Macy’s Mixed Up Day; Uber Pumped for Some IPO Magic; Madoff Victims Rejoice. Well, Maybe Not.

It could have been worse…

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There’s good news. And there’s bad news. Well, for Macy’s anyway. So let’s start with the bad because, why not. The department store chain just released its third-quarter earnings and very unhappily reported that comparable same-store sales fell 3.6%. That’s not even the bad part. What’s worse is that analysts expected those sales to fall, but only by 2.6%. This latest quarter marks Macy’s 12th consecutive quarter of straight declines and these dismal results come smack in the middle of Macy’s turnaround plan called “North Star.” To be fair, however, it was expected that this turnaround plan wasn’t going to change numbers overnight. As for the good news, Macy’s profit rate went up, helped by cost-cutting measures and store closures. That helped the retailer take in $36 million, almost double what it took in last year at this time. Online sales also went up by so much, that it almost took the sting out of the fall in comparable sales. Almost. So naturally, shares went up today, as well. A smidge. But those shares were at the highest point they had been in nine months. Too bad, though, they are still down more than 50% in the last twelve months.

IPWhoa!

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Uber is almost ready to make its big Wall Street debut.  Almost. The company’s new CEO, Dara Khosrowshahi, wants to make that happen by 2019. With a $70 billion valuation, Uber is the most highly-valued private company in the world. According to Khosrowshahi, “We have all of the disadvantages of being a public company, as far as the spotlight on us, without any of the advantages of being a public company.” Even Travis Kalanick, the ousted CEO but current board member, agrees. As for Kalanick, he’s not really gone and you can bet he won’t be forgotten. Not if he can help it anyway. IPO’s weren’t the only thing Khosrowshahi’s been discussing lately. Earlier this week, the CEO unveiled his own “cultural norms” for the company, and one of them goes a little something like this: “We do the right thing. Period.” A far cry from the climate under Kalanick that had a former employee write a scathing blog post detailing allegations of sexual harassment.  Which brings us to the much-discussed Soft Bank deal, where Uber is poised to give a very hefty 20% stake to the Japanese bank. For the right price, of course. Khosrowshahi insists the deal is really, truly going to happen. For real. It. Will. Happen. The primary issue being the price, because isn’t it always?

It’s about time…

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Thousands of victims of Ponzi Schemer Bernie Madoff are set to receive over $770 million in compesation for the money they lost. The $770 million is part of a $4 billion fund set up to compensate victims. And sure, that’s good news. Except for the fact that it took nine years to happen and much of those funds will only cover about 25% of the losses.  But guess what? It still counts as “the largest restoration of forfeited property in history.” Close to 25,000 checks will be mailed to victims, ranging from institutions to individuals in 49 states and 119 countries.  If you recall, Bernie Madoff was accused and found guilty of perpetrating a $65 billion Ponzi scheme. These days, the schemer of the century is chillaxin’ in Club Fed for the next 150 years.

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Wanna Be a Billionaire? Then Move to China; Rainbows and Unicorns!: Twitter Might Finally Churn Out a Profit; Nike’s Game Plan Leaves No Room for the “Undifferentiated​”

Something tells me we’re doing it wrong…

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There’s a new report out published by UBS and PwC, called the Billionaires Insights report that tracked 1,542 billionaires all over the world and their combined $6 trillion. And while some might quickly assume that the United States might hold the top spot for the billionaires club, they would be wrong. As it turns out, Asia has the most billionaires, topping out at 637, whereas the United States can only boast 563 billionaire residents. In fact, every two days a new billionaire is minted in Asia, with China having the most.  But, to be fair, the wealth of the U.S. billionaires is much higher, coming in at $2.8 trillion, compared to Asia’s $2 trillion. So six in one, half dozen of the other, I suppose. Except not for long. The report also mentioned that the wealth of Asia and its billionaires will far surpass the U.S. in four years. One of the biggest “problems” listed for these poor billionaires face is how they intend to pass on their wealth. Rich people problems. But somehow they manage, whether they choose to pass it on to their heirs or leave it to charitable organizations. Decisions decisions. Of course, the more people the billionaires leave behind, the more complicated things get. But such is life when one is saddled with so much friggin’ cash.

