The Messiahs Of Momentum, Shopify And Walmart Earnings Preview

Jason Zweig had a fun and excellent article in yesterday’s WSJ titled “How The Stock Market Works Now: Elon Musk Tweets, Millions Buy” (WSJ, Saturday February 13 [SUBSCRIPTION REQUIRED]). It’s a story about how business celebrities like Musk, Mark Cuban and Chamath Palihapitiya are egging on their millions of Twitter followers to buy highly speculative investments like GameStop (GME) and DogeCoin (DOGE-X).

Zweig concludes:

My own take is straightforward. The new messiahs of momentum, with their charisma and huge followings, can unite the buying power of scattered investors better than anyone who came before them. For a crowd of followers to be wise rather than foolish, though, those who lead it must have an unusual information edge.

And I’m not sure why the predictions of today’s powerful outsiders should be any more accurate than those of the insiders who came before them. Fame and fortune in other fields are no assurance of success in the financial markets.

Let me translate: This will likely end badly for the millions who follow Elon, Chamath and Cuban’s recommendations. This is another illustration of what has become the craziest market in history.

Now let’s put in a little legwork to get ready for the week ahead by previewing Shopify (SHOP), market cap $182 billion and Walmart, market cap $412 billion earnings. SHOP reports on Wednesday afternoon and it is almost certain to be another blowout quarter with businesses moving online where their customers are during the pandemic via Shopify’s online business platform. In 3Q20, SHOP reported 96% revenue growth and Adjusted EPS of $1.13 – compared to a 29 cent loss a year ago. However, the stock is up an incredible 33% in the last two weeks and trades for 84x Trailing Twelve Month (TTM) sales. Buying SHOP at these levels is not an investment; it’s pure speculation.

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