Market Movers - 15 June 2024
Market Movers - 15 June 2024
Stocks covered: EVO, NU, SE, ADYEN, MELI
Welcome back to the Wolf of Harcourt Street Newsletter.
Market Movers is your time-saving guide to crucial stock news, cutting through the noise.
A very quick announcement today. I am excited to reveal that the next investment thesis on Nubank will be released later this month. I’ve been working on this piece of research for almost six months now (on and off) and I’m excited to share it. Subscribers can expect a similar level of depth and detail as in previous deep dives, such as Adyen and Evolution last year. Make sure you’re subscribed so you receive it straight to your inbox.
With all that being said, let’s dive into today’s edition!
Todays Agenda
Evolution Lots and Lots of News
Nubank Reaches 2 Million Active Insurance Policies in Brazil
Sea Meta and Shopee Roll out New Feature in Thailand
Adyen and Stripe partner with Capital One to Combat Fraud
MercadoLibre Large Language Model Use Cases
1. Evolution (Ticker:EVO) Lots and Lots of News
Illinois Eyes iGaming to Boost State Revenue
The state of llinois has increased the sports betting tax rate to a graduated structure with the new tax rates expected to generate an additional $170 million to $200 million annually for the state. This increase primarily impacts FanDuel and DraftKings, the largest operators in Illinois.
The tax hike was driven by the need to balance the state budget. House Gaming Committee Chairman Dan Didech mentioned that while operators may not be as profitable as before, they are expected to remain profitable.
Source: PlayUSA
My Perspective: While Illinois has increased the sports betting tax to address immediate budgetary needs, this move may pave the way for future iGaming expansions, particularly online casinos, as a means to generate additional revenue. Evolution is waiting patiently in the wings.
NolimitCity Launches in the US
Evolution has announced its entry into the US online gaming market by launching Nolimit City's slot games in six states: Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia. This launch is significant as it is the first simultaneous rollout across all these states. Nolimit City became part of the Evolution Group in 2022 as part of a €340 million acquisition.
Source: Evolution IR
My Perspective: While slots are not Evolution's core competency, these games are what most land-based casino customers are familiar with, making them a good way for Evolution to attract players to its One Stop Shop platform.
New Jersey Online Casino Revenue Grows 21% in 2024
In May, New Jersey's online casinos experienced their second-highest revenue month ever, generating over $192 million, a 19% increase from the previous year. This follows March's record-setting $197.2 million. The cumulative revenue for the first five months of 2024 stands at nearly $942.8 million, up 21% from the same period in 2023.
In 2023, NJ online casinos set a new state record with over $1.9 billion in revenue, surpassing the previous year's $1.66 billion. The current trends suggest that 2024 may surpass these figures, potentially reaching or exceeding $2 billion in annual revenue.
Source: Play NJ
My Perspective: It is extremely positive to see such strong growth in the state of New Jersey. Not only is this a direct benefit to Evolution’s revenues at the moment but it will be an example for other US states. Look at all of the additional tax revenue you could raise overnight if you legalised iGaming in your state.
2. Nubank (Ticker: NU) Reaches 2 Million Active Insurance Policies in Brazil
Nubank and Chubb, a global insurance leader, have achieved a major milestone of 2 million active insurance policies in Brazil. This success is largely driven by Nubank Vida, a digital insurance product launched in 2020, which alone has over 1 million active policies.
The collaboration between Nubank and Chubb has been pivotal, leveraging Chubb's digital distribution platform, Chubb Studio, to efficiently create and offer insurance products through Nubank's app. As a fully digital insurance product, Nubank Vida allows users to manage their insurance needs entirely online. It addresses the high costs and lack of awareness that previously hindered access to life insurance.
Nubank’s insurance portfolio, developed with Chubb, includes various products like home, cell phone, loan protection insurance, and a unique life insurance product, Nu Vidas Juntas, which allows policyholders to gift an individual policy to another Nubank client.
