From Wednesday, Peloton will begin selling its original bike as well as a number of accessories to US customers via Amazon. 

Speaking to CNBC, Peloton’s chief commercial officer, Kevin Cornils, said: “Post-Covid, the retail environment — online and in stores — is continuing to evolve, and that’s something that we’re trying to understand better to make sure the Peloton of the future is calibrated appropriately for that.”

The move appears to be the most recent effort by Peloton to widen its customer base and boost investor confidence after a number of setbacks.

For example, February saw Peloton accused of concealing rust and corrosion on its bikes to avoid product recalls, with the company claiming the rust was “superficial” and would not impact the bike’s performance. In the first quarter of 22%, Peloton’s sales slumped by 24%.

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“In fact, the administration tried hard to inject even more stimulus into an already over-heated, inflationary economy and only Manchin saved them from themselves,” Bezos Tweeted. “Inflation is a regressive tax that most hurts the least affluent. Misdirection doesn’t help the country.”

Bezos’ comments come in response to a thread in which President Biden claimed the US was on track for its largest yearly deficit decline ever, totalling $1.5 trillion. 

Bezos called the President out over a tweet that said taxing wealthy companies has the potential to bring down inflation and urged the Disinformation Board to review the President’s tweet. 

“Raising corp taxes is fine to discuss,” Bezos said on Friday. “Taming inflation is critical to discuss. Mushing them together is just misdirection.”

Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.

Amazon

This week we are seeing Q1 earning results from 175 of the S&P 500 companies including big tech results from Microsoft, Google and Meta. Companies like Apple have thrived in the new year and reached all-time record earnings this quarter, continuing to make them an attractive investment for traders.

One to watch will be Amazon’s earnings report. Much like any other online-based service provider and seller, Amazon saw a boost in sales during the last two years due to Covid and lockdown affecting consumer behaviour. However, now that things have settled, recent UK sales reports are showing online sales falling noticeably across the board.

AMZN is currently down 23% from its November 2021 high and investors are keen to see whether their earnings show that things are picking up or slowing down. 

Amazon’s 18% stake in electric vehicle maker Rivian last quarter helped “juice” their gains, however, Rivian’s recent struggles surrounding botched price hikes and supply chain issues may affect the big tech’s profitability, as Rivian is now consequently trading at near all-time lows.

Additionally, Amazon’s fuel and inflation surcharge come into effect on April 28th to combat rising prices. Alongside the unionisation situation, it has had to deal with in Alabama and now New York, this may likely affect stock prices.

On the offset, Amazon Web Services has been a key profit driver for Amazon in the last quarter with Amazon’s cloud sales growth hitting 40%.

In any case, investors will need to closely consider Amazon’s earnings in comparison to the other big tech giants to make a decision on their trading. 

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The deal means UK Amazon customers can continue to use their Visa credit cards.

Back in November, Amazon announced it would stop accepting payments via Visa credit cards because of Visa’s increased fees due to Brexit. At the time, Visa said it was “very disappointed” with Amazon’s decision. 

Amazon has since been pressuring Visa to lower its fees in a series of moves that motioned retailers’ increasing frustration over the costs associated with major card networks. 

Speaking to CNBC via an email on Thursday, a spokesperson for Amazon said, “We’ve recently reached a global agreement with Visa that allows all customers to continue using their Visa credit cards in our stores. Amazon remains committed to offering customers a payment experience that is convenient and offers choice.”

The e-commerce giant is also set to abandon a 0.5% surcharge on Visa credit card transactions in Australia and Singapore, which it introduced last year.

The dispute is about the fees charged by Visa, which have recently increased due to Brexit. Interchange fees sit at the centre of this issue. This is a small fee levied by card networks such as Visa on every transaction made using its cards, taken to cover the cost of processing the payment. 

Under 2015 EU regulation, interchange fees were capped in the bloc of 0.2% for debit card transactions and 0.3% for credit cards. At the time of introduction, the EU said that the regulation would save consumers approximately $6 billion in hidden fees. However, post-Brexit, operators in the UK are no longer bound by these rules. 

