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- News of the Week (June 30 - July 4, 2025)
News of the Week (June 30 - July 4, 2025)
Brad Freeman
July 05, 2025
Table of Contents
Happy holiday to my fellow Americans and happy weekend to everyone. July 4th is generally the slowest news week of the year. Not much happened, but as always, we’ll cover what did. I’m excited for earnings season to pick up again in a couple weeks.
1. Lemonade (LMND) – Reinsurance Renewal
Lemonade is lowering the percentage of premiums it cedes to reinsurance from 55% to 20%. This means the company will retain a much larger portion of its premiums as revenue and will also incur a larger portion of potential losses stemming from these plans. For years, leadership has talked about this proportion falling as the firm scales and matures. Now, it’s ready to make a large jump in this light. This is a vote of confidence in the firm’s underwriting algorithm improvements over the last few years and its liquidity, as it makes strong progress towards income statement profitability.
Over the next four quarters, until Y/Y comps normalize, this change will have a profoundly positive impact on the firm’s in-force premium (IFP) growth – which is directly tied to more revenue generation.
And for context, consider the following example. If Lemonade generated $800M in trailing 12-month premiums, with a 55% ceded rate, it only retained $360M. Over the next 12 months, if it were expected to generate $1.05B in premiums, the same 55% rate would lead us to 31% Y/Y growth. If instead we assume the ceded rate will fall from 55% to 20%, premium growth would be 133% Y/Y. That’s the kind of growth spurt Lemonade will deliver as a result of this change. From a profitability perspective, this is really where being right about underwriting improvements is vital. If loss ratios continue to nicely trend in the right direction, more revenue will mean more fixed cost leverage and more EBITDA. If underwriting struggles, the added balance sheet risk will mean losses pile up and this could even turn into a negative for profits. That’s not my expectation, but it is important to note. They are placing far more pressure on their underwriting talents based on a growing pile of data and optimism in their ability to price risk.
One more note here. Lemonade explicitly said in the press release that this was voluntary. They said they easily could have renewed at identical terms. Some don’t believe them and think reinsurance was simply unwilling to take 55% of its premiums, forcing Lemonade’s hand. I do believe Lemonade’s team and don’t agree with this skepticism. Two reasons. First, the fees that reinsurance companies are paying Lemonade for these premiums are the same compared to the old contract. There’s no waning pricing power of any kind. Secondly, Lemonade seamlessly renewed 55% rate contracts through multiple years of an awful environment for reinsurance. That capital market was greatly challenged and it was still able to renew. I’m excited about this tweak to Lemonade’s business model. All of the loss ratio data we’ve seen over the last two years points to them being ready for this change.
2. Starbucks (SBUX) – Stores
Starbucks plans to renovate 10% of its USA stores in the next year and all of them over the next 3 years. Under the old team, Starbucks ran their stores like cold assembly lines. They ripped out seating, removed amenities, cut the condiment bar and attempted to treat their stores like distribution centers. Not only did that turn customers away, but it also created crippling throughput issues. Under new CEO Brian Niccol, Starbucks is determined to reclaim its community coffeehouse reputation and create a warmer, more inviting in-store atmosphere. Aside from better seating, other aforementioned changes include ceramic mugs, some free refills, free non-dairy milk add-ons and more. The company still has a few more quarters to get through where results will continue to look bad. As we approach the new year, I expect margin accretive, mid-to-high single-digit revenue growth to resume.
3. Robinhood (HOOD) – Crypto Product Event
Table-setting:
To start the presentation, leadership conveyed strong optimism in the brightening regulatory environment for crypto. In Europe, “clear regulations” are offering “clarity to unleash financial innovation,” while the USA is now “catching up to the rest of the world” after “years trying to obliterate the industry.” Robinhood is eager and ready to take advantage of this momentum. Fortunately, the innovation it presented at this event doesn’t entail meme coin speculating, but real, impactful product releases that can actually drive utility.
I thought this was an encouraging event for the company. They continue to rapidly innovate and roll out compelling product innovations to keep the user base increasingly engaged and growing. The coverage below makes it more clear why the stock reacted positively this week. It marks Robinhood’s push to tokenize all assets, unlocking tradable access to them for the masses and giving its financial engine more products to cross-sell. These are the kinds of debuts that can help Robinhood become a bit less reliant on cyclical options contracts and speculative cryptocurrencies to drive such a large portion of its results. The stock price certainly reflected that opinion throughout the week and I think the coverage below will make it clear why. Let’s dig in.
