This is an email from Buy/Sell/Hold, a newsletter by Marker.
Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker make sense of the most important developments in business right now — and give them a Buy for clever moves or positive trends, a Sell for mistakes or missed opportunities, or a Hold if they’re noteworthy but too early to call.
🔋Battery Day’s Big Takeaway 🔋
The Buy/Sell/Hold Analysis
Elon Musk’s influence over legacy industry has almost no modern precedent. Like Jeff Bezos’ shakeup of retail, automobiles in the 2020s and 2030s seem to be shaping up as Musk alone has reimagined them. Virtually every automaker, large or small, is piling into Musk’s electric world, with claims they will grab a significant slice of it.
Musk’s latest jerk of the wheel came this week with “Battery Day,” a long-teased event at which the Tesla CEO unveiled a sweeping, top-to-bottom recontemplation of the lithium-ion battery and how it is manufactured. The result, he said, would be a 56% cut in battery costs, finally opening up the mass market with $25,000 electric vehicles.
The market sent Tesla’s shares down more than 6%, and disappointed Wall Street analysts who said the presentation was light on details. But investors and analysts will need to catch up: Many battery experts themselves are treating what Musk described as a fait accompli.
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In interviews, battery experts told me that Musk seemed to be understating the timeline — it looks closer to 2030 than his claim of 2023. But what he described, arriving late or not, is the new bar for both legacy automakers and startups, seeming to eclipse almost everything in the commercial pipeline. “Others have elements of what he is doing, but no one is doing it all,” said Gene Berdichevsky, CEO of Sila Nanotechnologies, a Silicon Valley-based battery startup and a key early Tesla employee.
On Thursday, two days after the event, Venkat Viswanathan, a professor at Carnegie Mellon, said that he still had not fully digested all that Musk presented — and that it could require a phalanx of top battery experts to adequately analyze.
And what is that new bar? James Frith, head of energy storage at BloombergNEF, said that by his calculations, Musk was describing a new battery cost of about $56 per kWh. That is down from an average cost today of around $150 per kWh. (Tesla’s are currently lower, at $130.) He gets there by reconfiguring both electrodes, eliminating whole stages of manufacture, intensifying automation, mining metals more efficiently, tapering the length of supply lines, removing hundreds of parts from the EV, molding large sections of the vehicle as a single piece, and more.
As we have reported, the very leading edge of EV batteries is an attempt to commercialize metallic lithium or silicon anodes, which would allow vehicles to travel much further and cost much less. But Musk’s proposals may reduce the need for these exotic advances.
I asked Gene Berdichevsky, the Sila Nano CEO, what would happen if his own silicon anodes — when they are ready for the market — were added to Musk’s proposed battery transformation. “If he gets to $60, we can get well below $50 — maybe even $40,” he said. “Fifty dollars would be just transformational.”
— Steve LeVine
⚡ Lightning Round ⚡
⚡ The stationary bike wars just got a lot more confusing. We noted last week how crowded the home workout market was getting. Then it looked like it was about to get even more cluttered: On Tuesday, CNN reported that Amazon was selling a new $499 Peloton-knockoff called the Prime Bike, seemingly undercutting Peloton’s plans to drop the price of its own bike. The next day, Amazon rushed to distance itself from the bike and pulled down its product page, even though manufacturer Echelon had claimed they’d developed the bike in collaboration with the e-commerce giant. Echelon is now rebranding the bike so they can sell it on Amazon again, without the Prime branding. Maybe they missed a memo from Amazon to undercut Peloton, but do it sneakily. Hold.
⚡ Nike’s sales rebound from pandemic lows. In the quarter ending August 31, the sneaker and sportswear company’s revenue dropped just 1% from the same period last year, a feat driven by an 82% increase in digital revenue and continued growth in international markets — particularly in China, where Nike mastered the pandemic survival playbook, and where the new Air Jordans will be released three weeks before they’re available in the U.S. Buy.
⚡Ralph Lauren is laying off 15% of its global workforce. The pain inflicted on fashion brands continues to play out, as Bloomberg reported this week that Ralph Lauren would be laying off 3,700 of its employees in order to shift to a more heavily e-commerce-focused strategy. It’s a stark reminder that while some businesses have managed to adapt to the new realities of the still-raging pandemic, many others are having to make painful adjustments in order to survive, and white-collar workers are on the chopping block. Sell.
⚡ Bourbon prices are spiraling out of control. An investigation by Paste magazine found that a mix of social media-fueled hype and opportunistic price-gouging has inflated the prices of various bourbon brands to ridiculous levels, to the point that a Forbes article declared a 300% markup on a $70 bottle of bourbon a “bargain.” Nearly all those inflated margins are going to retailers, resellers, and package stores, leaving distillers frustrated about their inability to control their products’ retail prices, or ramp up supply to respond to a surge in demand (unlike hand sanitizer, bourbon needs to be aged for years). At a time when we feel the need for bourbon the most, this feels like a travesty. Sell.
📈 The Number: $1.25 Billion
It’s been a transformative year for Robinhood, the too-easy-to-use stock-trading app that we profiled in June. Back then, despite an embarrassing string of outages on important trading days, the company was emerging as a surprising pandemic-era star. It had just raised a fresh round of capital, and was drawing the attention of bored and locked-down young professionals looking for a distraction in the absence of sports and gambling. Since then, Robinhood’s profile has continued to rise — and notwithstanding its association with brutal losses by market-newbie users, its valuation has risen too. The company recently raised $660 million, bringing its total 2020 funding to $1.25 billion — and raising its valuationto about $11.7 billion. Some observers have argued that an influx of amateur investors are creating a “Robinhood effect” that’s influencing the stock market as a whole. That’s a highly debatable proposition, but the perception has never been stronger: Robinhood’s backers are betting that it has become a cultural fixture.
— Rob Walker
📖 Marker’s Read of the Week: From Gap to business card maker Vistaprint, mask-making has become the one solution to every business’s problems. But what happens when the demand dries up?
🔎 Marker’s New Fixation 🔎
We appear to have reached a new phase in social distancing in which you start seeing ads for “weighted anti-anxiety stuffed animals for adults.” Yes, they’re real, and they’re called Moon Pals: large stuffed pastel bunnies, filled with 5.5 pounds of plastic beads that are “designed to recall the sensation of holding a small child or pet to facilitate ultimate stress relief,” according to the company website. One major selling point: they have long weighted arms, so they can give you a hug. The $85 toy, launched in June, is the latest venture from entrepreneur John Fiorentino, who previously raised a total of about $6 million on Kickstarter to make other bead-filled products: the weighted Gravity Blanket and the Moon Pod bean bag chair. With more than half of Americans reporting a toll on mental health during the pandemic, helping us cope has become big business: Meditation apps Calm and Headspace have spent tens of millions on commercials since March and Pepsi recently announced a new sleep beverage. Between our frayed nerves and fewer gatherings with friends and family, it seems like we could all use a hug right now, even if it’s just from a pink rabbit filled with beads.
— Bobbie Gossage, Deputy Editor, Marker
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