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From coffee and crypto, to a new set of worries for the global shipping market, to inflation not cooling as much as hoped for, my team is going to show you how to navigate it all this week.
Enjoy your Monday – Keith Kaplan, CEO, TradeSmith
Snippet No. 1: Coffee and NFTs
OverviewStarbucks Corp. (SBUX) will launch an NFT (non-fungible token) rewards program through Polygon (MATIC).
The Breakdown
Dubbed the Starbucks Odyssey program, customers and employees in the United States can earn digital stamps as rewards, with each stamp being minted as an NFT.
The NFTs will allow access to merchandise and events.
The TradeSmith Takeaway
For Starbucks, this isn’t a move that would move the needle in the stock price, as people racing to get their morning coffee don’t have the time and aren’t in the mood to complete challenges and play interactive games within the Starbucks app to earn those rewards.
With the stock in the Red Zone, our Health Indicator says to stay away from SBUX.
But what is interesting from this news is the continued push toward “tokenization” from large brands, giving more credibility to companies using blockchain networks in their day-to-day operations.
For Polygon, this is another win, as it has already worked with Coca-Cola Co. (KO) on launching an NFT and was selected as one of six companies in Walt Disney Co.’s (DIS) 2022 Accelerator program, an incubator for technology and entertainment startups.
Snippet No. 2: A ‘Freight’-ful Earnings Failure
OverviewLast week, FedEx Corp. (FDX) withdrew its full-year guidance and announced that it will implement significant cost-saving measures.
The Breakdown
The bad news from FedEx came after the company missed revenue expectations in its latest earnings report.
The company said it had issues with lower shipping volumes in Asia and Europe and that operating expenses remain high.
In addition to closing 90 offices, FedEx plans to close five corporate office facilities, defer hiring, reduce flights, and cancel projects.
The TradeSmith Takeaway
This sounds like a case of FedEx being underprepared, as it could have executed some of these cost-saving measures at the start of the year to be ready for whatever the world had to throw at it.
Our system has flagged this as a company to stay away from since last September.
Of course, this doesn’t mean every transportation stock should be avoided. People still need their stuff, and the global on-demand transportation industry was valued at $128 billion in 2021.
One company in our Green Zone is Kirby Corp. (KEX).
It’s the largest tank barge operator in the United States, with 1,034 inland tank barges and 270 towboats, and operates mainly in liquid cargo transportation.
Not just any transportation is equipped to handle liquid cargo, giving KEX a bit of a moat. And as you can see below in the company’s 2022 presentation, what it’s transporting is essential to everyday life, meaning the company will always have work.
KRBY is in our Green Zone, and it has a consensus one-year price target of $81.50, representing a potential 24% profit from where the stock is trading as of this writing.
Snippet No. 3: Inflation Is Here to Stay
OverviewThough inflation fell to 8.3% in August from 8.5% in July, it’s nowhere close to being tamed.
The Breakdown
People’s bank accounts are feeling the burn as many products and services grew more expensive in August:
- Pets and pet product costs were up 1.6%.
- Motor vehicle maintenance and repair costs were up 1.7%.
- Health insurance costs were up 2.4%.
The TradeSmith Takeaway
With sky-high inflation and a potential recession on the horizon, the terms “inflation-resistant” and “recession-resistant” are often used interchangeably… but they shouldn’t be.
There are key differences between the two, as a company may be able to handle a recession but not high inflation.
Senior Analyst Mike Burnick has a perfect example of a stock that could handle a recession but doesn’t pass the test of being inflation-resistant.
You can find out which stock he is talking about right here.