Fairytales do come true…

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There’s a lovely rumor going around that maybe, possibly Twitter just might crank out its first-ever profit. We just need to wait until next quarter to see if that’s actually going to happen. But it’s not outside the realm of possibility since the social media company did make a major push to cut expenses while engaging in deals with other companies that don’t have them relying so heavily on advertising. Wall Street, at least is super stoked, causing shares of Twitter to soar 16% to over $20 per share.  And that company definitely needs all the share-soaring it can get. Twitter’s revenue was $590 million, a 4% dip from last year at this time but still decent since expectations were for $587 million. The other big news on the Twitter front is that the company made a very big mistake and is apparently trying to make amends for it. It seems that somehow an error was made in how user base was calculated for the last few years. But the company did revise the previous estimates, that had those numbers coming in a bit smaller than what was previously reported. Twitter insists that the difference amounted to less than one percent and that’s the story they’re sticking to. Their monthly active users, by the way, are up to 330 million and that number is supposed to be accurate, just disappointing since analysts expected that number to be 330.4 million. Oh well, Can’t win ’em all.

You’re out!

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Nike’s annoyed at under-performing retailers and has put them on notice. Which is definitely one way to make enemies. But hey, Nike is all about competing and if a struggling retailer is unable to “just do it,” then they’re out. Because Nike has a plan – a big one – that’s got them trying to hit $50 billion in sales by 2020. Nike wants to just do it, naturally. However, Wall Street is not so sure it can. I have yet to decide who my money’s on at this point in time. Apparently, 40% of Nike’s wholesale business comes from “differentiated” retailers and they want to up that to 80%.  Those retailers have a way of presenting the merchandise that gets customers wanting to spend their money at those establishments. According to Nike brass, “undifferentiated mediocre retail” just won’t cut the mustard and can expect a nasty goodbye within five years. Ouch. Nordstrom and Foot Locker apparently have nothing to worry about. For now. There were some obvious omissions, though, including Macy’s and JC Penney. Just saying. Whatever Nike has in store for those “undifferentiated” retailers doesn’t seem to bother Wall Street. Investors sent the stock up 3.5% today.

Twitter’s Attempts to Tweet Out Terror; Wal-Mart Boffo Earnings; EPA Calls Out Harley-Davidson

Tweet this…

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Looks like ISIS is going to have to find itself a new social media platform as Twitter pats itself on the back today after announcing it suspended 235,000 terrorist-related accounts in the last six months. That figure was about double over the previous period and the social media company went to great lengths getting bigger teams to review reports of flagged content on the site on a round the-clock-basis. Better spam detection and language capabilities also helped with the endeavor as the amount of time between content getting flagged and shutting down that content has gone down. But the great effort only really came about after Twitter took a lot of heat for allowing terrorist-related content to gain a big foothold on ISIS’s preferred site. Even the director of the FBI said how “Twitter was a devil on their shoulder” back in 2015. ISIS could have given courses on how to optimize media engagement as the terror organization regularly used Twitter to spread propaganda, recruit fellow murderers, raise funds for their evil ways and publicize its horrific actions. But to be fair, Twitter does have a policy in place prohibiting the promotion of violence and terrorism.  In any case, while Twitter concedes there’s no real “magic algorithm,”  to finding and shutting down terrorist activities on its site, there has been a noticeable drop on Twitter of all things ISIS and other terror-related organizations.

What bad retail landscape?