According to the Financial Times, Visa planned to up its cross border interchange fees from 0.3% to 1.5% this year. Such fees, to be paid either by Amazon directly or by sellers on its platform, would erode profit margins and lead to more costly products if passed on. 

A spokesperson for Amazon said, "The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers. These costs should be going down over time with technological advancements, but instead, they continue to stay high or even rise.

"As a result of Visa's continued high cost of payments, we regret that Amazon.co.uk will no longer accept UK-issued Visa credit cards as of 19 January, 2022."

The online retailer also advised its customers to update their default payment.

The speculation was initially sparked by an Amazon job advert for a “Digital Currency and Blockchain Product Lead” based at its Seattle headquarters. The job posting stated the position would be based within Amazon’s Payment Acceptance & Experience Team, with the role involving innovating “on behalf of customers  within the payments and financial systems of one of the largest e-commerce companies in the world.” This led some to suspect that the e-commerce giant was looking to accept cryptocurrencies in the near future. 

The speculation caused bitcoin and other cryptocurrencies to surge on Monday morning, with bitcoin up by 12% to $38,723 at around 8am in London. The surge marked bitcoin’s highest price in over a month. 

Growing numbers of companies have already begun accepting digital currencies as payment. However, Amazon has firmly denied these rumours, stating that although the company is interested in the space, the current rumours surrounding the company’s cryptocurrencies plans are not true. 

Finance ministers of the G20 economies have backed a landmark deal to prevent multinational companies from shifting profits to tax havens. The deal will introduce a minimum global corporate tax rate of 15% to deter big companies from exploring their options for the lowest tax rate. The deal will also shift how hugely successful multinationals such as Amazon and Google are taxed. Taxes for such multinational companies will come to be based partly on where they sell their products and services, as opposed to being based on the location of their headquarters. The deal marks an end to eight years of debate over the issue, with national leaders expected to give the deal the final go-ahead in October at the G20 Rome summit. 

Members of the G20 group include Britain, Germany, France, India, Japan, and Mexico. The group accounts for over 80% of global gross domestic product, 75% of global trade, and 60% of the globe’s population. While most G20 economies appear to be on board with the plan for a global tax crackdown, some countries are yet to sign the pact. These countries include Ireland, Hungary, and Estonia, and other non-European nations such as Sri Lanka, Kenya, Nigeria, Barbados, and St Vincent and the Grenadines. These nations are being encouraged to sign up to the agreement by October. 

Unsurprisingly, the market’s reaction to the grand breakthrough G7 announcement of a landmark “minimum corporate tax rate of 15%” is one such moment of noise over substance. While the announcement played brilliantly with the political classes who argued: “at last global corporate tax rates are being addressed and the largest tech firms will now pay their fair share”, does it mean corporates will suffer the ignominy of paying actual taxes?

Of course they will…not.

The share prices of the largest tech firms with the finest tuned tax-minimisation corporate structures barely yawned. The salaries of Corporate Tax Lawyers and Tax Accountants are already going North in anticipation of a feeding frenzy for their services. These professions set to reap windfall profits from the political posturing around the tax noise. They will dissect the deal’s underpinnings with a fine comb, identify the back doors, engage lobbyists to push for advantageous clauses, and get set to arbitrage every single facet of the deal – assuming it ever happens and becomes a reality.

If any European country ever receives anything close to a cheque for 15% of the profits made by a big digital tech company selling in their borders, I shall eat my hat. (I get to choose which one…) I’ve already seen a scheme from one accounting firm outlining how a major internet retailer that isn’t a river in Egypt can wriggle out because of the marginal cost calculations… something to with governments getting “the right to tax 20% of profits exceeding a 10% margin” – which sounds much less than 15% of profits the politicians blithely assure us they have secured.

