A.K.A. Big Mike. Again, not a typo. No, that is so true. It's scary. So, one banana species went, like, extinct in the past.

This one might, again, now. Either way, enjoy your breakfast. I'm sure the scientists will figure this out, though. Now, before we get into our real stories, check out these important words. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks you're about to hear rain food. candy. They don't reflect the views of the

Robberhood family. It's all informational just so. You know, we're not recommending any securities. No. 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 Fenra slash SIPC. For our first story, we're going to focus on the one IPO last week. Now, we found the most interesting. Zoom. I'm sorry, Pinterest. We're not covering you today. You look great. You jump 25% on your first day. But we are wondering when zooming is going to become a verb. Can we make this a thing now? We are zooming this story. We basically are. You could work from home and then just teleconference. Zoom had a hell of eight IPO, everybody. The stock jumped 72% on Thursday. It's first day of trading.

Now, the reason why is that this is a fairly unique rainbow-studied unicorn. Because it's profitable. Exactly. It's one of the few tech companies IPOing that's already profitable. It brought in like $7 million in profits last year. Now, it's business model. Here's its case study. So simple. The value proposition is make video conferencing frictionless. Stick that on a pillow. You can make that a tattoo. It is so seamless.

That's a surprisingly un-innovative plan. No, because there's lots of video conferencing services out there. It's incredibly basic. Now, it's got a free product, and that's the core. But then it's got a subscription product that it's making all that money off of. Get this. 344 subscribers pay over $100,000 a year for Zoom access. We're talking businesses like Uber. Uber has 14 million minutes used every month on Zoom.

Zoom proudly used Uber as its case study that it was telling investors. Like, if Uber is using us for 14 million minutes a month, we must be on to something. Can we say those people are zooming from 14 million minutes? Let's do it. Run with that Zoom. My trend that I'm excited about for Zoom is the more and more companies are having flexible work from home policy. Exactly. You're going to be at home. We could do this podcast from home. We're doing this podcast. We are today. And you would just have a screen up and look seamlessly into someone, and that would be zooming. So video conferencing is important with this work from home policy. And that's one reason why Zoom's valuation is gigantic. It got huge on IPO day. After the 72% trading bump, its valuation hits $16 billion. That is as much as American Airlines. And they have physical planes moving

places. American Airlines is a beast of a company, and Zoom is worth just as much. In fact, the valuation got so high that the CEO, Eric Wan, said that the price was too high. He's a modest CEO. He wants to bring people back to Earth. It literally was so high. He said he had to go home and start working as soon as possible. Speaking of this CEO, can we go on with him? He is a competitive advantage for the company. Fast-in-aiding guy. He owns 20% of the company, Chinese by birth, applied for U.S. visas to work in the United States eight times and was rejected eight times. He is persistent. He's relentless. He's tenacious. Ninth time is a charm. He also has a passion for video conferencing because, get this, like many of us, he had a significant

other who lived 10 hours time zones away. So I had to video conference with her all the time. Pre-Facetime era. So he ended up working at WebEx, which was bought by Cisco. Then he launches Zoom in 2011, and immediately people get enthusiastic. The guy also got his hands dirty early on. True. Early enthusiasts of the product used it. And if Zoom, if there was a problem with their Zoom, Yeah, they were complaining. This Eric guy would log into your video conference and, like, fix the problem himself. He'd be, like, zooming with you in real time, being like, why don't you like my product? I will fix it for you.

Last thing I want to mention about Eric before we move on. This is a great one. We just heard last week that Alibaba's CEO wants his workers to work 72 hours a week. Non-stop. The 9-6 plan. The worst. Eric is big on work-life balance. He goes to all of his children's basketball games, and he uses Zoom when he's at home.

That's what I love about this. During halftime, he does a video conference call. He says he doesn't do meetings. He just zooms into meetings, and that allows him to go to the basketball practice. He is big on a flexible work-from-home policy. So, Jack, what's the takeaway for our buddies over at Zoom and Eric? Your new product that you're thinking of, all the aspiring entrepreneurs out there, it doesn't need to be completely new.

