🤝 Even Musk and Buffett agree on this investment

Klarna needs its money, please | PCs aren't doing it for anyone |

Hi Reader, here's what you need to know for September 1st in 3:08 minutes.

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Today's big stories

  1. Klarna racked up major losses on the back of rising costs and cash-strapped customers
  2. Here are the three investment ideas that even Elon Musk and Warren Buffett can agree on – Read Now
  3. HP gave a disappointing quarterly update, as the PC market continues to drop off

Klarna Can Put Off Payments, But Not Losses

Klarna Can Put Off Payments, But Not Losses

What’s Going On Here?

Klarna reported on Wednesday that its losses ballooned in the first half of the year.

What Does This Mean?

Klarna got into the buy-now-pay-later (BNPL) game early, and went on to become Europe’s most valuable startup for a time. But now Klarna’s just one of many, which – along with investors’ mounting skepticism about high-growth tech firms – has squashed its valuation to $7 billion, down 85% from last year.

Still, the Swedish payments provider has managed to expand into markets like the Czech Republic, Canada, and Greece, all while attracting some 30 million users in the US too. That helped it swell its revenue by 24% in the first half of this year versus the one before, but that’s nothing compared to the 54% uptick in credit losses that came as increasingly cash-strapped customers failed to pay back their loans. Mix in rising borrowing costs and all the expenses that come with expanding, and Klarna’s losses more than tripled in the first half of the year.

Why Should I Care?

The bigger picture: Pay now, profit later.
Klarna’s competitors don’t just include tech companies like Apple, but also traditional banks like HSBC and Barclays. They’ve recently launched new services that spread the cost of purchases, which should help them hold onto younger customers who prefer pay-later services to traditional credit cards. That could be a lucrative move: GlobalData predicts BNPL transactions will make up 7.1% of all global commerce by 2026, up from 2.7% last year (tweet this).

Zooming out: Tighten your purse strings.
It’s no wonder shoppers want to spread out costs: data out on Wednesday showed that inflation in the eurozone hit another record high of 9.1% this August versus last year. And since some economists think that could encourage the ECB to go ahead with a jumbo 0.75% rate hike when it meets next week, folk might find their budgets are squeezed even tighter soon.

You might also like: Has inflation (finally) peaked?

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Analyst Take

Three Investment Ideas That Elon Musk And Warren Buffett Actually Agree On

Three Investment Ideas That Elon Musk And Warren Buffett Actually Agree On

By Russell Burns, Analyst

Elon Musk and Warren Buffett don’t agree on everything, and they certainly don’t see eye to eye on crypto.

But the two iconic billionaire investors do agree on this: with much of the world facing high inflation and low energy supplies, it’s a good time to invest in commodities and alternative energy.

In fact, there are three investment areas these two really seem to agree on.

That’s today’s Insight: the three investment ideas that Elon Musk and Warren Buffett actually agree on.

Read or listen to the Insight here

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HP Might Need To Turn Its Results On And Off Again

HP Might Need To Turn Its Results On And Off Again

What’s Going On Here?

HP gave a disappointing – but not surprising – quarterly update earlier this week.

What Does This Mean?

Looks like PCs are falling out of fashion: industry analyst Gartner said global shipments dropped 13% between April and June, marking the sector’s worst quarter in over nine years. And spare a thought for poor HP, which saw the biggest decline in shipments out of all the companies tracked over that time period. So it’s not a huge surprise that the PC maker saw sales of its consumer computers fall 20% last quarter from the year before, mainly led by sales of its notebooks falling by nearly a third. HP’s printer sales didn’t help either, falling by 6% as supply shortages continued to plague the division. And sure, sales of the company’s commercial PCs rose by 7% last quarter, but that wasn’t enough to save its overall revenue from falling a worse-than-expected 4%.

Why Should I Care?

Zooming in: Business isn’t booming.
Those commercial PCs have been buoying up HP’s falling consumer sales for a while, but that might soon come to an end: the company said business customers are starting to cut down on spending – and ramping up hiring freezes – to survive in an increasingly dire economy. On top of that, HP said it’s expecting evaporating consumer demand to continue for at least a couple more quarters. So left with little choice, HP cut this year’s profit outlook to below analysts’ expectations.

For markets: Investors are logging off.
Rival Dell also gave a disappointing outlook last week, citing many of the same issues that troubled HP. That’s not what investors banked on when they swapped high-flying tech stocks for PC makers earlier this year, keen to snap up their growth at much lower valuations. But they’re heading for the exits now: Dell and HP have seen their stocks fall 13% and 11% in the last month, much worse than the tech-heavy Nasdaq 100 index’s 4% dip.

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💬 Quote of the day

“Those are my principles, and if you don’t like them… well, I have others.”

– Groucho Marx (an American comedian, actor, and writer)
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🎉 Coming Up In The Next Week…

All events in UK time.

🎉 How To Build Wealth In Your 20s: 5pm, September 1st
🤑 Inflation Strategies For Savvy Investors: 12pm, September 1st
🇬🇧 In-Person Ladies Investing Meet-Up: 6.30pm, September 7th

🥳 And After That…

⚡️ What’s Driving The European Energy Crisis?: 5pm, September 12th
💰 Building Crypto Wealth In A Bear Market: 12pm, September 20th
😎 Three Industries That Can Thrive During Recessions: 5pm, September 21st

🎯 On Our Radar

  1. Parents do have their favorites. Just check their passwords.
  2. Not just the greatest player. Serena proved her on-court style is a winner too.
  3. WeWork’s founder is getting new backing. And the definition of insanity is…
  4. Bye bye, bleep machine. There’s a new way to scrub out accidental F-words.
  5. There’s power in saying no. Just ask Keke Palmer.
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