EU Perpetual Futures:
Robinhood is adding its Robinhood Crypto app to all remaining countries in the European Economic Area (31 total). It was already in 6, and will now add the remaining 25. As part of this news, the app is rebranding to simply “Robinhood”, and the product announcements made it clear why that’s happening. First, they announced a perpetual futures (no expiration dates) crypto product for their European customers. This news was born from a disdain for competing products among its user base. These users hated the clunky interfaces, complexity, limited availability and confusion with setting and modifying orders. They were forced to use the products due to a lack of viable alternatives. Now Robinhood has them. This greatly reduces clicks and pages to complete orders, which, like for PayPal and Shopify in commerce, should raise order completion rates. It offers an easy slider to control order size, up to 3x leverage and an ability to precisely set where your margin is allocated. Establishing profit and stop-loss triggers is also wonderfully easy under this new design.
This will be released in the EU this summer and will debut in the USA as soon as regulators approve perpetual crypto futures.
As an important aside, its recent purchase of Bitstamp (highly-regarded crypto exchange) provides the plumbing needed to offer this product.
Tokenization:
Tokenization, or creating digital tokens on a given blockchain that convey secure, guaranteed and even fractional ownership of a specific asset, was the theme of this event. I believe this is really where blockchain and the crypto space can really shine.
To start, Robinhood is tokenizing shares of publicly-traded U.S. stocks for European customers. This will broaden access to these assets, remove hefty commissions associated with trading them and unlock 24-hour transacting during business days. There are a few hundred stocks and ETFs available through this blockchain-based product, with thousands more coming. The company took us through a workflow demo of how an EU customer would buy a share of a stock via token vs. U.S. customers simply buying common equity. Interestingly, private company tokens from OpenAI and SpaceX are also available to EU customers.
The exciting part of this is that the interface is essentially the same. People don’t need to understand the depths of blockchain technology to use this product. It simply feels the same as buying an Amazon share on Schwab today. There are detailed explanations of the technology for those wanting it, but they’re only shown when requested – not by default. This makes the interface quite clean, yet packed with information for interested customers. While this simple workflow is commencing, Robinhood rapidly routes orders between brokers, market makers/exchanges and its “tokenization engine” to mint a single token per each purchase representing a single share. Eventually, Robinhood will integrate Bitstamp into this process to enable 24/7 trading. After that, it plans to enable self-custody of these assets to take tokens out of Robinhood’s ecosystem. At first, this will be done through blockchain partners, with eventual plans to debut its own blockchain (The Robinhood Chain) that’s more purpose-built for real-world assets like art and real estate.
The only fees associated with direct tokenization will be 0.1% for FX conversion from euros to dollars to enable transactions. That’s among the lowest in the industry.
USA:
Bringing some of the advanced charting tools from its desktop product to mobile.
Adding smart exchange routing to minimize fees for transacting crypto and facilitate volume-based discounts.
Adding tax lots for crypto transacting.
Integrating its AI assistant for crypto.
Debuting crypto staking in the USA. There’s a 0.02% fee and another 0.10% FX conversion fee.
Introducing the ability to redeem Robinhood Gold rewards in crypto.
4. Tesla (TSLA) – Deliveries
Tesla missed delivery expectations by 2% for this past quarter, representing -14% Y/Y growth. This follows negative 2024 growth as well. The weakness was broadly expected and perhaps priced in heading into the report. Many are now focused on its humanoid robot, thriving energy and robotaxi businesses as saving graces for this financial engine, as the auto business continues to struggle. The company continues to fetch a very large premium, and that premium is based on businesses that are not yet established or scaled yet. As has always been the case with Tesla, bulls are assuming these products will eventually carry the growth engine. If they’re right and if Musk is remotely close to right about the market size of its taxis and robots, this could eventually work. But they really do need to be right. An auto business trading for 150x forward earnings will not work. A leader in autonomous transportation and robot-led productivity could.
5. DraftKings (DKNG) – Tax News
As part of the new federal budget proposal, gamblers will no longer be able to deduct 100% of their losses. There’s a new 90% cap on this maneuver, which means people could be paying taxes even if there are net losses in a year. I think the impact will be quite modest if not immaterial. Why? Less than 5% of gamblers actually make money on a consistent basis. Those who do are far less profitable for a company like DraftKings than the vast majority of their casual customers who do this for entertainment. I truly don’t think almost all sports gamblers will even notice this change and I think the few that do will continue their typical behavior.
6. Analyst Updates
Scotiabank reiterated a positive Datadog rating in a note this week. They’re excited about S&P 500 inclusion. They also spoke about OpenAI, which is a large customer for DDOG and creating some modest concentration risk. They view that risk as quite low and think the large chunk of business OpenAI brings (~$190M/year) is an obvious net positive. They’re observing improved go-to-market, strong competitive positioning and a public sector tailwind with FedRAMP High authorization secured.
Wedbush sees Datadog’s S&P 500 inclusion as a “validation moment” for the company. It’s upbeat on DDOG’s pace of GenAI product innovation, and products like Bits AI (suite of automation tools).