You know when people say to you, oh, someone's already doing that, or, oh, that idea is not new for the Uber of Watermelons. They said the same thing to Zoom. When this guy started the company in 2011, people were like, Google's doing that, Microsoft is doing that, Skype's doing it. Yeah. And yet, stop him. And yet, the guy focused on the product and he said, I'm going to do what everyone else is doing, but better.

Make it mobile first, make it tablet first, and that ends up winning. Congrats on the big success, Zoom, great IPO. For our second story, Jack, can you hear me now? T-Mobile just got into banking launching a product called T-Mobile Money. Oh, and my partner Nick just mixed up a T-Mobile in a Verizon commercial. Doesn't matter. They all sound the same to me. This is true.

T-Mobile. First, it targeted the big wireless companies. Basically, companies you hate. Now it's targeting the big banks. More companies that you tend to hate. So Thursday night, T-Mobile announced an app-based bank account. You can sign up on your app for T-Mobile's money feature. If you're under the age of 40.

Sync it with your Apple pay, with your Venmo with your PayPal. Be complete digital. Or, if you want something physical, you can get a T-Mobile master car. Like my parents would do. Now, there are going to be no monthly fees with this thing. There are going to be no overdraft fees. and it's going to whip out a ridiculously high 4% interest rate for you. 4% interest rate.

With a 4. That means if you have like 100 bucks, it's going to become 104 bucks at the end of the year. Which is way better than the average these days, which is like 0.07%. Now, you don't need a T-Mobile wireless account to open up this checking account. Very nice. But most of the benefits come only if you're also a T-Mobile phone holder. So we dove into this snack style. And what we noticed is that T-Mobile knows the customer really well.

Know your customer. So the headline number on this story is the 4% yield. It's getting so much attention. It's like starring. It's like Jennifer Anderson and friends. But there's all source of asterisks, which you've mentioned. I know. We should get into some of this. And haters are going to point out that the 4% interest only goes for the first $3,000 in your account. Right. Once you deposit more than $3,000, you're only going to earn 1%. It drops pretty fast. And now that is a fair critique. But T-Mobile knows its customers. Very well. And it knows that most of its customers, probably don't have more than $3,000 in the account. Exactly. The strategy here for T-Mobile is that they're focusing on underbanked individuals. Right. So high-income, high-net-worth people are going to complain about this. But T-Mobile's customers, they're just getting served up kind of lower-income freebies that really matter if your money's tight. Now, to confirm this thesis, all you have to do is look at more evidence here. For example, the ATMs that you have access to, because it's free ATM fees, depends which ATM. Yes, there are 55,000 ATMs in America. number that have no ATM fees for T-Mobile customers. We looked at where those E-TMs

are located and they tend to be at lower-income grocery stores and not high-end malls. You're not going to get this on a Bank of America ATM. You're not going to get your fees waived on a J.P. Morgan ATM. So this account also doesn't have like retirement planning to put your college through law school, but that doesn't matter to as many T-Mobile customers. It's much more simple. So Jack, what's the takeaway for our buddies over T-Mobile? This is about stickiness. Sticky. Team Mobile wants you to be a sticky customer. Like honey on maple syrup on a banana that's kind of going extinct.

It's really easy to switch your phone plan because you get to keep your phone number wherever you go. And that's why phone plan prices keep on getting driven down. There's a lot of competition. It's easy to switch around. But if your phone account is also linked to your bank account, it's harder to switch phone plan. And if you're getting your monthly payments into that account, you're really not going to leave because you've got a whole system set up. So these high switching costs about a bank account and a wireless. I love that term.

That's going to make you tolerate higher prices. And we suspect T-Mobile might be planning that in the future. For our third and final story, tobacco stocks just dropped big because of a proposition to raise tobacco and vaping minimum age from 18 to 21. We're talking e-cigarettes and regular cigarettes. We're talking about the second coming of the era of the fake ID. Yes. This happened to beer and now it might happen to tobacco.

And it's thanks to Mitch McConnell, the senior senator from Kentucky, the majority leader in the Senate, basically parents have been calling him and he's getting tired of it. Yeah, he said that the vaping craze, basically taking away the smoke from smoking with e-cigrats, has led to a surge in teen tobacco use. Get these numbers from the government.

