Weekly Reads - August 15, 2022
Please read the Unison Asset Management Social Media Disclaimerhere
Amazon Prime seems to have found a worthy competitor in Walmart+ after Walmart signed a deal with Paramount to offer the company’s streaming service, Paramount+, as a perk to Walmart+ subscribers. With this addition, Walmart+ perks are eerily similar to that of Amazon Prime but at a substantial discount ($98 for Walmart+ vs $139 for Amazon Prime). While Walmart does not disclose Walmart+ membership numbers the company has remarked that the service has seen monthly membership growth since its launch in 2020. For Paramount this deal offers them access to millions of already established Walmart+ users and potential access to the hundreds of millions of consumers who shop in Walmart on a weekly basis. As a late mover into the streaming market Paramount+ now has a chance to take share in a saturated streaming market. With no details about the deal released as of this writing it is unsure how the economics will play out for both sides of the deal, but on the surface both companies seem to be in a better competitive position than prior to the deal.
Tencent continues selling off its investment portfolio with plans to divest its 24 billion stake in Meituan, one of the largest food delivery companies in China. This announcement is hardly shocking with the company already divesting its stakes in JD.com and Sea over the last year. Tencent faces regulatory pressure from the Chinese government who have taken aim at the company’s empire building aspirations via stake acquisitions of domestic companies. As a way to appease regulators Tencent is reducing its portfolio holdings in domestic companies and reallocating capital to other ventures that align with company’s/country’s social sustainability initiatives. With significant stakes in other domestic tech companies like Pinduoduo, Kuaishou, and Didi it is likely we see the company continue divesting more of its domestic holdings as a way to build goodwill with regulators.
The biking boom has ended with people returning back to everyday life leaving the industry in a state of oversupply and weakening demand. Biking in the U.S saw a renaissance during COVID with people opting for bikes over public transit to reduce COVID exposure and as a way to exercise. This renaissance included both indoor and outdoor biking which offered health and entertainment benefits during times in which gyms were closed. This led to bike shops not having enough inventory on hand to meet rising demand and having to delay many orders. Fast forward to 2022 and according to the Wall Street Journal revenue at U.S bicycle retailers feel 7% in the first half of 2022 vs gains of 46% in 2020 and 4% in 2021. This weakening environment has led biking companies like Peloton to see its stock price plummet 90% and SoulCycle to close 25% of their 80 locations. With gyms reopening and workers returning back to in office work it is likely that we see a continual erosion in bike sales in the near term as demand and supply normalize.