The Update Issue: The Apple Security Update Strikes Again, Amazon and Affirm Cozy Up, Logging Out of Facebook

Shares of peer-to-peer fashion resale site Poshmark (POSH) plunged 29% yesterday on a third-quarter revenue miss... The company, which was one of the first ones to raise a red flag about the impact of Apple's (AAPL) privacy update to its iOS operating system back in August, took a tumble because of this issue for a […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] The Update Issue: The Apple Security Update Strikes Again, Amazon and Affirm Cozy Up, Logging Out of Facebook By Berna Barshay Shares of peer-to-peer fashion resale site Poshmark (POSH) plunged 29% yesterday on a third-quarter revenue miss... The company, which was one of [the first ones to raise a red flag about the impact of Apple's (AAPL) privacy update]( to its iOS operating system back in August, took a tumble because of this issue for a second time. POSH shares dropped 17% back on August 11, when it warned that revenue growth would be lower in the third quarter because of the headwinds from people opting out of web tracking when faced with this screen. It's now a very familiar one to anyone with an iPhone or iPad...  Source: Appleinsider.com Since then, many companies have noted that their ability to target prospective customers has been clipped by the iOS change, with Facebook (FB) and Snap (SNAP) among the ones making the biggest headlines. Despite warning in August of the potential problem in the third quarter, investors reacted violently to the company's $80 million in revenue, which missed the consensus expectation of $83 million by about 4%. Poshmark CEO Manish Chandra explained on the call... Accelerating growth while navigating the impact of Apple privacy changes is our top priority, and we will continue to adjust our marketing strategy accordingly to grow our GMV [gross merchandise value]... We began adjusting our marketing spend in the middle of the third quarter and have seen an early positive impact on October GMV growth. Poshmark shares, which just went public in January, are now down around 55% from their $42 initial public offering ("IPO") price...  Poshmark caught at least two downgrades from "buy" to "hold" among Wall Street analysts and several more adjustments downward in price targets. --------------------------------------------------------------- Recommended Links: [The No. 1 stock to buy EVER?]( One of our analysts admitted, "I almost quit my job to buy this stock." He thinks we could be looking a potential double in weeks... and 1,000% gains over the next few years. This opportunity has crypto-like upside, but with far less risk than buying bitcoin. Get the details [right here]( [while this presentation is still available](. --------------------------------------------------------------- [What Musk, Thiel, and Bezos have in common]( For the first time in his 30-year career, Jeff Brown is holding a special presentation... to reveal how anyone can invest before a company goes public, and with the same terms as Silicon Valley billionaires like Elon Musk, Peter Thiel, and Jeff Bezos. [Click here to reserve your seat](. --------------------------------------------------------------- There are a few broader lessons here... Poshmark is just the latest example of how much this iOS change has upended the world of digital marketing. Companies are being forced to rethink how they spend their marketing dollars as conversion rates on tried-and-true digital marketing methods have dropped. We probably haven't seen the last bomb from the great Apple opt-in pop-up debacle of 2021 yet. The nearly 30% drop in POSH shares on a 4% revenue miss is a great reminder that [revenue growth is king]( in terms of what investors look for in tech startups with no history of operating profits. One inference that I am not making from the troubles at Poshmark is any kind of revision to my bullish outlook on the [growth prospects for the fashion resale industry](. It still has a very bright future ahead, with growth way above the overall apparel and accessories market. I remain very bullish about the resale industry, and I admittedly [had been intrigued with the company when Poshmark was going public](... but its IPO price proved way too steep for me. Poshmark has now fallen to a level where I find it more interesting as a potential investment, but I am not ready to jump in quite yet, given the big hiccup it is experiencing on the marketing front. I do have faith, however, in the resale space... Empire Market Insider subscribers know that I have picked a different horse in this race, one that has so far navigated the iOS changes more adeptly than Poshmark has. You can learn more about it [here](. Another IPO that made its debut the same week as Poshmark is faring