Truist sees Trade Desk delivering in-line or outperforming Q2 results and Q3 guidance. After some early hiccups on the Kokai launch, it thinks traction is now progressing smoothly with the user interface issues largely fixed. They view Amazon’s demand-side platform gaining popularity, but that is in no way preventing TTD’s success. As I talk about constantly, TTD’s lack of supply ownership and conflict of interests, as well as superior reporting and scale, are all resonating quite well with advertisers… as it has for well over a decade. They lowered 2025 and 2026 revenue estimates by a small fraction of 1% each.
Citi placed Trade Desk on a 90-day upside catalyst watch as they continue to witness TTD leading the demand-side platform pack in terms of service and results quality. They think Q2 and Q3 will be better than expected and think Amazon’s momentum in the space is having no material impact on TTD’s financial momentum. Their ad-buyer surveys yielded very positive results for TTD. They think most of the share Amazon is taking in the space is coming from players other than TTD. I would think Alphabet and Microsoft Xandr.
Deutsche Bank surveys are showing Google Search growing in excess of consensus expectations and new AI search innovations effectively adding incremental momentum. Digital advertising appetite is strong and Alphabet is taking a large share of that.
Truist sees Google delivering revenue and EPS slightly below expectations, but thinks the company will do enough to be rewarded. They view each segment coming in very modestly below consensus, but thinks the quarter will still be viewed positively. They lowered 2025 revenue estimates by 0.2%. Truist also included two interesting charts in the research report I wanted to include. The first meshes very well with other sell-side notes we’ve seen calling out Gemini retaking GenAI chatbot market share. Great news.
Truist is raising Q2 estimates for Amazon. Their AWS credit card data is pointing to that important segment beating expectations. They think AWS will maintain solid, nearly 20% growth and think they’re executing well in the realm of AI. They think the marketplace is better positioned to overcome tariffs than the competition. Leading scale and a dearly-loved consumer subscription are wonderful things. They see ad revenue outperforming, and fulfillment expansion to rural areas going very well. And finally, they envision $6B in 2030 revenue.
Brazilian e-commerce market share data from JP Morgan – Shoppee continues to perform very well in the region as it improves delivery times and assortment, but so does Mercado Libre.
Wedbush’s customer surveys and channel checks for CrowdStrike have been overwhelmingly positive this quarter. They (like me) view CRWD as the “Gold Standard” in the sector and are noticing less of a need for this company to discount for new business vs. its peers. They see CrowdStrike’s revenue and profit being above consensus estimates this year and raised their price target from $525 to $575.
7. Headlines
Meta continues to build out an impressive array of talent for its superintelligence team. They’ve hired 11 world-class researchers away from DeepMind, OpenAI and Anthropic. This follows the 49% stake in Scale AI they purchased, with that company’s founder (Alexandr Wang) joining Meta as part of the arrangement.
The article from The Information last week was wrong. OpenAI has not deployed Alphabet TPUs at scale yet, but they are testing the chips as we speak.
Amazon’s Project Kuiper is still on track to launch this year. Leadership reiterated that this connectivity product will come with faster speeds and lower prices than competitors like Starlink.
Bank of America raised Robinhood and Coinbase estimates due to regulatory tailwinds.
Coupang is rebranding its cloud computing business to Coupang Intelligent Cloud (CIC). This business really has not been a focus area for the company in recent years. It has used its data centers for its own internal productivity and sparingly for customers. Perhaps this is a signal that it’s ready to get more aggressive in prioritizing this business.
8. Macro
Output Data:
The Chicago Purchasing Managers Index (PMI) for June was 40.4 vs. 42.7 expected and 40.5 last month.
The Manufacturing PMI for June was 52.9 vs. 52 expected and 52 last month.
The Institute for Supply Management (ISM) Manufacturing PMI for June was 49 vs. 48.8 expected and 48.5 last month.
The Services PMI for June was 52.9 vs 53.1 expected and 53.1 last month.
The ISM Non-Manufacturing PMI for June was 50.8 vs. 50.8 expected and 49.9 last month.
Consumer & Employment Data:
The Unemployment Rate for June was 4.1% vs. 4.3% expected and 4.2% last month.
ADP Nonfarm Employment Change for June was -33K vs. 99K expected and 29K last month.
Nonfarm Payrolls for June came in at 147,000 vs. 111,000 expected and 144,000 last month.
Initial Jobless Claims were 233,000 vs. 240,000 expected and 237,000 last month.
Inflation Data:
The ISM Manufacturing Prices reading for June was 69.7 vs. 69.6 expected and 69.4 last month.
Average Hourly Earnings M/M for June rose by 0.2% vs. 0.3% expected and 0.4% last month.
The ISM Non-Manufacturing Prices index for June came in at 67.5 vs. 68.9 expected and 68.7 last month.
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