🗞 The Hidden Payments Company Winning the Remittance Market

Happy Sunday!

Here’s what’s on the docket for this week’s newsletter:

• ⛽️ Consolidation in the US Convenience Store market

• 🤔 Troubles at SuperMicro Computer

• 📊 Earnings Roundup (Nvidia, Salesforce, and Lululemon)

• 🏦 The hidden payments company dominating the remittance market

And more, let’s dive in!

News of the week

• ⛽️ Convenience Store Consolidation: On Monday, the Canadian convenience store operator Alimentation Couche-Tard offered to buy out its much larger rival Seven & I Holdings, which is the Japanese company behind the 7/11 brand.

  If this debt-fueled deal were to go through, this would be a “fish that ate the whale” type of situation as Seven & I holdings currently operates ~6x more locations than Alimentation Couche-Tard. The combined company would have an estimated 13% market share of the highly fragmented US convenience store market. Meanwhile the next closest competitor Casey’s would have just 1.7% share.

  Seven & I Holding’s stock is up 24% since the announcement.

• 📉 Troubles at SMCI: SuperMicro Computer is a data center operator that was once deemed by investors to be one of the biggest beneficiaries of the AI boom. However, over the last 5 months, SMCI’s stock has been cut in half and this week things got a whole lot worse.

  On Tuesday, famous activist short-selling firm Hindenburg Research which exposed companies like Nikola and Icahn Enterprises, released a damning report that sent SMCI’s stock cratering as much as 25%. Among other concerns, the report cites that shortly after the SEC charged SuperMicro $17.5 million in 2020 for “widespread accounting violations”, the company rehired the executives that were directly involved in the scandal.

  Adding fuel to the fire, SuperMicro Computer announced the same day that it could not file its annual report on time and would need an extension. Filing delays aren’t treated kindly by most investors. SuperMicro’s stock is down 28% over the last 5 days. 

Earnings Roundup:

• 🤖 Nvidia: The investment world held its breath on Wednesday (kidding… kind of) as leading chip maker Nvidia reported its heavily anticipated 2nd quarter results. While the revenue and earnings both came in above estimates, the heightened expectations and a delay for the launch of the company’s new Blackwell Chip sent the stock down ~8% for the week.

  While the report didn’t produce anything too unexpected, aside from a new $50 billion share buyback authorization, it’s still fun to look back at the jaw-dropping growth that Nvidia has experienced over the last 2 years.

• 🖥️ Salesforce: Software giant Salesforce reported 2nd quarter results on Wednesday that topped analysts expectations. The leading CRM provider delivered 8% revenue growth and improved profit margins versus the same period a year ago.

  While Salesforce has been through a turbulent last few years featuring activist investors and a nearly 60% drawdown, shares have mostly recovered and management is still clearly excited about the company’s future. This quarter Salesforce repurchased more than $4 billion in stock, which is more than double any other quarter in the company’s history.

  Despite the positive results, underwhelming guidance and the announcement that CFO Amy Weaver would be stepping down sent Salesforce’s stock down 4% for this week.

• 🛍️ Lululemon: Lululemon, a pioneer in the “athleisure” space and one of the best performing retail companies of the last two decades, has been struggling as of late. The company reported earnings on Thursday that missed analyst’s estimates and was forced to lower its revenue guidance for the rest of the year.

  Management said the underwhelming performance for the quarter was impacted by in-store assortment issues as well as a botched launch of its new Breezethrough Leggings line after customers reported negative feedback on the way they fit.

  Lululemon’s stock is still down roughly 50% from its highs, but despite the slowdown, revenue and earnings both continue to grow.

Company Spotlight: Remitly

Since going public in September of 2021, Remitly Global’s stock is down 72%. However, while most investors have discarded the company as yet another busted COVID tech-darling, the Seattle-based company continues to steal market share from its competitors.

Remitly, a digital payments app that allows users to send money across borders, has seen rapid adoption over the last 5 years primarily by targeting people who have moved to another country and want to send money back home.

Why is Remitly succeeding?

It’s Flexible: Remitly allows users to receive money in a variety of ways. Every country has its own quirks when it comes to payments so Remitly allows receipt via several methods including mobile wallet transfer, digital bank deposit, and even cash pick up or delivery. This works particularly well when money is being sent to someone who isn’t too digitally savvy.

Lower Cost: While not the absolute lowest cost provider, transferring money with Remitly tends to be cheaper than sending money through the legacy remittance providers like Western Union.

Localized Marketing: Remitly has done an excellent job tailoring its marketing campaigns to its target regions in the United States. In particular, it runs billboard ads and partners with prominent local sports teams in areas with large hispanic influence as that demographic tends to be a common user of Remitly’s services.

Given the reasons above and Remitly’s digital-native model, it appears to be on the winning side of the innovator’s dilemma. The company runs on a lower cost structure so it has a greater percentage of revenue that it can spend on marketing to win over more customers. This advantage is helping Remitly to accumulate a growing share of the remittance category, especially in North America.

Here’s how it stacks up against its biggest competitor, Western Union.

Meme of the week

While Nvidia’s quarterly numbers may not have any real, tangible impact on the global economy at large, it certainly feels like it come earnings day.

Investors love to extrapolate out Nvidia’s earnings and take guesses at what the implications are for the economy overall. In fact, Nvidia’s earnings have become such a monumental day for the investment community that some investors are now starting to hold watch parties on earnings day. 😳