Shares of Vroom Inc. more than double in market debut, and its top executive is hoping more people will give online used car-buying a try amid the… Optimism on President Trump winning re-election may in part be fueling the stock market’s latest surge, says this veteran strategist. Darden Restaurants, a restaurant company that operates multiple casual-dining brands such as Olive Garden and LongHorn Steakhouse has seen its stock decline by about 30% year-to-date, compared to the broader S&P 500 which is down by about 5%, as demand for dining out collapsed following the… (Bloomberg) — As a sense of euphoria sweeps through global equity markets propelling stocks to regain $21 trillion in value from a March low, the asset class is looking increasingly frothy.While stock luminaries who had advocated for a bull zone look like winners in hindsight, the debate goes on about
Vroom Inc.’s top executive is betting that more people will give online used car-buying a try amid the coronavirus pandemic, and Wall Street, at least on Tuesday, seemed to agree.
The pandemic is a tough time for people in the U.S. and elsewhere, but more U.S. residents are considering Vroom, looking for contactless car shopping and delivery, Vroom Chief Executive Paul Hennessy told MarketWatch.
Related:Vroom IPO: 5 things to know about the online used-car seller
“We actually have momentum coming our way,” as people are more likely to consider online car shopping at the moment, besides other advantages that Vroom offers, Hennessy said.
While Vroom hopes to benefit from a broader shift to online shopping accelerated by the pandemic, the economic uncertainty and turmoil in the car industry could render its business model more challenging.
According to Vroom’s prospectus, the company lost $143 million in 2019 and $41.1 million in the first quarter, compared with losses of $85.2 million for 2018 and $27.1 million in the first quarter of 2019.
Hennessy, a former Priceline.com chief executive and chief marketing officer of Booking.com, both owned by Booking Holdings Inc., has led Vroom since 2016.
He declined to give an specific timeline for Vroom’s profitability, but said the company has a “clear line of sight” to profits once it hits a sales pace of 200,000 vehicles, which it expects to reach “in the coming years,” he said. Vroom sold just under 19,000 vehicles last year.
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The company was “humbled” by the successful initial public offering, and after twice upping the IPO price range it knew investor enthusiasm would be there, Hennessy said. Vroom priced the IPO at $22 a piece.
Vroom has a major competitor in Carvana Co., also an online used-car selling platform, which had its IPO in April 2017.
Carvana may have spun its wheels on its IPO day, having ended it down nearly 3%, but it has more than made up for the rocky start and has gained more than 900% from its IPO price of $15.
Hennessy said that there’s room in the market for more online car sellers, given that the current e-commerce penetration is under 1%.
Besides being a contactless option amid a pandemic, customers also praise Vroom’s nationwide car selection, vs. shopping from their local used-car lot; its pricing, which Hennessy called “transparent” and said it avoids haggling, which most customers don’t like; and the shop-from-anywhere aspect of the experience. Vroom, like Carvana, also offers a 7-day return policy on its cars.
While it is true that close competitors are doing similar things, the market is so fragmented that in reality Vroom has thousands of competitors in the dealerships scattered across the U.S., not to mention the very large peer-to-peer market, Hennessy said.
Only a handful of top players share a small slice of the market, he said. “There’s plenty of runway to disrupt it.”
Author: Claudia Assis
Is Trump really fueling the new bull stock market?
The market may have found its latest hot dose of speculation to rally around: the prospects that President Trump will win re-election come November.
Despite the president’s botched response to the COVID-19 pandemic and social unrest now sweeping the nation — and seeing his approval numbers with Americans dip as a result — some corners of Wall Street are starting to wonder if stocks are melting up because Trump may surprise his critics yet again. The logic here is that the shockingly better than expected May jobs report points to a sharp, V-shaped economic recovery ahead of the election.
In turn, that along with a low interest rate backdrop boosts Trump’s standing among Americans (which has taken a major hit) and reduces the likelihood of a Joe Biden presidency. Voters in effect would be voting with their wallets.
As was made clear by Goldman Sachs this week, a Biden presidency would probably mean higher corporate taxes (and household) in 2021 and lower profits. And possibly — even if Goldman strategists just implied this — lower stock prices and general wealth creation.
