🎙️ Burrito Season

[5 minutes to read] Plus: What's with the tech layoffs?

By Matthew Gutierrez and Shawn O’Malley

🌯 Guac, rice, lettuce, chicken, salsa, cheese. By now, virtually everyone has memorized their ideal Chipotle order.

The $74 billion chain reported a 14% jump in annual sales yesterday (more below), bucking the trend seen at Starbucks and McDonald’s.

The country’s appetite for fast Mexican food has remained strong, and Chipotle plans to open another 285+ stores this year — including one a block from my apartment, just in time for “burrito season” from March through May.

Matthew

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

  • A rundown of Chipotle’s, Uber’s, and Roblox’s earnings

  • Why are tech companies laying off so many workers?

  • ESPN, Fox, and Warner team up on sports

All this, and more, in just 5 minutes to read.

POP QUIZ

U.S. federal budget deficits are expected to continue surging over the next decade. How big are they expected to get? (The answer is at the bottom of this newsletter.)

Chart of the Day

More on Chipotle in our earnings rundown below

In The News

☑️ Earnings Rundown

Created by DALL-E, via ChatGPT

It’s never been easier to have Uber deliver your Chipotle order, and coincidentally, both companies reported earnings this week.

Also reporting earnings was Roblox, which, to parents’ chagrin, raked in cash by selling its virtual currency — Robux — to (mostly) kids.

Chipotle:

Despite seemingly perpetual fears that the economy is nearing a recession, Chipotle delivered solid fourth-quarter earnings.

Burrito bowl eaters happily said yes to extra Guac to the tune of $2.52 billion in sales, with revenue at stores open for a year or longer rising 8.4%.

Its stock moved over 7% higher after slowdowns in fast-food spending at McDonald’s and Starbucks failed to manifest.

  • If you’re keeping track at home, that marks a 55% rally in Chipotle’s stock over the past 12 months (more than twice the S&P 500’s returns.)

Uber:

$1.4 billion. That’s Uber’s profits from last quarter, up from $595 million for the same quarter in 2022 — not too shabby. Part of that, though, is “unrealized gains” thanks to revaluations of its investments in other companies.

Still, revenue came in $180 million higher than analysts expected, a 15% rise from year-over-year.

Said its CEO, 2023 was a year of “sustainable, profitable growth for Uber.” Investors agree — the stock is up almost 104% over the past year.

  • Adding, “People are going out to dinner, they’re going out to concerts, sports events, etc. And when people go out and they spend money, or when they want anything delivered to their home, Uber benefits.”

Roblox:

Roblox stock popped 12% in Wednesday morning trading, bringing in more revenue than expected and not losing as much per share in earnings as feared.

As mentioned, Roblox players (60% are under the age of 16) spend real dollars on virtual currency used to dress up their avatars and purchase other in-game features.

For the quarter, 71.5 million people played on average daily, up 22% from a year prior. The company's long-term goal is to attract over “1 billion daily active users,” according to its CEO.

  • Beyond just player growth, players were also spending more. Average revenue per daily user rose 3% to $15.75.

Read more (more earnings coverage)

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💼 Why Tech Companies Are Laying Off So Many Workers

Angry Bad Day GIF by Freedomists

Gif by Freedomists on Giphy

As if 2023 weren’t brutal enough for tech workers, the industry kicked off 2024 with a bang: another wave of job cuts. 

Thousands of workers have been laid off through the first few weeks of the year, even for some “safe” jobs in cloud and software. Big tech companies believe they can accomplish more with less, thanks to AI. 

Over-hiring: Snap has reduced its workforce by 10%, or 540 employees. Okta cut 7% of staff, or 400 employees. DocuSign is cutting 6%, or 400 jobs. Google and UPS each cut 12,000 jobs recently. Even Amazon, Salesforce, and Meta are cutting costs by eliminating positions, reducing headcount, and doubling down on the positions they deem more necessary.

  • One analyst notes that “tech companies are still trying to correct for their over-hiring during the pandemic surge, given that the high interest-rate environment and tech downturn have both lasted longer than initially expected.”

