Three Things to know (Sept. 16th)

Commentary6 days ago
“I believe it translates into a once-in-a-decade type upgrade opportunity for Apple.” - Wall Street analyst on the anticipated 5G iPhone
1. Apple showed off a new smartwatch, a virtual fitness service, bundled subscription options, and more. We think it was just the drum roll to the main event: a 5G-capable iPhone.
At its first virtual-only product introduction, Apple showed off a new smartwatch that can measure blood oxygen, a workout class subscription service (“Fitness+”), and an Apple One subscription bundle. Yet the market remains focused on the main event coming up: the next generation of iPhones, for which analysts predict enormous growth opportunities. ~40% of the 950 million iPhone customers haven’t upgraded to a new device in the past 3.5 years. We think the anticipated first offering of a 5G-capable iPhone will lead customers to replace those older devices.
2. The SPAC wave continues: real estate startup Opendoor is merging with investor Chamath Palihapitiya’s blank-check company. Are SPACs the new IPO?
“Social Capital Hedosophia II, the blank-check company associated with investor Chamath Palihapitiya, announced that it will merge with Opendoor, taking the private real estate startup public.” (TechCrunch) This deal comes during a wave of interest in special purpose acquisition companies (SPACs), or blank-check companies, which exist as publicly traded entities in search of a private company to acquire. SPACs let startups go public without the hassle of an IPO (though not without their own risks). We think this trend is just getting started, similar to direct listings.
3. Starbucks’ sales recovery has a long way to go as the pandemic quiets cities, but we think it’s a diamond in the (temporary) rough.
“Starbucks said its sales recovery in the U.S. is at least another six months away as consumers continue to work from home and many of its stores in central business districts remain closed.” (WSJ) Restaurant chains concentrated in cities (e.g., Starbucks, Shake Shack) have been recovering more slowly than businesses that are more delivery-based (e.g., Domino’s Pizza). We think this is leaving some diamonds in the rough for long-term investors. Starbucks is on our investment watchlist, but it’s not yet “go time.”

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