Happy Friday and Memorial Day Weekend!
Stocks lack momentum despite Nvidia’s blowout earnings fueled by robust AI demand. Live Nation & Ticketmaster sued for monopolistic behavior. BARK Air begins offering “White Paw Service” for dogs. In a historic shift, NCAA agrees that college athletes can be paid. Have a safe and happy Memorial Day weekend!
#1 – Weekly Market Recap – Stocks struggled to generate positive momentum during the pre-holiday trading week.
The Dow Jones declined 605 points on Thursday, or about 1.5%, for its worst day in two months. Market breadth was poor for the S&P 500 and the Nasdaq yesterday with 449 S&P 500 stocks and 83% of the Nasdaq finishing down on the day.
Through Thursday, the NASDAQ advanced +0.4%, the S&P 500 faded -0.7%, and the Dow Jones fell -2.3%.
Early trading Friday morning, however, showed signs of investor willingness to buy stocks before the holiday weekend.
Trading volume was light with the lowest 4-day trading volume for S&P 500 contracts since August 2021. Tuesday’s volume was the sixth lowest since 2020, with all other occurrences around a US holiday.
On a positive note, Nvidia’s earnings release Wednesday afternoon provided investors with a sense that the AI revolution is here and now. Nvidia (NVDA) is up 110% in 2024… on top of +238% return last year. Nvidia also announced a 10-1 stock split.
#2 – AI Earnings Wrap –
Nvidia’s 1st Quarter earnings release on Wednesday appeared to further investors’ enthusiasm for Alternative Intelligence (AI) stocks.
Nvidia is viewed to be at the epicenter of the AI wave as the designer of computer chips and software enabling accelerated AI computing capabilities. As shown in the chart below, Nvidia stock is up 110% in 2024 and 625% since 2023…significantly outpacing the S&P 500 index.
The astounding growth over the past 2 years has made Nvidia the third largest company in the US (behind Microsoft and Apple). It has also made Jensen Huang, Nvidia’s CEO, one of the richest people in the world with a net worth of over $90 billion.
Many investors view Nvidia’s quarterly earnings releases as a proxy for the AI revolution. This quarter’s 262% sales growth and 461% earnings growth, combined with management’s updated product roadmap, supported investors position that the AI phenomenon is in full swing,
As stated succinctly by Nvidia CEO Jensen Huang, “This is the beginning of a new industrial revolution…This is really exciting.”
Of course, Nvidia is not the only company growing as a result of AI. As shown in the chart above, the Bloomberg AI index is up 120% since 2023 and 23% year-to-date. Certainly not on the same level of returns as Nvidia, but well above the S&P 500 index over the same period.
Source: Investors.com
#3 – Musical Monopoly? – If you’ve ever been frustrated by big fees for concerts and other live events, you’re not alone.
The US Justice Department announced that they are suing Live Nation Entertainment (LYV), the company that owns Ticketmaster, for allegedly monopolizing the live events industry.
Live Nation and Ticketmaster were allowed to merge in 2010 with the condition that the two companies wouldn’t combine the promotion services and ticketing platform to hurt consumers.
The Justice Department previously alleged that Live Nation Entertainment violated this promise in 2019. The issue was reignited in 2022 when tickets for Taylor Swift’s ‘Eras Tour’ were both difficult to acquire and exorbitantly expensive.
The “Eras Tour” ticketing issue focused public criticism on the nation’s largest concert promoter. Subsequent congressional hearings led to the most recent allegations that the core business model is monopolistic.
As stated in the Department of Justice suit:
“Live Nation-Ticketmaster’s self-reinforcing business model that captures fees and revenue from concert fans and sponsorship, uses that revenue to lock up artists to exclusive promotion deals, and then uses its powerful cache of live content to sign venues into long term exclusive ticketing deals, thereby starting the cycle all over again. Live Nation-Ticketmaster’s anticompetitive conduct creates even more barriers for rivals to compete on the merits.”
The lawsuit highlights key issues that the Justice Department has identified as issues, including:
- Threat and retaliation against ticketing competitors and venues that work with ticketing competitors.
- Blocking venues from using multiple ticketers through exclusionary contracts.
- Barring artists from venue usage unless said artist works with Ticketmaster.
Hopefully, those summer concert tickets you ‘ve been waiting to buy will soon go down in price!
