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Hey guys, it's Christian McCaffrey, pro running back.
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Tell you about their viral denim.
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Abercrombie's athletic fit is a game changer. They're designed for guys with an athlete's build like mine, just enough room and the perfect stretch.
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When a jean fits that well, I'm.
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Wearing it on repeat.
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Shop Abercrombie Denim in the app online and in store. Into it stocks down on earnings, but our take on its hidden gem Looking for investing? Reads our new book segment and Fed Chair Powell's big Speech today. What he said, what the market heard and what he left out for Friday, August 22nd. It's blue markets Daily and I'm Anne Barry. More market details to come. But first, just like a well crafted horoscope, Jay Powell's speech from Jackson Hole today had something for everyone. We all got to hear whatever we wanted to hear. Now the market's been eagerly awaiting what the Fed Chair had to say at the annual economic symposium. And the market certainly could not contain its enthusiasm for this one key line in particular, let's hear the words from the man himself.
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Nonetheless, with policy in restrictive territory, the.
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Baseline outlook and the shifting balance of.
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Risks may warrant adjusting our policy stance.
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Well, the markets ripped on hearing this. The major indices hitting at different points all time highs. And this I think is because the market was choosing to hear that the maybe that there would be a change in policy in that statement would equal a rate cut in September with expectations of a quarter point rate cut rising to nearly 90%. So that is why the markets were up. The market heard what it wanted to hear, but I wanted to just dive into what J. Pal actually said. So I went, I listened to the speech multiple times. I read the transcript and here's what I honed in on. Number one on tariffs, he said that the effects of these are now, quote, clearly visible, an issue likely to accumulate over coming months. Basically, he said that the risk of expected inflation as a result of tariffs might actually cause it, although he hoped that this was all, quote, relatively short lived. He did not, however, use the word transit transitory. Then on inflation, he said that the near term risks are tilted to the upside. And then on jobs, he thought that the labor market still looked pretty strong. Now those three points would typically point to keeping rates where they are higher for longer, but instead the market actually focused on the following comments on GDP that growth has slowed, notably in the first half of this year to roughly half the pace in 2024, largely from a slowdown in consumer spending. And he focused too on, quote, the value of a strong lab market for American households, reiterating that keeping unemployment low is a key priority. Overall, he said there are risks to employment downside and as a result as all of all of this. So the market saying of everything he said, this is what really matters and this is why rate cuts are imminent. Now, there is one other thing that struck me that did not get a lot of press coverage today actually, and it's towards the end of this speech, Powell dug into this idea that long term rates may not go back to the levels that we got used to before COVID This is something called the neutral rate or the balanced rate. And he said that this may now be higher than during the 2000s. This is a quote reflecting changes in productivity, demographics, fiscal policy and other factors that affect the balance between saving and investment. Now, he did do one thing that I expected him to do. This is his last speech from Jackson Hole in his tenure and he did take the opportunity to say that he felt that the Fed had succeeded in getting post Covid inflation down much closer to its 2% target target rate without quite a painful rise in unemployment, which is what you usually see when the Fed's trying to aggressively get inflation down. But there was also something he didn't say and after months of criticism from the White House, he's had pressure from the President to resign, he's had pressure from President Trump to cut rates. Powell did not double down on stating something he said before, which is the importance of the Fed staying independent. I thought he might do it, but clearly he is picking his spots today. Coming up, we're digging into death and taxes, but first Brew Markets Daily is sponsored by public. So let's throw it over to our producer John to tell us what he's excited about now that it's Friday.
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Heck yeah, Friday. Also, I think of it as 401k day because it's not just payday. Now that I'm older, I send some of that money straight into my retirement account.
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Well, for a limited time, public users can earn an uncapped 1% match on all IRA transfers and rollovers on top of a 1% match on your annual IRA contributions. That's a whole 1% match. Plus, with a self directed IRA on public, users can access thousands of stocks, ETFs and bonds to align their investing style with their retirement goals. Users can even trade options in their ira, a feature many brokerages don't offer. So get started at public.com brewmarkets that's public.com BrewMarkets paid for by Public Investing.
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Full disclosures and podcast description let's turn.
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Now to Intuit stock down 5% today on its latest earnings report. The software company market cap 185 billion. And I say that because we don't sometimes appreciate just how big this business is. Well, it has several well known consumer and enterprise brands inside it, including TurboTax, Mailchimp, QuickBooks, and also credit Karma.
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And Intuit's revenue and earnings per share came in slightly above the consensus estimates. But the market reacted poorly to slowing growth for marketing platform mailchimp as its small businesses struggled to adapt to new features.