But, of course, and tax deal is a win/win for everyone:

• The Sherpas of global finance say it’s a revival of “multilateralism” as nations come back together in the post-Trump era to solve “critical challenges facing the global economy”.
• The Politicians are all over it like a rash – looking forward to all that lovely US tech money to spend… while claiming to have righted a massive historical wrong in the lack of cash paid by many firms.
• Corporates will be delighted. A chance to show they support the good cause of tax equality, while behind the scenes, they keep emptying our wallets.
• National tax agencies won’t bat an eyelid. They know better than to go for the big tech firms. Such firms are heavily tooled up with the best tax lawyers. It’s much easier to go from small businesses that tend to cave quicker to HMRC threats.

On the face of it, the Irish should not be particularly happy at the loss of the jurisdictional arbitrage advantage – but even they are smiling. They know big European-tax dodgers aren’t going to haul out of Dublin any time soon. Many may decide to beef up their tax special-forces in Ireland in the expectation any tax deal is still years away from full ratification by all the members of the OECD, and that it may not happen at all… ever.

And there is no guarantee the Americans are going to accept it. Political gridlock and a Republican Party in thrall to the Beast of Mar-a-Lago means if it looks bad for America, then it hasn’t a breeze of passing. The reality is the new G7 minimum tax proposal is going to struggle to get through the slough of despond that is deepening US political gridlock. The Republicans are already parroting Trump that such a deal can’t be good for US Company revenues, therefore should be rejected.

What will the G7 tax deal mean for markets?

It’s going to be a busy time for the credit agencies, figuring out if the shock horror of corporates actually paying taxes in countries where they sell stuff, pushes a few names down a credit notch or two because paying taxes comes before paying bondholders. I’d be surprised if they find many lame ducks – but the credit agencies won’t miss the opportunity to be relevant and will no doubt start pumping out research for bond managers to fall asleep over.

In the real markets, experience equity investors know corporates will find new and better tax avoidance schemes to supersede whatever the agreement outlaws. As one wag once pointed out: “if you’re paying taxes on profits, you ain’t doing it right.”

That leaves an interesting thought: what about all the US tech firms now sitting on enormous cash piles, built up from untaxed profits channelled through corporate headquarters in nations willing to charge zero taxes – like Ireland? Retroactively taxing these untaxed gains isn’t on the agenda and will never ever happen…. Better spend the money on acquisitions, infrastructure, etc… heaven forbid paying staff better. But company spending is an economic multiplier – so it’s a good thing. Right? It will push up the stock price and allow Jeff Bezos to fund his trip to the moon…

I suspect that in the long run, all we will ever remember about the successful G7 agreement on tax was that there was an agreement… it will be rigorously enforced… and the tech giants still won’t pay very much tax.

Long criticised for the small percentages they pay in tax, big companies such as Google, Microsoft, and Apple will be pushed to pay more following a historic move by the G7 group of wealthy nations. The deal states that large multinational enterprises would pay a global minimum corporation tax of 15%. For the largest global companies, such as Amazon, 20% of profits would be reallocated to the countries where the sales originated from. 

In a tweet, US Secretary of the Treasury, Janet Yellen, highlighted the importance of a global minimum tax. She stated that it would "help the global economy thrive, by levelling the playing field for businesses and encouraging countries to compete on positive bases". 

However, experts have warned that Amazon may escape increased taxation unless a significant loophole in the deal is resolved. The move would exclusively apply to profits that exceed a 10% margin for the largest multinational enterprises. Due to its incredibly low profit margins, Amazon could be ruled out. According to a report by The Guardian, Amazon saw profit margins of just 6.3% in 2020, putting the multinational tech company significantly below the 10% taxation threshold. Despite having a net worth of $314.9 Billion, Amazon’s slight profit margins could potentially save the company from increased taxation costs. 

Experts have recommended broader global negotiations at the G20 summit, which is set to take place in Venice this July. They say that tougher rules need to be put in place to prevent big companies from adjusting their operations to remain below the 10% threshold.

Good tech firms rise because they create new value. 15 years ago, Amazon was a mystery – what was the point in a delivery company not making any money? Apple was building a niche with new gizmos like the iPod, while Facebook was one of many banal social media sites we could hook up on. Uber and AirBnB didn’t exist. If you wanted to watch a film before the video was released, you went to Blockbuster.

