Walmart, Microsoft, TikTok, CanSino’s Covid-19 Vaccine, HP and Dell

Walmart joins Microsoft’s TikTok bid, a Chinese Covid-19 vaccine vies for an expedited release and surging laptop demand buoys HP and Dell.
(By Sundry Photography)
(By Sundry Photography)
Share on facebook
Share on twitter
Share on linkedin
Share on email

Good morning! Today’s word count is 1,580 words, or an 8-minute read. Let’s get to it:

“The S&P 500 edged higher as data showed that spending and inflation rose in July, pointing to a pickup in American consumer activity,” WSJ writes.

  • S&P 500: $3,487.72
  • Nasdaq: $11,670.63
  • Bitcoin: $11,461.99
  • U.S. 10-Year: 0.714%

Justin Oh’s Quick Read: $SNOW

Snowflake, one of the fastest-growing Silicon Valley cloud companies, will soon be publicly traded under the ticker $SNOW. In short, data infrastructure historically can be very messy and siloed. Snowflake’s platform allows customers to upload and unify all their data in the cloud, enabling the data to be analyzed and shared seamlessly, without required customer maintenance. It even hopes to build a network of unified cloud data that can be shared between Snowflake customers. It’s growing at a breakneck 133 percent pace, but its latest valuation of $12.4 billion values the company at astronomic 50x LTM gross profit. But the valuation is not off-market, since it’s still cheaper than where $DDOG and $FSLY are trading. I like the business, and it could see immense upside with its partnership with Salesforce. But given it competes with solutions offered in-house by Amazon AWS and Microsoft Azure, I’ll be watching from the sidelines for now.

Walmart Joins Microsoft’s Pursuit of TikTok

Microsoft already had a pretty strong case to acquire TikTok’s U.S. operations, and now it’s even more potent. Walmart said Thursday it is joining Microsoft’s bid for the short-form video app after other investors dropped out of the running. A potential agreement, with Microsoft or Oracle winning, could be announced next week.

Why It Matters

Any TikTok deal is going to be expensive.

  • Interested parties and TikTok parent company ByteDance have grappled with a valuation for TikTok’s U.S. operations, as the Trump administration’s potential ban looms.
  • ByteDance is reportedly asking for around $30 billion, but bidders are reluctant to meet that price.
  • Twitter floated an informal bid of $10 billion in recent weeks, though it is rumored to have lost momentum.

Walmart makes sense as a partner.

  • The retail giant was initially working on a bid with Alphabet and SoftBank group and has almost $15 billion in cash on hand, according to MacroTrends.
  • While the Trump administration wants a U.S. tech company to be the leading investor in any TikTok deal, Walmart has close ties to the White House.
  • Walmart CEO Doug McMillon and President Trump have praised each other on several occasions, including Trump commending retail giants for helping with Covid-19 testing efforts.

It’s a step beyond Walmart’s retail roots.

  • Walmart already partners with Microsoft on several tech projects, with the retailer using Microsoft’s cloud computing services.
  • But the retail giant also wants to grow its online market place, sell a broader range of products and create a digital ad network.
  • Walmart has tapped into social media somewhat to advertise, but an ownership stake in TikTok could allow the company to sell ads to suppliers and market its products through the app.

Numbers to Consider

  • Walmart shares rose more than 4 percent Thursday following the news, approaching a $400 billion market capitalization.
  • The company spent the last few years ramping up its online business, paying $3.3 billion to acquire Jet.com in 2016 and spending $16 billion two years later for a controlling stake in Indian e-commerce company Flipkart.

Justin Oh’s Two Cents:

I’ve seen some bold claims that a Walmart ($WMT) acquisition will be transformational because they can create a social e-commerce giant. I have my doubts about this because firstly, we’ve seen how behind-the-times Walmart is on internet strategy. Secondly, I believe e-commerce dominance isn’t about targeted ads as much as owning the nexus of shopping search. Where do people go when they search for something when they want to buy? Amazon and Google, and not Instagram. Finally, could they see more lower-risk ROI from merely buying $5 billion in ads and dominating feeds for an extended period?


Chinese Covid-19 Vaccine Maker in Talks With Countries on Early Approval

Chinese pharmaceutical maker CanSino Biologics is talking with several countries to get emergency approval for its experimental Covid-19 vaccine. The candidate was developed with the Chinese military and has yet to complete large-scale trials, raising questions about the vaccine’s safety and effectiveness.

Why It Matters

It’s a head start.

  • If approved, CanSino’s vaccine would be the first to go into public use internationally outside of clinical trials.
  • CanSino is about to enter final-phase trails in Russia, Pakistan and Saudi Arabia, while in talks with Brazil and Mexico.
  • Initial doses would likely be given to healthcare and other essential workers.
  • China’s military has already approved the vaccine and has administered it to thousands of soldiers.

An untested vaccine poses serious health risks.

  • The effort to go-to-market first highlights the intensity of the vaccine race.
  • Russia “alarmed” health professionals and regulators worldwide this month by announced it had become the first country to register a Covid-19 vaccine, even though it didn’t complete trials or publish test results in a reputable scientific journal.

