Klarna makes a power move

Tickergeek market update:

Today’s big headlines:

• Klarna makes a power move

• Canva strikes a blow against bitter rival Adobe

• Don’t forget about Home Depot

• H&M surprises the market, shares rally 13%

Klarna makes a power move💥

What’s happening? In the cutthroat world of payment processing, where companies jostle for dominance like seagulls squabbling over the last chip, Klarna, the Swedish “buy-now, pay-later“ FinTech firm, has just thrown a proverbial Swedish meatball into the fray. With a move as bold as an ABBA reunion, they’ve decided to shake things up by embracing open banking in the UK.

Here’s the scoop: Klarna is now offering its customers the option to pay directly from their bank accounts, effectively giving the cold shoulder to both Visa (V) and Mastercard (MA) networks that facilitate debit card payments. This strategic move not only trims down card acceptance costs for Klarna but also leverages real-time bank account data to make more informed lending decisions. It’s a significant leap towards Klarna’s vision of crafting the payments network of the future, or as they might say in Sweden, “en betalningsnätverk för framtiden”.

How bad is this for the duopoly? While it’s crucial not to overstate the impact of this development, it’s worth noting that Klarna’s 18 million British customers could potentially shift to bank account payments, leaving a sizable hole in both companies’ earnings. The real test will be in the coming quarters when we’ll see how this move affects the two payment giants. Coupled with the news of swipe fees being frozen for three to five years, the horizon looks a tad gloomier for them.

Upcoming IPO: Earlier this month, Klarna’s CEO, Sebastian Siemiatkowski, expressed his ambition to mirror Google’s successful IPO “sometime very soon”. As for the company’s valuation, it took a nosedive from $45.6 billion to $6.7 billion in 2022, but recent reports suggest that the company managed to raise funds at a $9.5 billion valuation.

Adding to the buzz, Bloomberg reported last month that Klarna has initiated detailed discussions with investment banks for an IPO that could potentially value it around a whopping $20 billion.

sources: (pymnts), (fortune)

Canva strikes a blow against bitter rival Adobe🥊

What’s happening? In the high-stakes game of online image editing, where companies vie for supremacy like kangaroos in a boxing match, Canva, the Australian heavyweight, has just landed a haymaker on Adobe’s chin. With a userbase of 175 million users, Canva announced on Tuesday morning its plan to acquire Affinity, a design studio platform with a modest three million users. This move would arm Canva with its own set of AI tools, enabling it to flex its muscles in the business-to-business market in similar fashion to a bodybuilder at a beach competition.

The nitty-gritty: The exact value of the acquisition remains a mystery, with Canva’s CEO coyly suggesting it to be in the ballpark of “several hundred million pounds,” comprising both cash and stock.

Canva the serial acquirer? While this isn’t Canva’s first rodeo in the acquisition arena, it is its largest in terms of valuation and employee count, with Affinity bringing 90 employees to the table. Affinity will join a list longer than a kangaroo’s leap including the likes of Flourish, Kaleido, and Pixabay, among others, in Canva’s growing portfolio of acquisitions since its birth in 2013. To put things into perspective, Canva was valued at a whopping $26 billion in 2021 and rakes in over $2.1 billion in annualized revenue.

Should Adobe be breaking a sweat? The spectre of AI seems to have investors biting their nails over Adobe’s future. The sluggish rollout of Firefly, Adobe’s flagship AI product, hasn’t done much to calm these fears. The million-dollar question now is whether Adobe, the creative behemoth, can hold its ground in an increasingly competitive market with eroding barriers to entry.

sources: (arstechnica)

Don’t forget about Home Depot🏘️

What’s happened? In a move that could make Monopoly players green with envy, Home Depot (HD) announced on Thursday morning that it would be acquiring SRS Distribution, a residential specialty trade distribution company, for a cool $18.25 billion.

What does Home Depot get for this hefty price tag? Quite a bit, it turns out. SRS boasts over 760 branches across 47 states in the US, a formidable salesforce of around 2,500 professionals, and a fleet of over 4,000 trucks that could give Optimus Prime a run for his money.

How will this affect Home Depot: The company’s management believes this acquisition will turbocharge their growth with the residential professional customer. It’s also set to expand their total addressable market (TAM) to a staggering one trillion dollars (yes, trillion with a ‘T’), marking an increase of roughly $50 billion.

Stock market reaction: The market reaction to this news was a resounding “meh,” with shares remaining flat on the day of the announcement. However, Home Depot (HD) has been outpacing the market year-to-date, with its shares up over 11% at the time of writing.

sources: (sharecast)

H&M surprises the market, shares rally 13%👕

What happened? In the high-stakes world of fashion, where trends change faster than a chameleon on a rainbow, H&M (STO: HM-B), the world’s second-largest publicly listed fashion retailer, strutted down the earnings runway on Thursday and left analysts in the dust. The company reported earnings that not only beat expectations but sent shares soaring by 13%. Despite this rally, the stock remains as flat as a pancake for the year.

So, what’s the secret sauce behind this earnings surprise? It turns out, H&M’s new Spring collection turned quite a few heads, providing the Swedish group with first-quarter operating profits. This was a pleasant surprise, given the fierce competition from rivals Zara (ITX.MC) and Shein, the fast-fashion retailer hailing from China.

H&M’s earnings results were as follows (in Swedish Krona):

Management’s comments: H&M’s management didn’t stop at the earnings surprise. They also provided forward guidance, setting a 10% operating profit margin goal for the year.

The company’s new CEO, Daniel Erver, who took the reins in January 2024, was quoted as saying, “Where we want to be laser-focused on being a credible fashion brand is for the younger female customer.” He then shifted the spotlight to the company’s primary goal of boosting sales, a departure from the previous priority of maximizing profitability. It seems a new leader can indeed make a fashion statement.

sources: (quartz) (reuters)

Additional market-moving events🌎

• Amazon investing in AI: The leading cloud provider Amazon (AMZN) has invested a further $2.75 billion into AI startup Anthropic, amounting to $4 billion in investments to date.

• SBF sentenced: Founder of the crypto exchange FTX, Sam Bankman-Fried has been sentenced to 25 years in prison for fraud and money laundering.

• The Robinhood credit card: Robinhood (Hood) have launched a new 3% cashback credit card with no annual fees for gold members. Shares of Hood are currently up 61% year-to-date.

• The SEC vs Coinbase: The SEC’s lawsuit against crypto exchange Coinbase, stating that the defendant has been selling unregistered securities has been approved by a federal judge and will continue to trial.

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.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,330.60 SEK (📈+1.40%)

• Hims & Hers Health: $15.74 (📈+10.64%)

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