🥊 Elon’s X's Ugly Growth Figures

MARKET UPDATE

Good Morning Investor! Shares of Deckers ($DECK), the parent company of the popular Hoka running brand, stumbled over 5% after M Science released a cautionary note. The warning signaled a noticeable slowdown in the growth of both Hoka and UGG in June. It seems the once high-flying brands might be losing a bit of their stride. Meanwhile, shares of UiPath ($PATH) took a significant hit, plunging over 7% on Tuesday. The drop followed the company's announcement of a restructuring plan that will see 10% of its workforce laid off. UiPath is hitting the reset button, but investors aren't thrilled about the job cuts.

TODAY’S BIG HEADLINES

Elon’s X's Ugly Growth Figures

Microsoft and Occidental’s Largest-Ever Carbon Credit Deal

The $800 Million Non-Alcoholic Beer Brand

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SOCIAL MEDIA

Elon’s X's Ugly Growth Figures🥊

Text-Based Warzone: While Elon Musk’s X (formerly Twitter) is grasping at straws for user growth, Gen Z’s new darling, “noplace,” has rocketed to the top spot on the Apple app store. Meanwhile, Meta ($META) is gearing up to launch ads for their Threads app, adding more fuel to the social media fire.

• Since its launch just over a year ago, Threads now boasts a hefty 175 million monthly active users (MAUs), not far behind X’s 251 million daily active users (DAUs). Looks like Threads is threading its way to the top, stitch by stitch.

X’s Growth Dilemma: According to the Financial Times, Elon Musk’s platform is facing some turbulence. Despite its 251 million DAUs, growth has crawled at a mere 1.6% year-over-year. Meanwhile, Threads has gained a whopping 38 million daily active users in the same period. Awkward!

The Ugly Truth: App analytics company Sensor Tower’s analytics paint a grim picture for X. June 2024 saw a 13% decrease in DAUs year-over-year, and a 20% plunge since October 2022, just before Musk took the reins. To make matters worse, X’s revenues have nosedived by 45% in 2023, thanks to an advertiser exodus sparked by Musk’s controversial antics.

• In a bid to patch things up, Musk and X CEO Linda Yaccarino made a grand appearance at the advertiser conference in Cannes last month. Their mission? To woo back advertisers and stop the financial hemorrhage.

BIG TECH & INDUSTRIALS

Microsoft and Occidental’s Largest-Ever Carbon Credit Deal🤝

The Climate Loophole: Big Tech’s race towards energy-hungry AI is causing a few hiccups in their green ambitions. Microsoft ($MSFT) is no exception, struggling to meet its 2030 carbon-negative goals. But, as the saying goes, where there’s a will, there’s a workaround. On Tuesday, Microsoft announced it’s buying 500,000 carbon credits from Occidental Petroleum ($OXY) over the next six years, marking the largest deal of its kind in the industry. Talk about a green splurge!

• Why this sudden eco-spending spree? Between 2020 and 2023, Microsoft's carbon emissions surged nearly 30%, thanks to the expansion of AI and cloud computing. Necessity, as they say, is the mother of carbon credit purchases.

• Enter Occidental and its burgeoning carbon management unit, 1PointFive. They’ve swooped in to save Microsoft’s eco-reputation (and pocket a tidy sum while they’re at it).

The Nitty-Gritty: Here’s the deal: Microsoft will pay 1PointFive to remove 500,000 metric tons of carbon from the atmosphere using Direct Air Capture (DAC) technology at their still-under-construction DAC plant, Stratos. It’s a bit like paying someone to vacuum your living room, but on a planetary scale.

Could AI Just be a Fad?: Meanwhile, Microsoft investors are sweating bullets over AI’s sustainability. A recent Goldman Sachs report titled “Gen AI: Too Much Spend, Too Little Benefit?” has them particularly jittery. The report argues that the estimated $1 trillion AI infrastructure build-out in the coming years might cost more than any efficiencies AI promises.

• The report also highlights the massive energy grid expansion needed by 2030 to support AI’s growth, with less than half projected to come from renewable sources. Translation? Microsoft may be on a carbon credit shopping spree for the foreseeable future. Who knew saving the planet could be so pricey?

CONSUMER DISCRETIONARIES

The $800 Million Non-Alcoholic Beer Brand🍺

Athletic Money Printing: Athletic Brewing, the non-alcoholic beer sensation, just wrapped up a private funding round, boosting its valuation to a staggering $800 million. It appears the sober movement is picking up serious steam!

• This new valuation, which has doubled in just two years, follows a $50 million infusion led by private equity powerhouse General Atlantic. Athletic Brewing plans to use the cash to expand its retail presence and ramp up production. Cheers to that!

Behind the Brand: Athletic Brewing isn't just playing in the minor leagues anymore; it’s the top non-alcoholic brand by sales in U.S. grocery stores and ranks among the top 20 U.S. breweries by barrels sold. In 2023, the company raked in $90 million in revenue. To put that into perspective, Athletic produced over 258,000 barrels of beer in 2023, a colossal leap from the few hundred barrels they started with in 2018.

• Non-alcoholic beer is currently the fastest-growing segment in the beer market, fueled by the more than 40% of Americans trying to cut back on alcohol. Athletic Brewing commands 19% of the U.S. non-alcoholic beer market and is driving 32% of the category's total growth. That’s some serious clout in the sober suds scene!

MORE NEWS

Additional market-moving events🌎

The McSalad is Dead: McDonald’s ($MCD) has revealed that it killed salad from its menu because customers come to McDonald’s for burgers and fries. (YF)

Ackman Goes Public: Famed activist investor Bill Ackman’s fund, Pershing Square USA announces launch of IPO roadshow. (SA)

German Bitcoin Craze: The German government owns around $2B in bitcoin, it’s freaking out investors. (CNBC)

Tesla Market Share: Tesla's ($TSLA) share of the U.S. EV market dropped below 50% for the first time due in part to increased competition from GM ($GM), Ford ($F), and Hyundai ($HYMTF). (nytimes)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500. Then on the 12th of June we released our next stock selection.

Here’s how the three stocks have performed since:

• Evolution AB: 1,141.00 SEK (📉-13.06%)

• Hims & Hers Health: $20.20 (📈+39.60%)

• PayPal: $58.84 (📉-7.22%)

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