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That's right. So overall, a tone of slowing growth hitting the share price. But there is one area that caught our eye so we decided to dig into it. The Consumer Consumer group saw revenue grow 10% and we wanted to dig in here because we have a bit of special color. Why? But before we go into what that is, let's hear what CEO Sasan Ghdazi had to say.
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This was driven by breakthrough adoption of TurboTax Live, which grew 47%, well above our long term expectation of 15 to 20% revenue growth. This is the power of bringing data, AI and human intelligence together to provide better experiences for customers. Right. And so he's talking there about TurboTax Live. And that product is two things. It's software we all know about. We're doing tax prep and then it's also the Live component. So if you're doing the prep on your computer and then you want to go to a human, they offer that too. That's TurboTax Live. So Ann, what do you make of it?
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Well, this reminded me of a conversation actually that I had with the Chief Financial Officer recently. And John, you were actually part of that. One of the things that he made great pains to do was actually break down why this combination of having great software with AI enablement was so effective when it was combined with having a live tax expert on the other end. And so here are the things that really struck me and they, they really resonated because when I think about trying to use a tax prep service, I thought about how I would respond to the different elements of this product. So, number one, the AI tool and the presence of sophisticated AI has been getting consumers attention for the following reasons. They like the promise of accuracy that it brings. They like the 20% reduction in the filing time that it brings. And so it's that combination of accuracy and efficiency that's getting a lot of people to click through to actually explore it some more. And both of those combining two into trying to get, you know, the biggest refund possible, to navigate the complexity of text as quickly as possible. And then this human intelligence piece of it. The hi. Is what really caught my eye because in the conversation I had with the cfo, it was really clear that when we do our taxes, there's a really important psychological, important psychological element to all of this. And the quote that he had is, at the end of the day, what TurboTax is solving for is a fear. The uncertainty, the doubt that we have about doing our own tax returns. We're afraid of making a mistake. And so the idea that on top of having software, you've got a real human being, a tax expert you can schedule a call with to talk about your specific question, to have someone empathetic allay your fears really landed. And particularly if you think about it, taxes are incredibly intimate documents. You're laying out your whole net worth and often you're including information about your family in there. So if someone is sending their kid to college and they want to know, can they deduct some of the costs of doing that? They want a person who's perhaps lived through that experience to hop on the phone with them. So this combination of AI and EQ really, really struck me. And then the other part of that conversation was how the psychology of taxes applies to marketing to get new customers as well. Right.
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We heard that they had been marketing to people after the Christmas holidays. So retailers had pulled their ads, and now it's January, it's time to start thinking about taxes. And they found that it was much more successful if they were marketing to tax preparers late in spring after they had possibly just had a bad tax experience with a competitor. So you're thinking in May, you've still got taxes on the top of your mind. And then you get an ad from Intuit, maybe you want a better tax experience. Okay, I'm going to go with.
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With their preparer, then they've got you. Now the other thing too is just in terms of what's going on more broadly, if you actually look at what's happened to Intuit stock over time, last year was a really rough year for them. And that's because we saw the specter of the IRS actually producing what has been long anticipated, which is the ability for people to go and file electronically in a much easier themselves. And right as it looked like that was coming into fruition. We saw the share price crater. So it's clearly been working its way to try and build defenses around the possibility of that happening again with this TurboTax Live experience.
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And of course, they need to be on top of that because this is from the IRS website. Yesterday, IRS.gov posted IRS asks for public input on free Tax filing options to inform Congressional report. So they're asking American citizens, do you want this option to file your taxes for free through the IRS platform? And so that's something that Intuit has to defend against.
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Well, just a final thought on this one. Let's take a look at the share price over the longer term. So Intuit share price, interestingly to me, up over 100% over the last five years. But with this latest news from the IRS, with the earnings that are out today, a bit of a question mark over where it goes from here, flat over the last year. John, we have a question from the audience.
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That's right, Pariah from Texas wrote in and wrote. Dear Ann, I'm just starting out with investing and was wondering if you have any audiobook recommendations. I really value your insights and I'm so glad you have your own show now.