But it appears investors aren’t even factoring in that possibility of Biden winning, provided you are of the belief the stock market predicts outcomes six months into the future.
Since the jobs report on Friday (that Trump quickly crowed about in a rambling presser), the Nasdaq Composite has powered to fresh highs on the back of continued gains in big cap tech names such as Microsoft and Amazon. A record number of S&P 500 companies are now trading above their 50-day moving averages. Meantime, a total of $21 trillion has been added back to global stock markets since the March lows.
In short, investors are taking on more risk in the face of valuations many would deem frothy given the challenging global economic backdrop.
President Donald Trump speaks during a roundtable discussion with law enforcement officials, Monday, June 8, 2020, at the White House in Washington. (AP Photo/Patrick Semansky)
Prudential Financial chief market strategist Quincy Krosby says investors should watch the options market to see if the Trump re-election trade strengthens moving forward.
“This is interesting because moving into this week as the market moved higher, you started to see call buying on the election more than you would normally see. We started to see a lot of call buying. But it was based on the notion that you could have a Democratic clean sweep. So if we start to see a pullback in those put purchases or the options to hedge on the S&P 500, it would suggest that [thesis],” Krosby explained on Yahoo Finance’s The First Trade.
The Trump re-election thesis is far from perfect, naturally. It may simply be a small component of the new bull market, which up until now has been fueled by expectations for a pro-longed period of low rates and bond-buying from the Federal Reserve.
“The tax rate [expectations] is a big part of it [the rally], but I don’t think it’s the biggest part of the rally here. This is more about the fact that I’ve gotten control over what we are looking at,” explained Belpointe Asset Management chief strategist David Nelson on The First Trade.
Others on the Street aren’t sold on the thesis at all.
“The stock market has decoupled from Trump,” wrote RBC Capital Markets U.S. strategy head Lori Calvasina in a note this week to clients.
Calvasina added, “For the past year, expectations as to whether Trump will win again in November (as tracked by the betting markets) have been moving in sync with S&P 500 performance. But that relationship has broken down a bit in early June, with Trump’s chances (according to the betting markets) falling and the S&P 500 surging. Perhaps the stock market no longer views Trump as necessary for continued gains. Perhaps it is taking comfort in the idea that Harris, not Warren, will be the VP nominee for the Democrats.”
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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Does Covid-19 Present A Good Buying Opportunity For Darden Restaurants’ Stock?
KIEV, UKRAINE – 2018/12/29: In this photo illustration, the Darden Restaurants company logo seen … [+] displayed on a smartphone. (Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)
Darden Restaurants (NYSE: DRI), a restaurant company that operates multiple casual-dining brands such as Olive Garden and LongHorn Steakhouse has seen its stock decline by about 30% year-to-date, compared to the broader S&P 500 which is down by about 5%, as demand for dining out collapsed following the coronavirus outbreak. However, Darden stock has lagged over the last few years as well, falling from around $90 in early 2018 to $85 currently. This decline comes despite the fact that the company’s revenues have grown by about 19% between 2017 and 2019, with net margins also expanding from 6.7% to 8.4% over the same period. Does this make sense? We don’t think it does and believe that Darden’s stock could be attractive at current levels. Our dashboard What Factors Drove -5% Change In Darden Restaurants Stock Between 2017 And Now? provides the key numbers behind our thinking, and we explain more below.
Darden Restaurants Stock Has Declined Since 2018, Despite Solid Improvement To Fundamentals
Darden’s revenues expanded by about 19% between 2017 and 2019, rising from around $7.2 billion to $8.5 billion driven by same-restaurant sales growth at key brands like Olive Garden, LongHorn, and an expanding footprint of restaurants (up about 5%). Net income grew from around $480 million to $713 million, driven by an expansion of net margins from around 6.7% to 8.4% as same-restaurant sales grew and costs were better managed. Earnings growth, on a per-share basis, was still higher, as the company’s share count declined by about 0.6% to 123.5 million. However, the markets have assigned a lower valuation for Darden, with its P/E multiple contracting from around 23x in 2017 to about 19x in 2019 due to higher competition in the casual dining space. The multiple stands at about 15x currently.