CanSino’s vaccine has shown promise, though.

  • In early human trials involving smaller groups, CanSino’s candidate has been shown to elicit an immune response with no serious safety concerns.
  • Pierre Morgon, SVP for International Business at CanSino, said getting the vaccine out before clinical trials would broaden the base of knowledge about the drug’s safety and effectiveness.
  • However, vaccines “intended for large numbers of healthy people who don’t have the disease, are virtually never approved for widespread use before the completion of large-scale trials.”

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, has warned against emergency use of a Covid-19 vaccine.

  • He’s also indicated that the U.S. is unlikely to use a Chinese or Russian vaccine because of doubts over their testing procedures.
  • The U.S. has invested billions on manufacturing vaccine candidates for distribution to the public, but only after successful trial results.

Numbers to Consider

  • Morgon says a large country may be able to buy one to two million doses from CanSino.
  • Three of the first six vaccines in final trials globally are Chinese.
  • Even if multiple vaccines are successful, there will be a severe shortage until 2022 when manufacturing capacity can catch up.

Justin Oh’s Two Cents:

Data and news from China have always been suspect because of their authoritarian and perception-sensitive government. We also know they’re more likely to make certain sacrifices of individuals for the good of their whole country. All this to say, we don’t know how real CanSino’s vaccine is, and there’s no way the Western world will substantially adopt a vaccine developed by the Chinese military.


Number Crunch: Surging Laptop Demand Helps HP, Dell Amid Office-Spending Slump

“Hot demand for laptops as people work and learn remotely helped HP and Dell Technologies soften the hit from a slowdown in office-equipment spending during the coronavirus pandemic.”

  1. On Thursday, HP said laptop sales increased 30 percent in the July quarter from a year ago, limiting its revenue drop to 2 percent. It reported $14.29 billion in sales, beating Wall Street’s projection of $13.34 billion.
  2. Dell’s consumer revenue rose 18 percent for the business that includes computer sales, while its commercial-client business dropped 11 percent. Similar to HP, overall revenue sank 3 percent to $22.7 billion.
  3. Both stocks saw their shares rise 2 percent in after-hours trading following the results. HP says its printing business, arguably its most lucrative, saw sales decrease to $3.93 billion. The shipment of industrial printers declined 46.8 percent in the most recent quarter.
  4. HP’s profit for the quarter ending July 31 dropped 38 percent to $734 million. Dell’s profit fell to $1.05 billion.
  5. HP expects to end the fiscal year with a profit as high as $1.87 per share.

Justin Oh’s Two Cents:

Dell ($DELL) looks interesting as a cash flow and value investment at first glance. It doesn’t offer much growth, but they do have exposure to cloud IT trends, and half of their profits are actually from higher-margin services on their hardware and software. At current levels, they even have an over 16 percent free cash flow yield. As long as you believe they keep their market share and management spends cash flow wisely, this stock could offer a base-level 10-15 percent returns plus any upside growth you may think $DELL can get from cloud businesses like VMware. 


Worth Your Time

The Hurt Gets Worse: Like most industries, the pandemic has been particularly hard on media. Ad sales are plummeting, and at a critical moment for the industry, things might get worse. Apple is rolling out new privacy settings in its operating system update limiting digital publishers’ abilities to deliver personalized ads, which in turn could deal a significant blow to digital businesses predicated on third-party advertising. (WALL STREET JOURNAL)

Slicing The Pie: In a surprise move, “Billionaire Masayoshi Son’s SoftBank Group Corp. said it would sell a $14 billion chunk of its Japanese mobile unit, adding to a string of asset sales aimed at bolstering the company’s debt-laden balance sheet. The sale will lower its stake in the telecom unit, known as SoftBank Corp., ending its position as majority shareholder. It will remain the largest shareholder of the company, which is one of Japan’s biggest mobile-phone providers.” (WALL STREET JOURNAL)


The U.S. government is spending $750 million to purchase 150 million $5 rapid tests Abbott Labs, nearly all of its stock for this year.

“TikTok’s software engineers are drafting contingency plans to shut down the U.S operations of the popular video app if talks to sell it to a U.S. buyer fall through.”

Japanese Prime Minister Shinzo Abe, the country’s longest-serving premier, is resigning to undergo treatment for a chronic illness.

Tesla bulls are betting big on the electric vehicle maker as its 5-for-1 stock split takes effect Monday.

“U.S. consumer spending likely rose in July as the labor market continued to add jobs, although economists caution that last month’s expiration of $600 in enhanced weekly unemployment benefits could dent household spending ahead.”

“Elon Musk said on Thursday that Tesla’s factory in Nevada was a target of a “serious” cybersecurity attack, confirming a media report that claimed an employee of the company helped the FBI thwart the attack.”
“Regulators signaled they would take a neutral stance on a new London license for Uber, offering a route for the ride-hailing firm to continue to operate in its biggest European market.”

A Couple Cents Featured

Is it worth buying Palantir stock when it goes public, or are there better bets out there? Justin Oh gives his Two Cents.
Share on facebook
Share on twitter
Share on linkedin
Share on email


Your email address will not be published. Required fields are marked *

Related Posts