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It’s good to be Wal-Mart as the largest retailer in all the land posted better than expected results with revenue of $121 billion and a $3.8 billion profit for the second quarter, adding $1.21 per share. Analysts predicted shares would only gain $1.02. That profit was a very welcome 9% increase over last year’s $3.5 billion second quarter profit while the revenue figure beat projections by about $2 billion. If Macy’s Kohl’s and Target are left scratching their heads after their disappointing earnings, perhaps they should take a page or two from Wal-Mart’s playbook. The company made a major push in its e-commerce division, which always helps matters when you’re competing with the likes of Amazon.  Wal-Mart also increased its full year earnings outlook to $4.15- $4.35, up from $4.00 – $4.30. In addition to lower gas prices and warm weather, Wal-Mart brass attribute its great earnings to the boost they gave to employee wages which they think led to better customer experiences. Maybe it did. Maybe it didn’t. But there’s no denying the  company experienced stronger than expected sales growth.

Exhaust-ed…

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Look out VW. There’s a new emissions offender in town. This time the dubious distinction goes to iconic motorcycle maker, Harley-Davidson, who has to pay a $12 million penalty and another $3 million to fund a clean-air project.  The U.S. claims the company violated air pollution laws through its “super-tuner” devices.  These devices, while improving engine performance, also caused the exhaust levels for those engines to increase well beyond what they were allowed. Then there were some 12,682 bikes that were also found to be short of regulatory requirements. Even though Harley-Davidson graciously disagrees with the EPA’s findings, it settled if only to avoid a long-drawn out and very expensive legal battle. As part of the settlement, Harley-Davidson doesn’t even have to admit wrongdoing. After all, who likes to admit when they’re wrong, eh? In any case, the company will cease selling the devices by August 23 and will have to buy back and destroy the devices from the dealerships. Naturally, shares of Harley-Davidson did take an 8% hit following the news of its own emissions scandal, but they recovered relatively quickly. Sort of.

Macy’s Banks on Closures; Alibaba’s Boffo Quarter; Unvaliant Valeant

Winning…

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Shares of Macy’s soared today as investors gleefully cheered the retailer’s decision to close 15% of the company’s 728 stores. Presumably not as gleeful are the employees who work in those stores. While the locations of the closures have not been announced, many of those employees will be given a severance, provided they qualify, or be given the option to relocate. The stores to be shuttered have been costing an annual  $1 billion in annual sales. And in the face of online competition, that $1 billion could be put to better use like beefing up Macy’s e-commerce and finding bigger and better ways to further improve the better-performing stores. With Macy’s looking to invest in a “winning customer experience,” the company plans to bring in more brand shops and host a slew of in-store events that will hopefully drive traffic into the stores. Macy’s 2Q results saw sales fall about 4% to almost $6 billion in revenue with 54 cents added per share. To be fair, it did beat expectations of $5.8 billion in revenue with 45 cents added per share. But a strong dollar, off-price stores, bad-weather and less tourism didn’t help matters. Don’t knock the tourist angle; those visitors account for 5% of Macy’s annual sales.

More winning…

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China’s economy might be struggling but you’d never know it judging from Alibaba’s most recent earnings. The e-commerce giant posted its best revenue growth since its auspicious IPO back in 2014. Revenue grew a mind-blowing 59% from the same time last year to…wait for it…$4.8 billion. That impressive revenue figure was even more impressive if only because more money was made from mobile shopping than from PC’s. Talk about seismic shifts. Interestingly enough, the value of the goods it sells, aka gross merchandise value, only grew by about 24%. And like all good earnings reports, shares went up today on Wall Street. Profit for the e-commerce giant came in at $1.3 billion, a 71% increase over last year, with 74 cents added per share. Analysts only expected shares to increase by 63 cents. Monthly active users increased by 39% from the same time last year. It’s not just that the amount of monthly active users went up, but also that the average Alibaba user opens the app approximately seven times per day. Which probably explains why they account for 75% of the company’s sales.