much better... Shares of buy-now-pay-later ("BNPL") fintech company Affirm (AFRM) are soaring 15% today and have now tripled from their $49 IPO price. Affirm allows e-commerce shoppers to finance purchases in equal installments over several months instead of paying all at once. The boom in shopping online has been very good for the company. As I wrote about in the [January 8 Empire Financial Daily](... The shift to e-commerce during the pandemic – and also the propensity to purchase larger ticket items for the home like furniture, appliances, and exercise equipment – has boosted Affirm's business, and its valuation, which stood at nearly $3 billion, when it last raised capital in the private markets in April 2019. Affirm's market cap now stands at an incredible $42 billion, which means any venture capital or private equity type that is lucky enough to have participated in that last private round has gotten a stunning 14 times return on their investment in just over two and a half years. A big part of the incredible rise in AFRM shares relates to the business relationship it has struck with e-commerce giant Amazon (AMZN). As you can see in the chart below, AFRM shares were solidly above their IPO price, but well below their post-IPO highs last summer. But when Affirm announced its deal with Amazon in late August, shares went on a tear...  Last night, Affirm announced that the relationship with Amazon had expanded, and Affirm will be embedded as a payment option in Amazon's digital wallet for U.S. users. The company added that Affirm would be available for almost all purchases over $50 on Amazon's U.S. shopping app. Affirm will be Amazon's exclusive buy-now-pay-later partner in the U.S. In exchange, Amazon received warrants to purchase AFRM shares in the future. As if that wasn't good enough news, Affirm announced strong results for its first fiscal quarter and issued a strong outlook for the second quarter. The company predicted revenues to clock in between $320 million to $330 million, versus the consensus of $298 million. It's more evidence that – yes, revenue growth is king if you are an unprofitable tech startup. Affirm is also proof that if Amazon loves you, investors will too... Affirm is actually the second example of this concept this week, as shares of electric vehicle ("EV") maker Rivian Automotive (RIVN) have soared about 60% since making their trading debut on Tuesday. New IPO Rivian hasn't sold a single electric truck or SUV yet and has no revenues... but it does have a contract from Amazon for the future delivery of 100,000 EVs, as well as around $2 billion of investment money from the tech giant. That large vehicle order and implicit endorsement from Amazon was a big part of Rivian hitting more than $100 billion in market cap before generating its first dollar in revenue. I have no opinion yet on Rivian... the business sounds really promising, but I can't get my head around how to think about what it's worth. Right now, the market is telling me: about the same as 113-year-old General Motors (GM) with its $90 billion in global sales. Maybe that's right – I just don't know. As for Affirm... it's hard to understate how big this Amazon news is... Amazon sold about $275 billion in goods in its retail division in the last 12 months. Not all products will be appropriate for Affirm, nor are all Amazon customers interested in using Affirm. But Affirm's expectation for its GMV for the year ending June 2022 is around $13 billion. That number surely includes some growth from Amazon already in it. But in the longer term, if even 5% of Amazon U.S. purchases by value got bought with Affirm, that is an addressable market twice the size of the entire company in its current fiscal year... There's a lot of growth ahead here. In case you missed it, there's another big push for consumers to log out of Facebook (and Instagram) this week... The Facebook Log Out began yesterday, organized by an organization called Kairos seeking accountability in Big Tech. There are a few dozen other non-profits that have signed on in solidarity. The organizers behind this movement have asked participants to stay logged off for three days to send a message to Facebook. From the [Facebook Logout site](... For years Facebook has been rife with scandals and bad decisions, including Cambridge Analytica, ignoring disinformation for profit, poor content moderation, and being investigated for antitrust concerns. Every bad decision Facebook makes affects our lives – because the online world doesn't exist in a vacuum, and there are real-world consequences to Facebook's irresponsibility. All that is, of course, true, and this effort is reminiscent of summer 2020's [#StopHateForProfit Facebook boycott](. That effort – which probably got more press than this one is getting – didn't have any material impact on financial results... and the latest attempt to strike back at the social media giant probably won't either, no matter how well-intentioned. Kudos to the readers who caught the error in my piece on Elon Musk and Tesla (TSLA) yesterday... In the essay, I discussed Tesla founder and CEO Elon Musk's infamous 2018 "funding secured" tweet, when he signaled that the EV maker had struck a deal to be bought at $420 when, in fact, no such deal had been struck. Musk and the company paid $20 million in fines each to the Securities and Exchange Commission ("SEC"), who would use said funds to compensate investors harmed by the tweets. I noted that since TSLA shares trade a lot higher than $420 now, long-term holders would be the opposite of harmed by the company had they held on. I erroneously wrote that TSLA shares are up 150% since the infamous tweet... but I forgot that Tesla did a 5-for-1 split back in August 2020... so the shares are instead up an incredible 1400% since then! Big difference... my apologies! I obviously didn't pull up the stock chart when I was writing, or I would have seen my big error. Congratulations to readers Philip B., Michael S., and Roland D. for paying attention to detail and knowing their Tesla corporate history! All wrote in to note the miscalculation. In the mailbag, a couple of letters about Tesla and a couple about Rent the Runway (RENT)... If you have Apple products, do you find that the ads you are being served digitally have changed much since the privacy update went in? Any Poshmark buyers or sellers out there? I would love to hear from you about your experience. Same for people who are using Affirm instead of credit cards these days. Did anyone buy shares in Rivian? Or log out of Facebook and Instagram this week? Share your thoughts in an e-mail by clicking [here](mailto:feedback@empirefinancialresearch.com?subject=Feedback%20for%20Berna). "You're my favorite! There are three kinds of stocks I will never buy: cigarettes, weapons, or anything run by Musk!" – Danilo T. Berna comment: Danilo, hahaha – those are probably good rules to live by to sleep well at night. And thank you for the kind words! "I was advised to buy Tesla when it was about $300 (before the split). Then I heard Whitney on Stansberry say that it would be $100 by year's end (It was October, I think). I resolved to avoid the stock based on Whitney's comments. Then it went to $2,000, split, and went back to $1,000. Finally, in the past year, I bought a few shares on dips three separate times, waited until it seemed to stall, and took profits. But if I only hadn't heard that original broadcast... Do you think Whitney would like to send me a check for all the money I didn't earn? 😊" – Michael S. Berna comment: Michael, I'm glad that you got in later and were able to make money. I can't say I remember the timing of all of Whitney's Tesla calls over the years with great specificity, but I think he has been on the sidelines and neutral on Tesla for well over a year. I am guessing based on the chart, that the call you heard was made in 2019... In any case, it's a fundamental truth in investing that no one is right all the time. In fact, if you are right 60% of the time and diversify appropriately, you should greatly outperform the markets. We all have the ones that got away, especially in a tape like this one. And yes, they hurt. Kudos to you for not letting missing it once, make you miss it twice. "A major reason not to invest in Rent the Runway is the name! "These are Harvard grads? OMG. "Granted, I am a mere male, but the name initially makes me think of airport management or perhaps private aircraft storage or rental. I can squint and see the relevance to fashion – because my wife watches 'Project Runway' – but I cannot see fashionable women whispering that name to each other. It's so ... plebeian, so much like saying 'I got this awesome outfit at ... 'Walmart'!' "Generate a usable, memorable and semi-secret 'whisper' brand name, and it might work." – Anthony M. Berna comment: You're right, Michael. The company's name is a bit of a mouthful. I wouldn't count it out on that, however. The most unfortunate corporate name I know belongs to Be Shaping the Future (BEST.MI), a small-cap Italian consulting company based out of Rome. Absolutely horrible name... but BEST.MI shares were up a whopping 43% in 2019, 16% in 2020 and are up an amazing 79% so far this year. Great stock, terrible name. However, I am bearish on Rent the Runway having anything like this kind of return... for reasons that have nothing to do with its name. Regards, Berna Barshay November 11, 2021 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2021 Empire Financial Research. All rights reserved. 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