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Thank you. Well, I'm happy to give audiobook recommendations, but I really am going to make a plea for real books, for physical copies, particularly hard copies, support authors out there. There's nothing quite like turning the page or annotating them to take notes, which is something that I do well. There are lots of different kinds of things that I read to try to be fresh in my ideas and to be creative about investing. So I thought I'd just give you quite a broad range of a couple that I've been recent reading recently. The first is an old classic, it's the Intelligent Investor. It was published all the way back in 1949 by the author Benjamin Graham. I have to admit, I read this. I think my dad gave me a copy of this when I was really small. I think I was only about 12 years old and I still dip into it occasionally because there are still nuggets there. It's the basics, it's the essentials and how to look at a company and how to think about what are the engines of its growth and how to value those. So the Intelligent Investor by Benjamin Graham, number one second book that I read recently, the Little Book of Crypto, which is written by Anthony Scaramucci of SkyBridge Capital. It's a really good simple description of what's been going on in the world of cryptocurrencies when did they come about? What's the adoption cycle being like? Where does it go from here? Helps to break down bits of jargon like stable coins that are just flying around all over the place. And I went to this actually to get up to speed at the beginning. I'm also going to plug the fact that Anthony Scaramucci is going to be a guest on our show and we're filming next week. So come back if you want to hear about what he has to say. I'm going to touch on some of the topics in his book as well. Third book I'm going to throw out there is Chip wars by Chris Miller. Now this is written like a thriller. It's got a bit of a Dan Brown feel to it. It's a bit of a novel. This one is a really comprehensive overview of who the biggest players in chips are in the world, from Nvidia to tsmc, what's been going on with them, how are they created and how do they try and figure out a path forward from here. So Chip wars. Hold that because at the end of the show we're going to tell you why. It's a good one to read this weekend. And then two more. Elon Musk, the biography by Walter Isaacson. This is the biggest name in tech. It's the biggest name in business. Talks about how he runs his companies and a real eye opener for me, talked about how when he's got, say an issue at SpaceX or an issue at X or an issue at Tesla, he will go and pluck the best talent from any one of those companies and send them in to go and sort out issues to go and be firefighters in amongst the rest of his portfolio. Fascinating insight into how that brain works and into how he goes about running so many different successful companies at the same time. And then the last one, I mean, so enthusiastic that I've run scuttled through these. But the book War by Bob Woodward, the very famous journalist, it's a fascinating tale of how the unfortunate situation, the Russia, Ukraine war has come about. And here's why I bring it up in the context of investing. It was while I was reading this that what came to the top of my mind was the sheer scale of depletion of global munitions as a result, as a result of that war and as a result, the amount of restocking there's going to have to be and the amount of spend that there is going to have to be as a consequence on the defense sector. And so, you know, as investors we look to see what kinds of macro themes that that could generate. So ideas everywhere. Read many things. We're going to keep coming back to this. I'm so glad someone asked about books because I do read a lot and want to keep shar sharing some of these names with you. We'll take a quick break and when we come back, we're going to check in on those work from home stocks that were almost left for dead. Eczema isn't always obvious, but it's real and so is the relief from Ebglis. After an initial dosing phase, about 4 in 10 people taking EBGLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing.
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EBGLIS Liberikizumab LBKZ A2 the 250mg per 2ml injection is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema, also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals, or who cannot use topical therapies. Ebglis can be used with or without topical corticosteroids. Don't use if you're allergic to Epglis. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with Epglis. Before starting Epglis, tell your doctor if you have a parasitic infection.
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Ask your doctor about epgliss and visit epgliss.lilly.com or call 1-800-lilyrx or 1-800-545-5979. This episode is brought to you by State Pharm. Checking off the boxes on your to do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone or using the award winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there welcome back to Brew Markets Daily. We've seen the death of Skype, we've seen the spread of teams and Google Meet, and sometimes we just reach for FaceTime, even to reach our colleagues. So what happened to Zoom? Well, today the stock shot up over 11% in reaction to the Company's earnings with its market cap hitting nearly $25 billion.
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Right. And in Q2, total revenue grew nearly 5%, its fastest rate in 11 quarters. And it beat guidance for both sales and income. And when we listened to the earnings call, we were surprised at how diverse its products have become.
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That's right. So beyond the simple video call, which is what we all came to know Zoom for at the peak of the pandemic, it's actually evolved into having a number of integrations into lots of different office apps, which actually makes it quite versatile. Right.
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I remember in the early days, obviously we were having calls and we were communicating with people and then they introduced the AI companion.
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Yeah.
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And that blew my mind because we'd have a meeting and then it would summarize bullet points. But it's moved on beyond that, where now that AI companion can interact. They were saying today with 13 new third party apps. And so it's not just what's happening on the call. They can then do meeting prep and post meeting tasks. So that means the AI can listen to what happened in that meeting and it can start scheduling things, it can start sending out emails. And so that's a really big move forward for what Zoom can do. Ann, have you been trying any of these products?
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It's interesting, I've got to admit, in the places I work, Morning Brew included, I don't use Zoom. Actually. There's a lot of teams I use with in one instance, A lot of Google I use in another instance. But as I was listening to you describe the product and as I was digging into this, the one function I know has real appetite for this kind of product is the sales function. So in the teams that I've worked with as a CEO and I think about the sales teams I try to coach and support as a board member, one of their really big pain points is the admin around remembering when do I go follow up with this client? When do I go and chase down this prospect? How much time has elapsed between my different meetings? What were my notes? Right. What are the different documents I should use to support my pitch? And so when I hear about the integration of Zoom with lots of other office applications that they use, I can absolutely visualize how it's useful. I just don't think that the brand awareness of Zoom's applicability like this is there yet.