There’s a fungus among us…

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There’s nothing like a criminal probe to completely throw your shares under the fiscal bus.  Today’s probe is brought to us by Valeant Pharmaceuticals, purveyor of everybody’s favorite toe-nail fungus treatment, Jublia. The burning question is whether Valeant had a very special relationship with a specialty pharmacy that helped inflate its drug prices. The specialty pharmacy at the heart of the probe is, or rather was, Pennsylvania-based Philidor Rx Services. Investigators suspect the mail-order pharmacy and Valeant were a little too close for comfort as far as insurance and wire fraud is concerned. It seems that Philidor wasn’t being entirely truthful to insurers about its relationship with Valeant so that it could sell lots of Valeant drugs at prices that seemed rather high. Distributors, in this case Philidor, are supposed to be completely neutral, yet Philidor seemed anything but, with almost all of its products that it sold coming from Valeant.  These days, however, Valeant (conveniently) says it didn’t condone Philidor’s practices. Valeant naturally neglected to mention the very large role it played in those practices. Incidentally, sales of Valeant dermatological products plunged since Philidor went the way of the dinosaur and now Valeant is staring in the face of $30 billion of long-term debt and a market value that plunged by 90% in the last twelve months. As criminal charges loom large, brass at Valeant have booted CEO Michael Pearson and overhauled the board of directors in a  seemingly desperate bid to restore investor confidence. Good luck with that one.

Michael Kors Department Store Diss; Disney Swims to Great 3Q; Ralph Lauren Hits and Misses and Hits

More bag for your buck…

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Michael Kors is biting back at the hand that feeds it: department stores. The accessories company is blaming them for its recent losses, fed up with the constant discounts department stores are putting on Michael Kors merchandise. In case you haven’t noticed there is nary a moment when Michael Kors products are not discounted. I dare you to prove that one wrong. The fact that consumers can use coupons for Michael Kors products? Ugh. Don’t even get them started. In fact, CEO John Idol is putting the kibosh on them and also chucking those friends and family discounts. Michael Kors reported a 7% drop in its first quarter wholesale business and is planning on shipping less merchandise to the stores in an attempt to reclaim some much-needed pricing power. Michael Kors feels that consumers forgot the value of its products. Seems like a prudent move considering that Macy’s, in particular, brings in the largest chunk of wholesale revenue for Michael Kors.  In any case, it’s a strategy that Coach also is beginning to employ, except that Coach also plans to pull out of about 250 stores completely. Earnings came in at $147 million and 88 cents a share on $988 million in revenue. That was a slight change from last year’s $174 million and 87 cents on $986 million. The fact that mall traffic and tourism were down didn’t help matters. Even same stores sales took a 7.4% hit, which was especially brutal since analysts only predicted a 4.2% decline. Still, analysts expected 74 cents on $953 million in revenue, so the earnings weren’t all that bleak in the first place.

It’s Dory’s world after all…

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Disney posted impressive earnings throwing a big shout out to its studio division, who cranked out the incredibly endearing and ridiculously, lucratively marketable “Finding Dory.” Okay, so marine life wasn’t the only reason since “The Jungle Book “and “Captain America: Civil War “also contributed to that success. Just not as much. Not nearly as much. In any case,  Disney particularly relished those 3Q earnings considering that its 2Q earrings missed the mark while this quarter it took in $1.62 per share, beating estimates by one penny. But not everything was coming up roses and clown fish at Disney, all because of ESPN and a future for it that looks more bleak than bright. Taking a beating from “cord-cutting” consumers who are giving the heave-ho to cable subscriptions and bundles, ESPN is, not surprisingly, rapidly losing subscribers. The network signed a $1 billion deal with BAMTech to find a way for ESPN to bring “direct-to-consumer ESPN-branded, multi-sports subscription streaming service.” Two words, ESPN: blue tang.

No medals for you…

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Even Michael Phelps couldn’t help win this one. Of course  I am referring to Ralph Lauren’s recent earnings that had the luxury brand posting a 7% sales loss. Ralph Lauren reported a loss of $22 million with 27 cents per share. That’s a far cry form last year when the company took in a profit of $64 million and 73 cents added per share. Revenue, which came in at $1.55 billion, took a hit, but analysts expected that hit to be closer to $1.77 billion so complaining wasn’t necessary. Shares still went up today so clearly these losses have done little to spook investors. That’s because those losses were expected as part of a strategic comeback plan engineered by Ralph Lauren CEO Stefan Larsson, who took over back in November. His grand plan also includes reducing turnaround times from design to shelves and to focus on Ralph Lauren’s core brands – initiatives that he thinks will generate roughly $180 million to $220 million in annual savings. That and closing about 50 stores should have Ralph Lauren returning to its fiscal glory in no time.

