Google Craps

What’s Going On Here?

Alphabet, the parent company of Google, lost its way late on Monday: it reported a worse-than-expected profit, and its stock initially fell 2%.

What Does This Mean?

Though Alphabet’s overall revenue didn’t disappoint, part of its all-important advertising business did: clicks on ads across Google’s properties (think YouTube, the Google Play store, and, of course, Google.com) grew by half as much as analysts had predicted. Between that and some hefty fines it paid off last quarter, profit came up short. That’ll likely worry investors, who might now treat April’s revenue miss as the start of a downward trend.

Investors might be hoping other revenue sources will point Alphabet in the right direction. Cloud computing could be the answer, but growth has been slowing with increased competition from Amazon and Microsoft. Instead, Alphabet might have better luck with new hardware ventures: it’s reportedly made an offer to buy the billion-dollar fitness tracker company Fitbit – causing the latter’s shares to sprint upwards Monday.

Why Should I Care?

For markets: All change, please.
Alphabet’s update might push investors further away from fast-growing companies’ shares – i.e. “growth” stocks – and towards relatively cheap, overlooked “value” stocks (tweet this). On Monday, investment bank Morgan Stanley branded growth stocks overpriced, and warned their prices might not rise much as investors search for bargains.

For you personally: More to life than money.
On Friday, Microsoft secured a hotly contested $10 billion cloud computing deal with the US Defense Department. Alphabet – which withdrew from contention because its employees thought military collaboration conflicted with the company’s values – might now be kicking itself. It's a reminder to keep tabs on your investments if you’re building a “socially responsible” portfolio. Microsoft might’ve won the lucrative contract, but it might now see its currently high environmental, social, and governance (ESG) ranking start to fall.

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What’s Going On Here?

On Monday, luxury conglomerate LVMH – owner of Louis Vuitton, Dior, and Moët & Chandon – announced its $15 billion bid to buy US jeweler Tiffany & Co. Clearly someone has expensive tastes...

What Does This Mean?

Tiffany's has had a blue year: its second-quarter sales were lower than forecast, and it issued a profit warning after Chinese demand slowed. The retailer is now looking to turn its fortunes around – and LVMH, which has a history of polishing up acquisitions, thinks it can help.

But there’s no guarantee Tiffany's will marry LVMH for its money, especially after its share price shot past LVMH's per share bid price on Monday. Tiffany’s is expected to reject the offer – which is only 14 times its earnings, versus the 22 times Michael Kors paid for Versace last year – as an undervaluation. That could trigger a bidding war between LVMH and its two arch-rivals: Gucci-owner Kering and Cartier-owner Richemont.

Why Should I Care?

For markets: The pros of consolidation.
The luxury goods industry has seen a wave of mergers and acquisitions in recent years, in part because expanding into growing markets – like China – is so pricey. Tiffany’s has also taken the trade war to heart: it can’t rely on Chinese tourists coming to the US to buy bling, and doesn’t have many of its own stores over there. It’d benefit from LVMH, then, which has a massive presence in China. LVMH would benefit from Tiffany's too: it’d have a younger, less wealthy customer base to tap into.

The bigger picture: Making beautiful music.
The LVMH-Tiffany's deal is an example of a “horizontal” merger, where two competitors join forces. But it’s not the only type of pairing in vogue. A vertical merger – where companies within the same supply chain join up – has worked for Spotify, which bought podcast producer Gimlet earlier this year. On Monday, it hit the high notes with impressive subscriber growth – and investors danced to its tune, sending shares up.