The Rundown - Rivian Snags $5B Investment from Volkswagen, Starbucks Gets Into Energy Drinks

Episode Date: June 26, 2024

Stock market update for June 26, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zad Admani, and today is Wednesday, June 26. In today's episode, we tell you about a partnership between Volkswagen and Rivian that might have just saved the company. Then Starbucks is getting into the energy drink game, but will it be enough to turn around the stock? And then stick around to the end of the show to find out why YouTube might be the real winner of the streaming wars.

All right, let's go. Stock saw a nice bounce back on Tuesday. Both the S&P and NASDAQ finished higher for the day, carried by a rally in tech stocks. Nvidia carried the day yesterday, jumping more than 6% and putting an end to the three-day slide going back to last week. It's kind of crazy that we're seeing this kind of volatility for a company worth $3 trillion. I mean, a 6% move is pretty wild for a company that size. Now, I know all you crypto traders are laughing at the thought of a 6% move being kind of why. But I mean, Nvidia is casually adding or losing $200 plus billion in market cap every other day,

which is like the equivalent of a Disney. You don't really see that very often. Let's run through some headlines. Starting with Rivian. The EV Maker is getting a $5 billion investment from German automaker Volkswagen. Now, this investment is going to be part of an overall partnership between the two companies. Rivian is going to help Volkswagen by improving their software because I guess Volkswagen cars have bad software. Now, I've never owned a Volkswagen car, so I don't know how bad the software is, because I don't know why every company just doesn't go with Apple CarPlay and not worry about the software.

And as for Rivian, they're getting a ton of cash, which they kind of need right now. Things haven't been so great for Rivian lately. The overall EV market is down, and demand for EVs just hasn't been strong. And while Rivian makes pretty cool cars, their business hasn't been great. In fact, the company has never turned a profit in their history, despite making $70,000 cars. And last year, the company lost $5.4 billion. So this investment from Volkswagen could be a lifesaver for Rivian. Plus now Rivian has a partner that has like what, 80, 90 plus years of experience in manufacturing cars.

So maybe they can give Rivian some tips on how to improve their manufacturing and reduce costs. Now, as far as the details of this investment, Rivian's not just getting a $5 billion overnight wire from Volkswagen. Volkswagen is starting off by investing $1 billion today with plans to invest $1 billion more in 2025. and 2026. And then another $2 billion is going to be going into a joint venture between the two companies to create the software that I mentioned earlier. I would say that Rivian's probably the bigger winner in this deal. I mean, honestly, they kind of needed this because things were looking pretty bleak. So hopefully with this investment, they can kind of stick around and survive.

Because like I said, the EV market and demand is just not there right now. And no one really knows if it's going to come back anytime soon. This was a huge side of relief for Rivian investors, though. As in market closed yesterday, Rivian stock was down more than 40% this year and down more than 90% since the peak back in 2021. Well, after this news was announced, the stock spiked more than 40% in the pre-market. I mean, the stock has a long way to go before it gets back to its peak, but it's a nice little bounce back here. Let's shift gears and talk about Starbucks. They're getting into the energy drink game. They're launching an energy drink called iced energy to its menu, and it's going to have more than 200 milligrams of caffeine in it. Now, to give you some perspective

here, Red Bull has a little more than 100 milligrams of caffeine. So it's going to have more caffeine than a Red Bull and more caffeine than most of the Starbucks coffee options, but it's going to have less than Panera's charged lemonade, which had 400 milligrams of caffeine. You guys remember the charged lemonade challenge from last year? Yeah, that was something. Now, I can see why Starbucks is trying to get into the energy drink market. It's expected to be over a $200 billion market. It's been dominated by players like Red Bull and Monster Energy, which is one of the best performing stocks of all time. You've also had some new players in this industry like Celsius. Starbucks business has been struggling lately. The growth has slowed down significantly, and

The stock is down 15% this year. So maybe getting into the energy drink business is going to help kickstart that growth. I was trying to make a caffeine joke somewhere there, but couldn't land the plane. Let's talk about some stocks making moves today. Starting with FedEx. Shares of the company are rising after they beat on both earnings and revenue estimates. FedEx was one of the few companies that had yet to report earnings and investors liked what they saw. Revenues were up and while profits were down slightly compared to last year, they did beat Wall Street estimates.

FedEx has announced they're going to. going to be cutting $4 billion in costs by the end of 2025. And they're in the middle of that cost cutting plan right now. In fact, they've said they've already cut $1.8 billion in costs in fiscal 2024. And as part of this turnaround plan, FedEx is also thinking about spinning off their freight business, which could result in a huge cash windfall for the company, and they would allow it to invest into their package delivery business. The company's expected to make a decision on selling their freight business by the end of this year. So all that has got investors pretty hype, and the stock jumped more than 15% in reaction to this news.

On the flip side of stock not doing so great this morning is Southwest Airlines. The stock is down after they announced that they're cutting their Q2 revenue forecasts. Southwest says that they're dealing with complexities and adapting their revenue management to current booking patterns in this dynamic environment. That's a quote from them. I don't really know what it means. I think they're trying to say that they're dealing with less demand, but yeah, they're trying to put a little corporate spin on it.

Oh, and to make matters worse, Southwest also reported that they expect their unit costs to rise by 7.5%. Previously, they thought that their costs weren't going to rise at all. So their costs are rising and their revenues are dropping. Yeah, not a good combo there. As a result, the stock is down more than 4% in the pre-market. I feel like ever since they had that debacle back in like December of 2022, Southwest just really hasn't been the same. The vibes are different. The vibes are really bad right now. Let's wrap the show with the fun fact. YouTube makes up 10% of all viewerships on TV. That's according to a report, from Nielsen.

So according to this report, more people are watching YouTube on their TVs than any streaming app, including Netflix. Netflix comes in second place at 7.6% of viewership. Now, just to clarify, that 10% viewership number for YouTube is just for TVs. It doesn't include computers or phones, which would make the viewership numbers a lot higher. It's just TVs. Because every TV these days is a smart TV that has apps, so you have YouTube and all these streaming apps on there.

People are choosing to watch YouTube over other streaming apps. And maybe that shouldn't be that surprising because YouTube is free to watch while streaming services cost money. But I think the bigger takeaway here is that YouTube viewership on TV continues to grow. And if more and more people are watching YouTube, that leaves less time to watch other streaming services. Even I find myself watching a lot more YouTube on my TV than my phone or my computer these days. So, you know, we've been talking about the streaming awards for years now and how Netflix is the winner. Maybe the real winner just might end up being YouTube. By the way, YouTube is not paying me to say this, but YouTube premium,

Totally worth it. I mean, highly recommended. I haven't seen an ad on YouTube in years now, and it's incredible. I don't think I could go back. I would rather cancel Netflix than cancel YouTube premium. Like, that's not even a hot take. Well, all right, guys, that's a rundown for today. Hope you guys enjoyed today's episode. If you have like eight seconds, tap whatever podcast player you're listening to listen to this episode on and give the show a five-star rating. And if you're listening to listen to this show on Apple, consider writing a review. That engagement really does help the show out. Thank you guys again for listening. Shout out to Connor and Mike 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. Respective professionals.

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