 

Costco’s Credit Chaos; Macy’s Switches it Up with New Chief; VW’s Writing Checks

Not to their credit…

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So much for a seamless transition of the Costco Anywhere Visa cards. The club-retailer started accepting the card this week, after ending its 16 year relationship with American Express, and there has been no shortage of chaos. While American Express enjoys a hearty laugh over this new credit card debacle,  Costco customers have been flocking to Facebook to rage against Coscto and its Citigroup credit card. Since Monday, Citigroup has been flooded with phone calls from 1.5 million disgruntled callers whose issues included problems activating accounts, lengthy wait times to speak to a living human breathing customer service representative and even difficulty trying to pay off existing balances. I mean seriously, when was the last time you had a hard time getting someone to take money from you. Costco has over 80 million members worldwide and eleven million of them applied for this new card. Those cards were supposed to have arrived back in May. Unfortunately many didn’t. The card offers a generous cash-back program and has no annual fee and, which was the bone of contention between Amex and Costco, that ultimately put the kibosh on the relationship. About 25% of Costco shoppers used Amex cards for their purchases and Amex took a 6% fee that cost the retailer $180 million. Citigroup is the biggest credit card lender in the world and analysts think the new partnership is a great idea to cut down on costs. Visa’s fees will be considerably smaller, costing Costco somewhere between $60 million and $150 million. Which is great news, as long as you’re not standing on line right now trying to make a purchase with the store’s new Visa card.

Miracle on 34th Street?

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Long-time Macy’s CEO Terry Lundgren is getting set to bid a long and fond farewell to the department store he helmed for the last 14 years. While he still gets to remain chairman, succeeding him officially in 2017 will be Macy’s president and former Chief Merchandising Officer, Jeff Gennette. Lundgren might be a bit sad but Wall Street sure isn’t. Investors sent shares up on the news, which is especially reassuring since shares have gone down in value more than 50% in the last twelve months. To be fair, Lundgren’s contributions were nothing short of impressive. He made Macy’s the largest department store chain in the United States, among other shining achievements. But the time has come for a changing of the retail guard as Macy’s got hit with five straight quarters of same-store losses and its first quarter results were the worst they’ve ever been since 2008. That last bit caused a bit of panic in the retail sector as other big retailers worried that these results signaled an industry-wide problem. Some experts, me not being one of them, are convinced that Macy’s doesn’t have the chops, yet anyway, to compete with the likes of the Amazons, H&M’s and Zaras of the world. (Not that H&M’s recent results were all that impressive). With a strong dollar and falling sales, Macy’s had to close about 40 stores and cut thousands of jobs. As for Gennette, one source said, “He is going to make the radical changes” which sounds awfully ominous, but in fact, entails, at least in part, setting up an off-price store called Macy’s Backstage and making online shopping enhancements, which seem to be all the rage.

Farfegnugen…

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It’s official. Sort of. Volkswagen will cough up a settlement of about $10.3 billion to settle claims that it rigged emissions tests on some of its models. Part of the settlement includes offers to buy back about 500,000 odious vehicles which emit 40 times the allowable amount of nitrogen oxide into the air we breathe. By the way, VW is not expected, by the EPA anyway, to repair all of the offending vehicles. Some owners will receive as much as $7,000 in compensation. There’s a joke in there somewhere. Also, VW must set aside money for green energy projects besides establishing programs whose focus is to offset diesel pollution. Talk about karma. Both Volkswagen and the EPA declined to comment on the settlement, which I suppose is to be expected. This settlement is completely separate from other lawsuits suits filed by other U.S. states and is also separate from the Justice Department’s own criminal investigation into the matter. So it seems as though things are anything but settled for Volkswagen.