Now, I'm going to use the term youth here because that's what they do. I don't usually use the term youth, right? I think he actually uses high school. I think it's high school. Yeah. High school use of e-cigarettes surged 78% in the last year, and now one out of every five high school.

schoolers is a vaping. That is actually scary. Like, that is too much tobacco use among teens. Now, one of the reasons behind that was the now worth billions of dollar company, Jewel. Jewel made vaping cool. Right. They had, they had like mango flavor, which like a starburst case. And they had like Apple brand, you know, stuff that looks almost like an Apple product. It was very sharp. Now, 11 states have already bumped the legal age for e-cigarettes to 21 years. Now, there are a couple big shockers here. Mitch McConnell has proposed a nationwide increase for all tobacco uses to kick in in May. Which is big.

And then the second shopper is that this isn't just baking. This is tobacco products in general. We're talking Sigs andy Sigs. Yeah, this is a shocking, shocking story. I couldn't believe that Mitch McConnell- Are you sitting down over there? Yeah. So this is going to impact more than just the 18 to 21-year-old part of the tobacco market.

Right. There's a very strategic segment that's targeted here because 87% of current smokers began smoking before they were 18. Right. And that is when peer pressure is at its peak. Exactly. During high school, middle school, I don't know how young peer pressure starts. So the thing that's so important here is that if you're not exposed to smoking at that young and age,

during the peer pressure years. Then maybe you're in age where you'll choose not to spoke when you are exposed to it. Right. When you're finally 21 and you can legally smoke now, peer pressure is not really a thing anymore. Maybe you'll be on your way back from Soul Cycle and it just won't vibe. And you'll be like, I'm not going to smoke. So estimates are that this could impact 4% of tobacco sales in the short term. Which is a huge number.

That is a huge number. But in the longer term, maybe fewer people would ever even try tobacco because of this long term. And we saw that translated in the market because shares of Altria, Philip Mortis, and British American tobacco. They all dipped as soon as this news was announced. So, Jack, what's the takeaway for our buddies over in the tobacco and vaping industry? The big winner here is hemp, cannabis, marijuana, and any. combination of the above. Came out of nowhere.

Turns out Senator Mitch McConnell's been supporting a hemp-related farm bill in Kentucky because hemp can replace tobacco as a crop. So tobacco is kind of out right now. Not cool. Cannabis is kind of in right now. It's very nice. And this reshuffling of like how bad drugs are for society or not bad at all, it's producing some winners and losers.

The key for cannabis, though, is going to be national legalization, which isn't here yet. Jack, can you whip up the takeaways for us? Zoom's successful IPO proved. Your product doesn't need to be completely new. And I love that the CEO probably gave his kids like the birds and the bees conversation via Zoom. I'm sorry, zooming. True. Second, T-Mobile wants you to be a stickier customer.

Marriage and your bank account, both very sticky. Very, very sticky. In a good way. Third and final story was tobacco. It is the loser if we increase the tobacco age from 18 to 21. And Jules mango flavored stuff is just ridiculous. So time for our snack fact of the day. This one, we're going, what do we got here?

Like kind of an Earth Day Wikipedia page, essentially, snack style. Yeah, I think it's fair to recognize Planet Earth. We got to give some context to the day. So Planet Earth, we should first thank a couple people for Planet Earth. Yeah, I don't know, like six billion years ago, whatever it was. So John Muir was the founder of the U.S. Conservation Movement, so we're going to mention him on Earth Day. He was great. Second is Rachel Carson.

She wrote the book Silent Spring, which really brought environmental protection to our consciousness. And then third, you got Gaylord Nelson who proposed this, like, first official Earth Day celebration. He was a senator from Wisconsin. Now, the next step, great state, is national holiday status, which it doesn't have yet, even though Earth Day celebrated world world. It's just a celebration. We need a holiday. Great having you guys on the Snacks Daily Power with us. Remember to check out our newsletter at Snacks.robinhood.com. Everybody, I'll talk to you tomorrow. I 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

Robinhood Markets, Inc, or any of its subsidiaries or affiliates. The podcast is for informational purposes only and 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.