Big picture: There was the “early Covid” spike in layoffs, in early 2020, then the “interest rate hike” layoff period, which has been going on for nearly two years, more evidence for why some economists believe we’ve lived through a rolling recession over a lengthy period. 

  • Some companies cite artificial intelligence as a lead reason for the layoffs: They’re shifting resources to focus on AI.

Job postings in “artificial intelligence or requiring AI skill increased by about 2,000 from December to January,” up to around 18,000 total postings.

From Bloomberg

Why it matters:

So, yes, tech layoffs are very much a thing. But tech hirings are also in full force. Both can be true. 

  • “I do feel like most of the layoffs have happened, and companies are going to start rebounding, " one hiring firm executive commented. “But it’s still very uncertain.” He expects things to stay that way “until the Fed really comes out and starts to cut interest rates.”

Or, as one professor put it, after tons of hiring and wage increases during the pandemic, “workers are getting whipsawed.”

More Headlines

💰 Disney takes $1.5 billion stake in Fortnite-maker Epic Games

📉 New York Community Bank shares continue to fall after being downgraded to “junk” by Moody’s

😅 Snap shares crater 30% after revenue miss and weak guidance

🥤 Coke’s first new permanent flavor in years adds a spicy twist

📈 Nvidia is nearing Amazon and Apple in market capitalization

💬 Tesla is the worst-performing S&P 500 stock this year

👉 Uncertainty creeps into the Treasury market after Fed comments and strong economic data

🏀 ESPN, Fox, and Warner Team Up for Sports Streaming

Walt Disney’s ESPN, Fox, and Warner Bros. Discovery are teaming up to (try to) revolutionize how we watch sports. 

They’re launching a joint streaming service this fall, just in time for football season. The new platform will be run by a new company with its leadership team, which will likely reshape our sports-viewing experience.

Bundle up: Consumers can subscribe directly via an app, with the option to bundle the service with Disney+, Hulu, and Max. It will include channels like ESPN, ESPN, Fox Sports, TNT, and TBS, all of which broadcast events like the NFL, MLB, and the NCAA Tournament. 

  • The expected monthly fee will be around $50, much lower than cable packages that usually run north of $100.

The goal: We all know cable TV hasn’t had a very good run in the past decade. But sports viewership is still big business, and the companies hope to make the platform a home base for sports programming. 

  • Disney, Warner Bros. Discovery, and Fox will each own one-third of the new company. Per CNBC, the rights to fee revenue sharing will be proportional to what the cable networks charge pay TV providers.

  • Citi analysts say the new service could encompass about 55% of U.S. sports rights.

Any sports fan will tell you it’s been tough to watch all the games you want. There’s this service, that service, this app, and all sorts of confusing packages. But as pay TV declines because of cord-cutting, ESPN, Warner, and Fox see the writing on the wall. They’re making a big bet on streaming, even if it’s a crowded market.

Why it matters:

Look, you probably won’t see us invest in anything media-related, but there’s a short list of things people worldwide can connect with — good food, music, family, and sports. That’s unlikely to change.

The big question: Could the new service make sports viewership seamless again, all in one place? That’s the hope as consumers abandon pay-TV at a fast clip — an annual drop of 7%

  • Still, about 55 million U.S. households pay for traditional TV, down from a peak of about 100 million a decade ago.

  • Most of the decline is due to rising alternatives like YouTube TV, FuboTV, and others, which are growing rapidly, with about 18 million subscribers combined. 

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Quick Poll

How do you feel about AI generated images in our newsletter?

Login or Subscribe to participate in polls.

Yesterday, we asked: How much do you think your grocery basket has gone up in the past four years?

— One reader who voted 40% or higher said, The items I used to send $100 on seem to be about $200 to $250 now.

— Said another 40% or higher voter, In the EU, the prices rose generally much more than in the US.

— This reader commented, “The grocers have taken advantage of America eating at home during and post-pandemic. I would wager that their profit margin has increased dramatically over the past 4 years.

— One more, “CPI underreports just about everything, our bill is easily up 50% for a married couple & 1 child.

TRIVIA ANSWER

$2.6 trillion. That’s how large annual U.S. government budget deficits are expected to be by 2034, according to the Congressional Budget Office.

See you next time!

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