The Rundown - Crocs Slip Out of Favor with Investors, Starbucks' Biggest Chinese Rival May Be Coming to the U.S.

Episode Date: October 29, 2024

Stock market update for October 29, 2024.

Public.com presents the rundown. Your daily market update in five minutes. My name is Zadadmani, and today is Tuesday, October 29th. In today's episode, we tell you about a coffee company ready to take over the U.S. Also, we tell you why META is working on an AI search engine and Apple's rollout of Apple Intelligence. Then stick around to the end of the show to get an earnings recap of Crocs and McDonald's and how a new law will keep the McDonald's ice cream machine from breaking down as often. All right, let's go.

Stocks are off to a nice start this week with the S&P and NASDAG both finishing higher on Monday. More than 350 companies in the S&P 500 finish in the green, with Carnival Cruise being the best performer up nearly 5%. Cryptot traders are smiling this morning as Bitcoin joined in on the fun, climbing to over $70,000. First time hit that level since June. So yeah, kind of a fun time being an investor right now. I feel like the only people not having fun this week are oil traders and Yankee fans. Prices of U.S. oil dropped 6% yesterday to close at $67 a barrel. That's the biggest one-day drop in oil prices in two years.

Now, the reason for the drop is that there was initial worry that widespread conflict in the Middle East might disrupt oil supply, but those fears seem to be subsiding. So yeah, oil traders and energy companies not having a good time, but it's hard to complain about lower oil prices, you know. Let's run through some headlines. Starbucks might be getting some more competition in the U.S. This time from a Chinese coffee company. Luckin coffee is China's largest coffee chain. They call it the Starbucks of China. And now they're planning to expand to the U.S. of A.

It's an interesting strategy because, you know, the U.S. market already has a ton of coffee incumbents. The big players obviously being Starbucks and Duncan, but then you got some newcomers like Dutch bros. But on top of that, I feel like I see a new coffee shop open up in my neighborhood every other week. So there's a lot of competition here. but Luckin's strategy is to undercut everybody when it comes to prices.

They're planning to sell coffee at around $2 to $3 a cup. Now, they're going to start by targeting cities in the U.S. with large Chinese populations. Luckin coffee's story is pretty impressive. The company was founded just 18 years ago, and today they have over 20,000 store locations in China, compared that to Starbucks, which has 7,300 locations in China. So, yeah, we'll see if luck and coffee expands to the U.S. And if that strategy pays off. But, you know, every time I think of Luckin Coffee, I started thinking about that accounting scandal they had back in 2020.

The company admitted to inflating their sales by over $300 million to make their numbers look better and pump their stock price. Yeah, that was a pretty big deal. And their stock ended up tanking and getting kicked off the NASDAQ as a result. But since then, they've had an incredible comeback. Let's shift gears and talk some tech. You know, we have a lot of big tech earnings coming out this week. And some big tech companies are already starting to make some news early this week. Apple is finally releasing Apple Intelligence through a software update.

And it's about time because Apple has been hyping up Apple Intelligence since the summer. I haven't used it yet myself. I plan to update my phone sometime later this week. But based on what I've read, Apple Intelligence will summarize your emails or rewrite your text messages so your group chat jokes are always funny. You know, I guess that's pretty handy. Apple Intelligence will also summarize your notifications too. So instead of getting 20 separate fantasy football notifications on game day,

you might get one summary about how your team performed. Yeah, it might help ease the pain of losing every time and just getting bombarded with messages. And Apple's not done improving Apple Intelligence and update at a later date will incorporate ChatGPT. So I'm really looking forward to that, but that's not coming out for a few more weeks. I feel like Apple really botched the release of Apple Intelligence.

I mean, they've been hyping it up for months and months, then it's not ready to come out when the new iPhones come out, and now there's so much hype around it, and they finally release it, but they don't have all the features, and it's just kind of a mess. And if it's not good, people might get pretty upset, you know? You know, who else might be getting upset right now are executives over at Google because meta is working on their own AI search engine.