Now, these same tech firms are worth trillions – because they created entirely new markets and new revenue streams. They carry substantial growth premia: Facebook consumed its rivals while its targeted advertising becomes more sophisticated allowing it to rake in money. Apple has become the most valuable company on the planet – by creating an ecosystem of IOS addicts to buy its constantly upgraded models that haven’t innovated anything fundamentally new in 10 years. Amazon is indispensable as the place stuff comes from. Google is successfully monetising every aspect of our lives. And Netflix…Netflix is an outlier. It’s great. My family couldn’t live without it – anything is better than watching the BBC news. Although Netflix invented the concept of a streaming service, it’s now just one among many. When Disney launched its streaming service in 2019, it was able to attract more subscribers faster – because streaming demands great content. If you want great content, Disney has it in spades. Netflix invented streaming, but Disney will dominate.

Generally, the success of companies that innovate new markets underlies their initial success. It also causes hype – when every investor thinks every new exciting tech launch is going to replicate the success of Amazon or Apple, it’s wise to remember tulip markets and step back and consider. This year’s big story has been ZOOM – worth billions because everyone on the planet suddenly learnt it exists and started using videoconferencing.

Or how about the blowout record-making IPO success of Snowflake – the cloud-computing solutions provider? Snowflake competes in a very crowded market. Its rivals have been making very healthy billion-dollar profits for a number of years. One firm, 40-year old Teradata, makes $2 bn revenues from its cloud activities and is valued at $2.5 bn. But brand-new Snowflake makes $250 million revenues, runs at a loss and is worth $80 billion – despite doing essentially the same thing as profitable Teradata. But Snowflake is new – and investors seem to be believing the old market lie: “this one is different”.

Tesla is a bubble. But it's one that, thus far, hasn’t popped.

Nothing illustrates the hopes and expectations that drive tech stocks as well as Tesla. It’s a fascinating company. It has created an entirely new market in electric vehicles, and it also dominates the battery tech. It is successfully making and selling cars and setting the market’s agenda.

There are two different views on Tesla:

There is the “you don’t understand” perspective favoured by the Tesla fan-club. They have some good points. They stress Tesla is a long-term play on the future not just of cars, but everything about capacitance (batteries), personal transport and power. It’s created and taken leadership of the expanding non-ICE (Internal Combustion Engine) market. It’s got proven battery technology and it’s collected massive amounts of data that will enable to lead autonomous driving – enabling Tesla owners to run their precious cars as self-driving taxis when they aren’t using them. The Tesla fans say the traditional financial markets don’t understand what massive future value the firm has created.

The market clearly believes in Tesla. It’s worth over $400 bn dollars despite making less than $1 bn profit in the last 12 months (the first time it’s ever posted an annual profit). While most car companies trade on modest single-digit multiples, the market clearly believes in Tesla’s exceptionalism at a plus 400 multiple.

Even though it produces less than 0.5% of global auto sales, Tesla is worth 2.5 times as much as Toyota which builds over 10% of the world’s cars, each year posting healthy profits of $23 bn on 10 times multiple. The big three US auto companies make 18 million cars per annum and post profits most years.

The unbelievers say Tesla’s minuscule profits after 10 years of developing their car model means it’s just a small niche player. They say it’s too reliant on selling carbon-regulatory certificates – every car it sells is sold at a loss. Ferrari makes 23% margin on each car while Tesla loses money. Naysayers don’t believe the hype around batteries – pointing our newer, cleaner battery tech, which can charge in seconds, will make every Tesla obsolete overnight; sometime in the future. They say Tesla’s batteries, actually made by Panasonic, won’t set the industry standard. The Chinese are saying they already have million-mile batteries, and although Tesla got a Chinese factory up and running in record time, the Chinese are outselling it.

Even sceptical financial analysts accept that Tesla makes good cars, but they believe that it needs to massively increase its margin per car and increase production at least 10 times to justify a stock price even half of its current value. In short - Tesla is a bubble. But it's one that, thus far, hasn’t popped.

But it will.