George Soros, Golden Boy; Home Run for Home Depot; Pandora’s Streaming Away From Profits

Just because George Soros is doing it…

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George Soros just put a whole lotta money in gold. Lucky for him. However, the non-George Soroses of the world are supposed to take note, because, after all, he is, “The Man Who Broke the Bank of England.” And also because, since his net worth according to Forbes is $25 billion, he knows a things or two. Or a billion. In any case, according to a very recent regulatory filing that folks like him have to file (it’s called a 13F, and you are welcome that I am sparing you the boring details), Mr. Soros has sold off about 37% of his stock holdings. He then whipped out $387 million to buy lots of gold, including picking up a hefty 19 million shares in Barrick Gold, the world’s largest gold producer. It seems Mr. Soros is a more than a bit freaked out by the state of the global economy, and especially the slowdown in China. He feels the fiscal climate is reminiscent to him of 2007 – 2008 period just before the fiscal crash we are all still trying to forget. Not everyone agrees with Soros and his decision for his Soros Fund Management, but hey, he is the one who, back in 1992, bet against the British pound and made $1 billion off that bet – in a single day. I bet he’s real popular there. Anyway, it’s no secret that gold has always been a strong performer on Wall Street, as well as other places, mind you. The precious metal is up 21% for the year. But, just so ya’ know,  Soros still has plenty of other cash in plenty of other places. Like eBay and Apple. And Yahoo. And Gap…well, you see where I’m going with this. In fact, he’s got $80 million invested NOT in gold. In case you’re wondering what stocks he did ditch, some of those include Alibaba Group and Pfizer. Also, TripAdvisor and Expedia are out of his portfolio. Though, he did keep airline United Continental Holdings. Go figure.

Home improvement…

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As the warm weather brutalized plenty of retail outfits lately, (sorry, Macy’s, Nordstrom), Mother Nature knocked it out of the park for Home Depot. In turn, Home Depot warmed our hearts by boosting its sales and profit forecasts after regaling us with the news of its better-than-expected earnings, courtesy of Mother Nature. And as we all know, Wall Street loves nothing better than better-than-expected earnings. Except when investors feel that shares have hit their potential, for the moment anyway, which explains why shares of the home improvement chain were a wee bit down today. But no worries. A good housing market and fabulous weather added some $250 million in sales for Home Depot in the quarter, with February being the sweetest month, fiscally speaking. For the year, Home Depot is up about 20%, posting a profit of $1.8 billion a $1.44 per share. That was a 14% boost over last year, not to mention that it trumped analysts predictions of $1.36 per share. The company also saw $22.76 billion in sales, again stomping on predictions of $22.39 billion. The earnings also showed that consumers are actually spending their hard-earned cash, as opposed to hoarding it under mattresses (okay, banks too), unlike what was previously thought because of the generally poor performance in the retail sector. Spending money is good for the economy and now economists aren’t so worried anymore because they realize where all that hard-earned cash went. For the full year the retailer thinks it’ll pull down $6.27 per share for the year. And Spring has hardly sprung!

Closing the box…

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Pandora Media has had better years. Even better decades. Founded in 2000, the company had its IPO in 2011 and has about 80 million active users. While it was amongst the first crop of music streamers, the company’s stock is now down about 40% for the last twelve months, having never caught the same momentum as some of its competitors, including Apple and Spotify. Enter activist investor/Carl Icahn protégé Keith Meister, who feels that the time has come for Pandora to put itself on the market. Keith Meister’s Corvex Management has some very strong feelings about how much better – and profitable – Pandora can be and seeing as how he’s got 22.7 million shares, giving him an almost 10% stake in the company, he’s entitled to more than just his opinion on the matter. As the largest shareholder in the company, Meister wrote in a recent letter how he has “become increasingly concerned that the company may be pursuing a costly and uncertain business plan, without a thorough evaluation of all shareholder value-maximizing alternatives.” Basically, he’s wondering if the folks in charge, namely CEO and co-founder Tim Westergren, knows what they’re doing. Wall Street certainly seemed to be agreeing with Meister, as it sent the stock up today as much as 7% at one point.