TrefisCoronavirus Has Hurt Darden, But It Could Emerge Stronger Post The Crisis
The global spread of coronavirus led to lockdowns in the U.S., significantly impacting the restaurant business, as fewer people dined out. Moreover, the U.S. economy contracted by close to 5% in Q1 in 2020 and is expected to see a sharper decline in Q2, with consumer spending likely to remain sluggish. Darden said that same-restaurant sales declined 47.9% for the fourth quarter to date through May 17. The company’s Q4 ended on May 31. 
That said, we believe the long-term outlook for the company remains intact making the stock relatively attractive at current levels. As the pandemic eventually wanes, there could be pent-up demand for dining out and this could help demand rebound. The company indicated that it would have over two-thirds of its dining rooms open by the end of May. Moreover, many smaller restaurants are unlikely to survive the current crisis and this could help well-capitalized players such as Darden gain market share. The company had roughly $700 million of cash on hand as of mid-May, with access to an additional $750 via a revolving credit facility.
There are other interesting opportunities to play the recovery in the restaurant space post-Covid-19. View our analysis on Restaurant Brands vs. McDonald’s for a detailed comparison of how Restaurant Brands – operator of BugerKing – compares with McDonald’s.
See all Trefis Price Estimates and Download Trefis Data here
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Author: Trefis Team
Signs Stock Rally is Doomed to End After $21 Trillion Rebound
Signs Stock Rally is Doomed to End After $21 Trillion Rebound
(Bloomberg) — As a sense of euphoria sweeps through global equity markets propelling stocks to regain $21 trillion in value from a March low, the asset class is looking increasingly frothy.
While stock luminaries who had advocated for a bull zone look like winners in hindsight, the debate goes on about whether the rally is a bear market bounce, doomed to end. Asia ended the day up but off the session’s high, while equities in Europe slipped in early trade, with the Stoxx Europe 600 falling as much as 1.6%. It’s a similar picture for the U.S. market as S&P 500 futures were down 0.9%.
Global equities have climbed back to levels last seen in February, when the coronavirus began spreading rapidly outside of China. The 42% surge from a March low is the best advance over an equivalent time-frame since 2009 for the MSCI ACWI Index that includes stocks in both the emerging and developed world. The gauge is now trading at 20 times next year’s profits, the most expensive since 2002.
“This rally is a function of government support being thrown behind the economy,” said Paul Sandhu, head of multi-asset quant solutions and client advisory for Asia Pacific at BNP Paribas Asset Management. “There are key risks that could lead to more volatility ahead over the short term, which is why we continue to hedge our portfolios on the downside while still looking for opportunities to add risk for the medium to long term.”
So far bulls are in charge. U.S. stocks just crossed an important psychological milestone of recouping this year’s losses. Asia’s equity benchmark just posted its seventh straight day of gains, the longest streak in more than two years. And euro-area shares are on course for their best monthly gain since 2015.
Factors including a wall of money from the guardians of global economies, the easing of lockdowns and the shockingly positive employment numbers in the U.S. are drawing more buyers to participate, picking up cheaper sectors and adding more fuel to the rally. Yet caution still abounds with some investors increasing hedges for potential volatility ahead.
“The risk of a correction will rise if investors continue to price in a rapid recovery, especially for sectors that are vulnerable to another wave of infections or an escalation of tensions between the U.S. and China,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management.
In another sign that the rally is stretched, global share-price gains in the past month have purely come from multiple expansion as earnings forecasts have barely budged since May. Adding to that is the fact the MSCI world measure has been in overbought territory since the start of the month, with the relative strength gauge on the index reaching the highest since January, which is considered a bearish signal by some.
Meanwhile, speculative excess has surged to the highest in at least 20 years among U.S. options traders, a negative for stocks over the medium term, according to Sundial Capital Research Inc. And a time-honored strategy of hedging stocks with government bonds has become questionable now that bond yields have plummeted thanks to policy easing across the world.
“If everyone is holding stocks just to pass on to the next greater fool, and if the greatest fool is a central bank with infinite liquidity to buy them, then, yes, prices will keep going up,” according to a note from Rabobank on Tuesday.
(Adds market performance in second paragraph)
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