What’s driven Tesla to such stratospheric values is a result of some extraordinary factors. Founder Elon Musk is regarded by fans as a far-sighted prophet of genius. To detractors, he’s an arrogant market manipulator, hypester and snake-oil purveyor. Musk attracts the hopes and dreams of retail investors who are jumping on board the Tesla party bus. Good luck to them.

The main issue Tesla fans are missing is the same thing that is going to test Netflix and a host of other overpriced tech stocks: Competition.

Every other automaker gets what Tesla is doing. So far no one is doing it better. Someday, very soon, someone is going to launch something better. It might not be anything like Tesla, or it might just be much, much less hyped.

It is forecasted that mobile banking is set to be more popular than visiting a high street bank branch within two years. And as the banking industry continues its digital journey, Mark Grainger, VP Europe at Engage Hub, says consumers are coming to expect more control over their data, greater convenience, and “anytime, anywhere” accessibility.

Mobile-first consumers

So far, most banks worldwide have handled the mobile era in exactly the same way, simply shrinking down traditional bank accounts and putting them on a smartphone screen without offering real innovation or engagement.

But simply pouring millions into innovation hubs and piecemeal digitisation strategies isn’t going to deliver the kind of results that will win over those tempted by the challenger banks. Traditional banks need to shift gears and use the valuable information they already have to provide customers with seamless interactions across different channels.

At the same time, banks need to understand that the digital banking revolution is more than a mobile app. It’s about creating an entire experience. The implications of failing to facilitate a seamless cross-channel customer experience – one that lives up to growing customer expectations – is huge. Today, consumers have more choice than ever before, thanks to the rise of fintech start-ups and digital-only banks, and if they do not get the level of service they’ve come to expect, they will not hesitate to take their business elsewhere.

Subscription service model

Using a service model patterned after Amazon Prime or Netflix may seem odd to many retail banks, but challenger banks are already experimenting. Would consumers pay a subscription to get the same service they do with Amazon and Netflix? The answer is yes.

Revolut is already showing itself as a front runner in subscription-based banking. The challenger provides a ‘freemium’ model, which gives users a free UK current account and a free euro IBAN account that offers no fees on exchanging in 24 currencies, up to £5,000 a month. Revolut also provides monthly subscription plans with higher thresholds for no fees, as well as instant access to crypto-currencies, cash back, travel insurance, free medical insurance abroad, airport lounge access and priority support.

Research shows that in the UK 57% of people would be willing to pay an extra monthly fee for additional services from their banks. Most consumers – 45% – would like additional media services such as Netflix and Amazon while 40% prefer earned cashback and 37% would pay for overdraft facilities.

Considering that at present, 72% of customers don’t pay any monthly fees to their banks it’s fair to say that there is a great potential for financial institutions to leverage these services and elevate their game when it comes to competing against challenger banks and unconventional financial services.

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Trust and value

Furthermore, traditional banks have a crucial asset compared to challenger financial institutions, and that is trust. Traditional banks have a much longer and seemingly more robust security record.

The paradox is that many people trust their primary financial provider but distrust the financial services industry overall. Therefore, banks that want to persuade their customers to adopt new models and pay a potential monthly fee have to prove that they have customers’ interest at heart.

One way to achieve this is through transparency. The financial services industry still lags behind other sectors when it comes to transparent policies, costs and customer data. This needs to change and they need to show that they are keeping pace with the market trends and customer expectations.

Another crucial aspect banks need to keep in mind when it comes to monthly subscriptions is the added value they would bring to customers. If they agree to additional costs, consumers will also expect extra benefits and not just the same things they used to get for free. Without additional value added, it will seem that banks are trying to simply make some extra money thus confirming customers’ distrust in financial institutions.

If they agree to additional costs, consumers will also expect extra benefits and not just the same things they used to get for free.

Bank of America, for example, learnt this lesson the hard way when they wanted to charge their customers a $5 fee for using their debit cards for purchases. The backlash was swift and strong, and the bank had to cancel the plan within six weeks.