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And I had no idea. And what you're describing is the Zoom contact center.
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Oh, interesting.
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And so it goes both ways because it can also use virtual agents like a call center, so it can do tech support or other sort of customer service applications. And they said on the call today that they just made a major five year deal with a client that had previously been with Cisco. And so if we're looking to see what is Zoom doing, they're. They're eating into the lunch of some other companies with their call centers.
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Yeah, taking share from Cisco is a big deal and Zoom has been consistently trying to gain share from some of the big players. The fact it's doing it probably with a bit more aggression and a bit more speed, sort of reminiscent of its more startup, recent startup Origins, makes a ton of sense to me. You know the thing that is really interesting, if you think about what we've just discussed, what we've described, you could not get a more different vibe. Right. Than what we sort of thought of it as is this single product doing one thing, doing it really well during the pandemic. Which just goes to show that it is possible to survive when people think you're a one trick pony.
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And the other survivor is docuSign from that same period.
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Yeah, it's interesting you bring up DocuSign actually, because I did last year have the opportunity to interview the CFO of Docusign. Actually that's for a sister podcast called After Earnings. And one of the things that I do remember very vividly was asking the DocuSign CFO, what do you do when people have signed, you know, a contract using your electronic signature feature? Isn't that can anyone do it right? You've seen other competitors and startups pop up off offering the same thing. And he said no. DocuSign has morphed into a document management system. So what DocuSign is now doing, they'll take the contract that you signed with your E signature, that feature that we all recognize, and it will maybe summarize the contract for you and send you that summary. Or even better, when the contract expiration is coming up X amount of time later, it can ping you and remind you that you have now on your to do list perhaps a renegotiation of this contract or something to do around its expiration. So again, it's a similar story. You use one strong product as your trojan horse. You get on in there and then you find ways to try and grab share of wallet from the rest of your consumer or your or your enterprises spend. It's fascinating.
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Well, how's the share price looking today?
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Well, the share price today for Zoom, as we said up the top, zoomed on up over 10% up at 11%. So I actually wanted to just look at the context for this because the context is always really important. And if you take a look at Zoom's share price over the last five years, if we go back to the pandemic that was its go go day as a stock, right, it's down over 70% since then. Over the last year though, upper, you know, 20%, pretty decent performance. And if you look at DocuSign, it's actually the share prices look extremely similar. So two stories of survival. And one other thing I would say too, that really is pertinent to both of them. We spent a lot of time on the show yesterday talking about software companies in general. And so just a reminder on these names, they have all those attributes, subscription based, sticky recurring revenue, predictable revenue contracts that support their tenure. And so one key thing just, you know, with my markets hat on, I wanted to double down on here. One of the reasons that Zoom stock responded so favorably is the fact that as a free cash generating business, half a billion dollars of cash thrown off by the company. Investors Love that. It's 4pm on the east coast, the markets have closed and we don't have a ticker tape, but we're going to throw it over to our human ticker John.
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That's right. And the markets were up across the board today. Let's start with the Dow at an all time high, up nearly 2% and the S&P was up 1.5%. The NASDAQ up 1.8% and Bitcoin a rising tide up 4% to over $116,000.
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Yeah, and just quick thought too on Treasuries, look, with the market clearly expecting a rate cut as predicted, a lot of those treasury yields coming on down. So, you know, big day in the markets today. It's really quite a sprint going into this weekend. Well, we did folks, make it to Friday, affectionately known over here as the end of retail week, because we've just had tons of retailers with their earnings coming out. So we're going to take a bit of a break from that and instead we're going to rest up this weekend. Friday, a sprint before Labor Day. Just as we thought we're heading that quiet vacation period, Nvidia is releasing its earnings. Something, by the way, that the New York Times hypothesized when I was reading it yesterday would quote, move the S and P more than Powell's speech. Given the bump up in equities today, I'm sure all shareholders out there are definitely hoping for another equivalent of today in the markets. That's all, folks, for today's blue markets.
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Daily Brew Markets Daily is hosted by Anne Barry and produced by John Cotto, Tarek Abdelatif and Emily Miliron. Our techn Director is Uchena Waagu and the president of Morning Brew Inc. Is Devin Emery. If you'd like to get in touch, send an email or voice memo to brewmarketshoworningbrew.com and wake up on Monday with.
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The Morning Brew newsletter. And tune in to Neil and Toby on Morning Brew Daily. See you back here on Monday, folks. Have a great weekend.