Another Cheque?

By Hoda Mehr Fri, May 15, 2020

Hey Scoopers,

In a reversal of the direction, all three indices finished Thursday in the green as the hopes for another round of stimulus cheques are getting stronger. — More on that in the “Overall Market” section.

Beyond the overall market, a SaaS startup got a boost while Elon dampened the mood for another company’s investors. — More on that in the “What’s Up?” and “What’s Down?” sections.

Oh, by the way, soon we will know more about the future of sports betting in the U.S. — More on that in the “Water Cooler” section.

But, first, here is a recap of what happened in the market yesterday:

Market Recap

• U.S. markets: All three indices ended the day in the green zone. Scroll down to the “Overall Market” section to read more.
• Cryptocurrency: Bitcoin’s price is near the $10,000 mark. It seems that the excitement in the cryptocurrency market sees no boundaries.

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Another Cheque In the Mail?

The stock market indices gained back some of the losses from the earlier days in the week. There were two pieces of news that fueled the reversal. Firstly, the White House is expected to support a new round of stimulus cheques. Also, investors are now speculating that the Fed is going to make another big move to support the economy after they had a chance to reflect on the Fed Chair’s remarks earlier in the week.

Too Much Excitement

So, what happened?

Shares of New Relic (Ticker: NEWR) were up more than 19% on Thursday. The company sells analytics software for real-time data analytics and just announced its latest quarterly earnings report. Both quarterly revenue and annual revenue were up more than 20%. This is a technology company that generates free cash flow. And, similar to all SaaS businesses, it makes a reliable, recurring, and growing revenue. It has a retention rate above 100%, which means customers are increasingly buying additional services and seats from the company.

However, according to the company’s press release, the dollar-based net expansion rate for the fourth quarter of fiscal 2020 was 116%, compared to 131% as of the fourth quarter of fiscal 2019. That’s a sign that the customer retention rate is dropping. And, the company holds a significant amount of long-term debt. It’s a bit surprising to see investors’ overexcitement about the company’s earnings.

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Sanity Has Come Back for Investors

So, what happened?

Shares of VectoIQ Acquisition Corp (Ticker: VTIQ) were down more than 16% on Thursday. We talked about this company on Thursday’s edition of the Daily Scoop (Read More) The stock price has been moving up rapidly in the last few days despite lacking operational data and history. VTIQ is just a special-purpose shell company that has become the talk of the town due to the excitement around its merger with Nikola Motor, an autonomous truck startup. It’s a hot stock for risk-taker investors that would want to bet on the future of autonomous trucks.

It seems that finally, some sanity came back to investors, investors decided to take their gains off the table, and leave the new company along with all the uncertainties it has to deal with. The decline in the price seems to be in response to the news that Tesla (Ticker: TSLA) is coming out with a new low-cost electric vehicle battery technology.

One thing for sure is that Elon Musk couldn’t help but dampen the mood of other company’s investors.

The Future Of Sports Betting

So what happened here?

Shares of DraftKings (Ticker: DKNG) were down on Thursday. We had to bring it up in the Water Cooler section because of the exuberance taking over investors about the future growth potential of DraftKings. The company is among the first platforms that brought digital sports betting to the U.S., and similar to Nikola Motor and VTIQ, DraftKings has become a publicly-traded company through one of those mergers with special-purpose companies. Since then, the stock price has been on a 161% rocket-like trajectory.

The stock price decline on Thursday is in preparation for the company’s first earnings report as a publicly-traded company. All eyes are on May 15th earnings release report to shed some light on the future of sports betting in the U.S.

While we are on the topic of sports betting, what are your thoughts about the future of the industry in the U.S.? Let us know by emailing us at members@tradestocks.com.

About the Author

The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card