To avoid such situations, banks need to focus on their customers’ financial health and create personalised and holistic value propositions that will provide a competitive edge against challenger banks and convince millennials that they can provide safe and innovative solutions for life’s complex challenges.

By understanding these strategies and embracing the changes in consumer buying behaviours, financial institutions will be able to create new ways to generate recurring value for their customers and new sources of predictable income.

Key skills

However, in order to transform their approach to digital transformation and subscription models banks will also need the right skills and capabilities.

A new CBI/TCS report highlights the UK’s rapidly accelerating digital talent gap as new technologies transform the way we live and work. Currently, the UK is losing out on £63bn a year as companies struggle to find people with digital skills. Areas of banking that need to be a focus for investment include the use of AI in customer profiling, money laundering detection and improving customer services. All of these investments require emerging technology to be implemented, and employees with the skills to manage it. Banks will need to implement training programmes, smart hiring strategies, and strategic digital transformation programmes to attract tech talent and implement a customer experience to rival challenger banks.

And whilst providing subscription services to their customers might require considerable resources and a significant shift in strategy and policies, engaging the new generation of digital-first customers is paramount if traditional banks want to remain relevant and fend off challenger financial institutions. Harnessing this opportunity will provide a critical competitive edge, inspire loyalty and make customers feel valued.

Many industries have already adopted this system and have reaped significant benefits already. It’s high time for traditional banks to challenge the current status quo as well and reap the benefits of a subscription model.

If it was possible to rewind back to 1999, we’d all invest in Apple stock instead of that VHS Recorder. In a new study by SmallBusinessPrices.co.uk, we analyse the priciest stocks of 2019 and what you could have bought with $100 over the decade.

Amazon is the most expensive stock, with the average stock price calculating to a whopping $1,752 - meaning $100 couldn’t buy you any stock, whilst in the year 2000 you’d be able to afford just two.

As one of the top e-commerce platforms in the world, Amazon gets more than 197 million visitors each month, and in 2018 the company’s share of the US e-commerce market hit 49%.

Based on the average stock price of Apple in 2000, $100 could have bought you around 35 stocks, whilst this same value wouldn’t buy a single stock based on 2019’s average stock price.

Steve Job’s innovative and visionary approach led to Apple becoming one of the biggest tech giants in the world. The launch of the iPod revolutionised the portable media player market, eventually launching iTunes which essentially changed the world’s understanding of digital media and the music industry.

Who’s worth more?

Microsoft top the leaderboard this 2019, with the company’s net worth being valued at $1 trillion - one of the only three companies to pass this figure, with Apple and Amazon being the other two in recent years.

Amazon takes second place for net worth, being worth around $928.5 billion, whilst Apple follows behind on $892.1 billion.

Despite Apple taking third place for net worth, the brand still remains champion for yearly revenue. In 2018, the giant made over $265.6 million - higher than both Amazon and Microsoft who made $232.9 and $110.4 million respectively.

What are unicorns? 

A unicorn business is a startup with a valuation of $1 billion, they are privately held and rely on venture capital. The name ‘unicorn’ comes from the rarity of businesses gaining such success.

Which sector is taking the lead?

Despite unicorn companies being private and not being publicly traded, if you’re hot on investment and want to keep an eye on which sectors seem to tip the edge, we’ve taken a look at the sectors which are most likely to become unicorns.

With over 360 companies being valued at $1 billion this year, the e-commerce sector took the lead, with 42 companies being declared as unicorns. This was closely followed by Fintech, which saw 39 companies join the leaderboard, whilst Internet Software & Services took third place with 32 companies.

Ian Wright from SmallBusinessPrices.co.uk stated: “Unfortunately we can’t go back in time and invest that $100 we spent on junk, in Apple or Amazon! However, this research reveals just how quickly some of these brands have grown in the last few years, and how privately held start-up companies are also experiencing huge valuations from investors taking big risks to be successful.”

Investments of the 2000s

To see how much $100 could have bought you in the 2000s, or find out more about unicorn start-ups in more detail, you can take a look at SmallBusinessPrices.co.uk’s tool here.