Source: Justice Department
Source: NBC News
#4 – Memorial Day – This weekend, we celebrate Memorial Day by honoring and remembering those who died in service to our country.
Originally called Decoration Day, stemming from the early tradition of decorating graves with flowers, wreaths and flags. Memorial Day was first widely observed on May 30,1868, at Arlington National Cemetery to commemorate the sacrifices of Civil War soldiers.
The first National Commemoration speech was given by former Union General, and Ohio Congressman, James Garfield. After the speech, 5,000 participants helped decorate the graves of the nearly 20,000 Union and Confederate soldiers buried at Arlington National Cemetery.
This first National event galvanized state efforts to honor and remember fallen soldiers. New York became the first state to designate Memorial Day as a legal holiday in 1873.
After World War I, it was more broadly established as a national holiday and became an occasion to honor those who died in all of America’s wars.
In 1971, Congress passed the Uniform Monday Holiday Act, which established that Memorial Day would be commemorated on the last Monday of May.
Each year Memorial Day is still commemorated at Arlington National Cemetery, with a small American flag placed on the now more than 400,000 graves. Traditionally, the President or Vice President also lays a wreath at the Tomb of the Unknown Soldier.
Source: PBS
#5 – White Paw Service – This week BARK Air, a new airline catering specifically to dogs before humans, made its inaugural flight.
BARK, a pet company founded 2011, announced the new aviation experience for dogs and their humans. BARK Air, the new airline moniker, is providing dogs (and their humans) a first-class travel experience by flying on spacious and comfortable Gulfstream G5 jets.
The United Kingdom-based public charter service allows dogs to travel with their humans in a plush aircraft rather than in a crate in aircraft cargo. The company said it launched the air travel experience to make long-distance travel more comfortable for dogs that don’t fit in a cute little carrier under the seat in front of you.
BARK Air is offering “white paw service” to its canine customers. According to the company, like first-class human passengers, dogs on board will be offered BARK-branded treats, a beverage of their choice, noise-canceling earmuffs for skittish flyers, as well as other dog-friendly surprises.
Before you book your next flight for your dog, know that the “white paw” service does not come cheap. A one-way ticket from New York to Los Angeles for a dog plus one human currently costs $6,000. Families can purchase additional passes, however children under 18 are not allowed on flights. There are no size or breed restrictions.
The company acknowledges the high cost of the service and hopes that as demand increases, the prices will become more “dogfordable”.
Source: CBS News
Source: BARK Air
Bonus – NCAA Settlement – Regular readers will know that we don’t often add a bonus story to the Friday 5. However, the story that was released last night is simply too big not to mention.
In full disclosure, this is a story that I have been following closely as my youngest daughter is graduating high school and will be playing D1 soccer this fall.
In short, after decades of the NCAA insisting that college athletes were amateurs, and therefore not eligible to be paid for their performance, the NCAA and D1 schools have agreed to a revenue sharing agreement between schools and D1 athletes.
Under the settlement, which still has to be approved, $2.8 billion in back damages will be paid to approximately 14,000 athletes going back to 2016. The NCAA will be responsible for contributing 40% of the total while colleges will pay the remaining 60%.
The amount each school is required to contribute will be based on their conference. For instance, the power-conference schools (i.e., Big 10, ACC, SEC, Pac-10, Big 12) will be paying roughly 24% of the amount, much of it coming from TV revenue rights.
Going forward, approximately $15 billion is expected to be disbursed to college athletes over the next 10 years.
The revenue sharing plan could be implemented as soon as fall of 2025, and there are numerous details yet to be worked through. However, the current basic arrangement is that D1 schools will share as much as $22 million per year with its athletes (this number represents approximately 22% of the average power conference revenues).
This will be a sizeable dollar amount for many schools as it totals approximately $200 – $300 million of revenue sharing being paid to college athletes over the 10-year term.
This arrangement could be particularly difficult for non-power schools as the average revenue for many smaller D1 programs is not significantly above the revenue sharing requirement.
Make no mistake, the agreement announced last night will lead to the most dramatic shift in college athletics in decades. Whether or not this agreement is a positive or negative for the “average” D1 college athlete is yet to be seen, but it will certainly be fascinating to watch it unfold!
Source: Yahoo Sports
Have a great Memorial Day weekend!
Denver & the DSGCA Team