The Death of Cash? - Weekly Market Update Aug 7,2020
“The End Of Cash?”
The payment processing company Square released their earnings this week and reported a 64% surge in revenue for Q2, mainly driven by their money-sending app, Square Cash. The stock is up about 17% on the week. Paypal also reported their strongest earnings ever as digital payments surged (Paypal owns another popular money-sending app called Venmo).
There are a few reasons why digital payments are soaring. First, there’s almost no opportunity to actually go to a store and pay cash because so many businesses have been pushed online which means people need to use digital payments. Second, lots of people are nervous about touching contaminated bills and contracting coronavirus.
The death of cash has been coming for a while now. First, credit cards hurt cash, and now digital and touchless payments are gaining steam. It will be interesting to see when the first truly cashless society emerges.
In addition to Square, lots of other companies released their Q2 earnings this week. Let’s take a look at a few of them as well as other relevant business updates.
“Donald Trump takes on Tiktok”
Donald Trump has been relentless in his attacks against large social media companies. First, it was Twitter, who has been the most vocal on censoring tweets that are deemed as misinformation. Then it was Facebook, who started taking a stronger stance after receiving significant backlash. Now, Tiktok is in the hot seat.
➢ Tiktok has been under scrutiny for potentially sending American users’ data to the Chinese government and has already been banned in other countries. Donald Trump has toyed with banning the app but now appears to be getting more serious.
There’s just one problem: Tiktok is wildly popular, especially among younger generations...and there is an election just three months away. Banning the app altogether could prove fatal for his re-election chances.
One solution that has surfaced might be for the tech giant Microsoft to purchase the company’s U.S. operations, instead of banning the app. Trump is a fan of this deal but only if the U.S. government gets “a large sum of money” for brokering the deal.
Disney’s Earnings Drop
Disney reported disappointing earnings this week, with most of their segments performing poorly. Disney is an interesting company because they’re so diversified. The Disney ecosystem consists of:
1. Parks and Experiences - sales plunged 85%
2. Studio Entertainment - sales sank 55%
3. TV Channels - sales dropped 2%
4. Streaming - sales jumped 2%
In general, this strategy works well because it provides Disney with lots of ways to make money. However, in the coronavirus economy, almost all of their business sectors were shut down. Disney’s parks, resorts, and cruises were closed for the entire quarter but Disney still has to pay for all of the overhead. The only winner was Disney+, which now has about 60 million subscribers.
Tech Earnings soar
As we saw earlier with Square and Paypal, most tech companies have been on a roll during the coronavirus economy. That’s because most of the measures taken to prevent the spread of the virus directly benefit their businesses. The tech-dominated Nasdaq is up an incredible 61% since it’s low in March.
Over the past three months:
1. Amazon stock is up 37%
2. Facebook is up 26%
3. Shopify is up 49%
4. Microsoft is up 16%
5. Netflix is up 18%
As these company stock prices soar, it’s interesting to think about how these technology companies are changing not only the business landscape but the way that so many people live their lives.
That’s it for this week -- Join us next week for another market update.
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This material is not intended as an offer or solicitation for the purchase or sale of a security or an other financial instrument. Past performance does not guarantee future performance.
All the views expressed are those of Chris Simpson and not those of Sierra Ridge Wealth Management or NEXT Financial Group Inc. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.