Asset Bubbles, Google Earnings, Cupcakes, And $70k Potato Salad, Yo!
Estimize | Jul 20, 2014 02:02AM ET
Earlier this week Federal Reserve Chair Janet Yellen commented that she signs that some asset classes may be overvalued. If she was hinting at the big new tech companies posting incredible earnings such as Alibaba , then she’s probably wrong. If she were referring to asset classes like cupcake companies, $70,000 potato salad, and the app Yo, Ms. Yellen might have a point.
You may have already heard but the other day some guy created a Kickstarter looking to raise 10 bucks to fund some potato salad he wanted to make. For serious donors ($3 or more), he even promised a taste of the finished product. The project creator, “Zack Danger Brown” now owes 2,611 people a bite of his potato salad. His project has inadvertently raised in excess of $70,000. That’s right, some random dude is making the world’s most expensive potato salad thanks to Kickstarter. And for just $3, you can have a bite too.
Sadly, this extravagant behavior isn’t just limited to Kickstarter potato salad trolls. Just last month we saw an app called “Yo” go viral. The only thing that Yo lets users do is send a stock message to each other which literally just says “Yo”.
Yo may be the ultimate (satirical) manifestation of the theory of unbundling. Mark Zuckerberg has been hard at work unbundling the one big blue app of Facebook into smaller more efficient apps that provide best in class experiences within individual product verticals. Yo is an extremely lean app that provides a top notch 0 charter messaging platform. How useful are 0 character messages? Well, that’s another story.
It isn’t terribly shocking that a few hundred thousand Silicon Valley cheerleaders downloaded Yo and had fun with it for a few hours, but what is surprising is that investors were willing to back the app for over $1 million.
In other news, Crumbs Bake Shop ((OTC:CRMBQ) finally called it quits last week. Crumbs set out to build a cupcake empire, selling overpriced concoctions of cake and frosting on expensive real estate. Last quarter appears to have been the final nail in the coffin. Crumbs reported a quarterly loss of 33c per share, a 94% increase of the quarterly loss on a year over year basis. FQ1 revenue also dropped an embarrassing 25% from $12.10M to $9.10M. The latest reports indicate that the star of CNBC small business turnaround reality TV show “The Profit”, Marcus Lemonis, might be interested in teaming up with Fischer Enterprises to offer a deal to buy and rescue Crumbs.
Ms. Yellen is right, some asset classes are overvalued (like cupcakes, potato salad, and apps, yo!). But if she means to say that tech stocks are overvalued across the board, she is a few months late to the party. Back in March and April, we saw bloodletting among internet names and high flier growth stocks, and Google was one of them. Price-to-sales and price-to-earnings ratios came crashing down while earnings growth has for the most part stayed the path.
Get The News You Want
Thursday after the close, Google reported earnings and showed us that its perfectly capable of keeping up with revenue expectations, even when costs per click suddenly drop 6%.
Google did miss EPS expectations Thursday, but occasionally missing a profit target is just part of Google’s DNA. The company spends so much money on research and development that it’s impossible to know how quarterly EPS will come in each period, but as long the numbers keep going up investors don’t seem to mind a miss here and there. Thursday, Google reported $12.67B revenue while the Estimize community had forecast $12.77B and the Street was low like they usually are predicting only $12.35B.
Although Google missed its earnings target, both EPS and revenue made double digit year-over-year advances. And investors greeted the news favorably.
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