Source: Nubank IR
My Perspective: Another nice milestone for Nubank. The important takeaway is that Nubank is bridging the insurance gap in Brazil by democratising access to insurance products. Nubank is quite literally expanding the insurance market in Brazil by bringing customers onboard that otherwise would not have insurance.
3. Sea (Ticker: SE) Meta and Shopee Roll out New Feature in Thailand
Meta has introduced shopping features within its Messenger service, in collaboration with Shopee, to facilitate seamless shopping experiences by integrating Shopee's merchant product catalogues. This feature, launched in Thailand, is intended to compete with TikTok and enhance both Meta's advertising revenue and Shopee's user traffic.
Thailand was chosen due to its high number of Facebook and Messenger users, with over 60 million Facebook users. The integration allows businesses to sync their Shopee catalogues with Messenger, providing a smooth shopping experience for Thai consumers.
Additionally, Meta has partnered with V Rich App to test Live Shopping tools, making it easier for businesses to showcase and sell products through livestreams. These tools will be available from mid-June in collaboration with V Rich App, ZWIZ.AI, Kaojao, and others.
Source: Bangkok Post
My Perspective: This is a very significant partnership for Sea Limited. Up until now, it could be argued that it was taking on TikTok on its own. Now, it has the support of a $1.3 trillion giant in Meta.
4. Adyen (Ticker: ADYEN) and Stripe partner with Capital One to Combat Fraud
Capital One is collaborating with payment giants Stripe and Adyen to develop a free product aimed at reducing fraud, demonstrating a shift from competition to cooperation within the financial sector.
Capital One has created an open source project called Direct Data Share, which is an API designed to allow merchants and payment processors to share real-time transaction data. By sharing transaction data through Direct Data Share, the partners can detect and prevent fraud more effectively. For example, if a fraudulent IP address is detected via Stripe, it can also be flagged for transactions processed by Adyen.
Source: Tech Crunch
My Perspective: This is a great example of mission-driven companies like Adyen putting aside commercial interests and focusing on protecting customers for the common good. Positive customer goodwill compounds over time.
MercadoLibre (Ticker: MELI) Large Language Model Use Cases
Large Language Models (LLMs) have made rapid advancements over the past year, highlighting the transformative impact of OpenAI's GPT API on natural language processing (NLP) tasks. MELI has been exploring various innovative applications of LLMs, focusing on the practical aspects and lessons learned from their experiences.
Retrieval Augmented Generation (RAG)
RAG involves using LLMs to generate personalized answers by retrieving information from relevant documents.
Initial attempts with Llama Index showed success but revealed that LLMs struggled with questions outside their contextual knowledge base, often leading to inaccurate or hallucinated responses.
Enhancing documentation was crucial to ensure the model could provide accurate answers.
Documentation Generation Use
Integrating LLMs to generate comprehensive documentation for data tables was a significant challenge due to the vast number of tables and the incomplete existing documentation.
Using a generic prompt, the team generated documentation that was well-received by most stakeholders.
Lessons learned included the need for iterative prompt refinement, quality assurance, and creating a clear structure for outputs.
Natural Language Inputs
LLMs were used to extract specific information from raw text, going beyond basic named entity recognition to interpret contextual meanings (e.g., identifying "next week" as a specific date).
In use cases like booking services, LLMs helped translate natural language queries into actionable data, improving user experience and efficiency.
Source: MercadoLibre Tech
My Perspective: AI and LLMs have been the flavor of the month for the past year or two. While we can see the demand for Nvidia chips, I’m more interested in how the companies consuming all of these resources can truly benefit from AI.
The insights provided by MELI shed light on this. There is still a long way to go. While LLMs can effectively interpret and process complex natural language inputs, they require comprehensive and relevant documentation to provide accurate responses. Any gaps in documentation can lead to inaccuracies.
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Happy investing
Wolf of Harcourt Street
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Twitter: @wolfofharcourt
Email: wolfofharcourtstreet@gmail.com