This is according to reporting from the information. Meta has been developing the search engine for at least the last eight months and it could be incorporated into WhatsApp, Instagram, and Facebook. So you'll be able to go into WhatsApp or Instagram, ask a question to Meta AI, and get the answer. So right now, meta relies on Google and Microsoft Bing. to provide information about news, sports, and stocks when people use meta-a-I. But moving forward, Zuck doesn't want to be so reliant on Google and Microsoft. So he's developing his own search engine.

And this could be huge because over a billion people use meta products like WhatsApp, Instagram, and Facebook. I could definitely see someone like my parents who use WhatsApp and Instagram all the time, just search the internet using meta-a-I instead of going to Google. So this could, over time, have an impact on Google's search dominance, and how much money they make from search ads. Google executives got to be a little nervous right now for sure. Let's talk about some stocks making moves today.

Let's start with VF Corp. Their stock is up huge today after the company reported a swing to a profit after two straight quarters of losses. VF Corp is the parent company of brands that includes Vans, North Face, Timberland, and Supreme. Pretty much to all the brands that were cool about 10 years ago, I guess maybe they're still cool now

because they delivered better than expected sales, which is a sign that its turnaround strategy is working. The company's game plan has been to reduce inventory and focus on their core brand, which is vans. Now, vans still suffered an 11% drop in sales in the recent quarter, but investors view this as the step in the right direction, because sales in the previous quarter fell by 21%. VF Corp stock is up more than 20% this morning, so they're having a big day.

Now, on the flip side, McDonald's shares are down this morning after the fast food giant reported its second straight drop in global same store sales. Global comparable sales fell by 1.5% for Q3 compared to a 1% drop in the previous quarter. Now, if you look at just U.S. same store sales, those actually increased by 0.3%. So at least they're seeing a rebound in their business in the U.S. McDonald's has been trying to win customers back by offering better deals. Like over the summer, they started offering a $5 value meal, which they ended up extending through the rest of the year.

Now, these value meals are cutting into McDonald's profit. McDonald's reported a 12% year-over-year decline in profit in Q2, and their profits in Q3 fell by 3%. So not great. And now McDonald's is dealing with the whole E. coli outbreak, which has led to a 10% drop in traffic in the first three days of the CDC's warning, according to CNBC. McDonald's did not comment on the outbreak during the earnings call, and we're not going to know the full fallout and the impact of the E. coli outbreak until McDonald's reports Q4 earnings next year. McDonald's shares are down around 2% in reaction to these earnings. Actually, check that they were down 2%, but now the stock is up trading over 1%. So I guess investors changed their mind.

Let's talk some crocs. They just reported earnings, and I guess it was an underwhelming back-to-school season. Crocs shares are down 15% after the company said sales remain flat for the recent quarter. And they only expect a 3% growth for 2024 sales. Now, what's interesting is that some schools across the U.S. are banning Crocs, citing safety reasons. So that possibly could be a challenge for the company. Now, the bigger issue for Crocs has been their Hey Dude brand. Sales of their sneaker, loafer brand are expected to drop 14.5% this year,

which is worse than what they had initially expected. I think the hey dude hype is officially over. Let's wrap the show with a fun fact. McDonald's ice cream machine can be fixed much faster now. See, previously, the manufacturer of the McDonald's ice cream machine would require McDonald's to use their certified repairman to fix the ice cream machine, which was a big pain compared to just hiring someone locally to fix the machine, you know? Well, the manufacturer can't do that anymore because a new federal law allowing other tradesmen to fix the machine.

So hopefully this means that the ice cream machine is working more often than not, right in time for winter. Well, all right, guys, that's the rundown for today. Week is already off to a fantastic start. We got more earnings coming out, and we got some economic data coming out this week as well. By the way, if you guys enjoyed today's show, consider sharing it with someone who might enjoy it as well. And if you have like 15 extra seconds, consider giving us a five-star rating on Apple and Spotify. Vote in the Spotify polls, leave us a comment on Spotify. All that engagement really helps us out and it helps other people find the show.

Thank you guys so much for listening. Shout out to Mike and Connor for all the help behind the scenes. And we'll see you guys back here tomorrow. This is the rundown, your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell or hold that security. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult. Respected professionals. Learn more at public.com disclosures.

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