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Zoom Will Outlive the Pandemic
Its initial success during the early days of the coronavirus has proved to be more than just a fluke.
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.
🖥️ Zoom is here to stay 🖥️
The Buy/Sell/Hold Analysis
As the pandemic’s impact on the economy first struck in March, there was some musing that perhaps the famous FAANG stocks (Facebook/Amazon/Apple/Netflix/Google) should be swapped with lockdown-relevant replacements like Domino’s and Walmart. But with the tech giants proving perfectly resilient, maybe it’s better to simply add one newcomer: Zoom. Hello, FAANGZ.
It’s becoming increasingly clear that Zoom will be a feature of the post-pandemic world — the coronavirus success story that rose to meet its hype. When I first wrote about Zoom back in March, it looked like the ultimate example of a company experiencing the pandemic as a branding event, going from niche business software to household name in a matter of weeks.
Many of us hoped the Zoom moment would prove fleeting, and Zoom itself admitted that it was “too early to tell” if its pandemic-fueled user spike had legs. And while the company leaned into the growth opportunity — making the product cheaper and more accessible to a mainstream audience it hadn’t previously prioritized — early results were mixed. Zoom was criticized for alarmingly lax security and for an overall lackluster user experience, among other things. It seemed vulnerable, perhaps a mere fad to be snuffed out by massive competitors like Google and Microsoft, or nimble newcomers.
But it turns out that Zoom just works. Wall Street had high expectations, and the company completely blew them away, announcing a fivefold revenue jump over last year. Analysts predicted $131 million in profits; Zoom reported $181 million. At a time when many public companies are declining to offer any earnings guidance, Zoom raised its full-year outlook for the second time since the pandemic kicked in. (At the start of 2020 it was predicting under $1 billion in sales; it’s now suggesting at least $2.37 billion.)
Dig a bit deeper and those results are even more compelling. Companies with 10 or fewer employees and individuals now account for 36% of Zoom’s revenue. Clearly Zoom isn’t just a stopgap substitute for big-company office confabs or conferences. For a good chunk of the population, it’s become an everyday tool — an upgrade over a phone call, a new way to go on a date, or force you to “attend” a wedding or conference you would have skipped.
Indeed, Zoom’s popularity is already inspiring a new breed of startups promising to “build a better Zoom” (rather than a better Google Meet or Microsoft Teams). Zoom already seems to be turning into a default noun and verb — the Kleenex or Xerox of video meetings. And that’s a fate most brands would envy.
— Rob Walker
⚡ Lightning Round ⚡
⚡ Bumble Plans to Go Public. The dating app is reportedly prepping an IPO for early next year at a valuation of $6 billion to $8 billion, according to Bloomberg. Bumble was launched by Tinder co-founder Whitney Wolfe Herd in 2014 and differentiated itself among dating apps by only allowing women to send first messages to men; it’s since gone on to offer career networking and friendship matching services. Online dating has reportedly spiked during the pandemic, but Bumble still remains an imitable platform in a saturated market dominated by competitor Match Group, whose dating brands (including Tinder and Hinge) reportedly control 60% of the market. Sell.
⚡ Michael Jordan Joins DraftKings. The fantasy sports betting giant saw its shares jump 8% after the company announced that NBA Hall of Famer Michael Jordan would join the company as a special advisor to the board of directors. The Boston-based company went public in April via a SPAC, and has managed to survive through a pandemic without much traditional sports by adding esports to its mix and riding the hype train driven by amateur investors on trading platforms like Robinhood. And what better way to turbocharge the hype than by announcing that one of sports’ most iconic figures — recently reintroduced to the public through an acclaimed documentary series co-produced by its subject — is joining the team? Buy.
⚡ Patreon Hits a $1.2 Billion Valuation. The platform that allows audiences to directly support creators announced on Tuesday that it had raised $90 million dollars from investors, nearly doubling its previous valuation of $660 million in 2019. According to the Wall Street Journal, the battering of the in-person entertainment industry has driven a surge in memberships, as talent pivoted online for new sources of income. Although the seven-year-old platform now boasts more than 200,000 creators and 6 million fans, Patreon is still unprofitable, and it remains unclear how many of its creators earn a living wage from memberships. Hold.
⚡ Target Doubles Down on Grocery. From meatless burgers to jalapeno avocado hummus, the big-box chain is adding hundreds of new food and beverage products to its Good & Gather private label brand this month. Target saw a 20% jump in Q2 year-over-year grocery sales and a 30% jump in grocery sales under its in-store brands specifically, according to CNBC. Groceries contribute to 20% of Target’s overall revenue — compared to 56% for Walmart — and with DTC-inspired branding as its competitive advantage over its larger rival, food and beverage is a category with room to grow. Buy.
📈 The Number: 120
The number of new brick-and-mortar stores Lego plans to open in 2020, according to BBC.
In the wake of a pandemic that has only underscored the rise of digital retail, and that has shrouded shopping in the physical world with a vague sense of risk, opening 120 new stores sounds like an aggressively optimistic strategy, if not an outright peculiar one. But Lego CEO Niels Christiansen insists that only real-life stores (Lego already has 612 globally) can deliver the necessary “brand experience,” like seeing spectacular Lego builds up close, and looking over the latest kits. “When our stores have reopened after lockdown, there have been queues,” he told BBC. Lego’s online sales have been up, too. The company says it has been attracting more adult customers in the pandemic era, and recently reported an overall sales rise of 14%. Still, the re-upped commitment to in-person shopping can be read as a vote of confidence that the “experiential retail” ideas so trendy before the arrival of Covid-19 may have a future, after all. Notably, 80 of Lego’s new store openings are planned in China, where a version of “normal” that includes going out and shopping has already settled in. Maybe brick and mortar still has a future — beyond just Lego bricks, that is.
— Rob Walker
📖 Marker’s Read of the Week: The recovery of airlines, Starbucks, and a hidden trillion-dollar economy hinges on one thing: the white-collar worker’s return to the office.
🔎 Marker’s New Fixation 🔎
If you’ve ever felt torn between your love of landscape art and your love of market data, there’s a way to become whole again. Stoxart offers original artwork based on real stock performance charts pulled from trading apps like Robinhood and sites like YahooFinance. The prints transform the market performance of companies like Disney and Spotify into colorful mountainscapes, and contain “symbols and hidden messages that are relevant to the company.” It’s an aesthetically pleasing way to get your boom-and-bust fix without pumping any additional blue light into your eyes — or prompting yet another frantic trade.
— Jean-Luc Bouchard, Senior Platform Editor, Marker
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