Whoever uses the Internet most wisely wins.
Sometimes it does seem to come down to that, doesn't it? We can sit here and talk about whether this company's got better earnings or that company got better revenues, but for many companies the issue is survival, and survival might very well depend on how well you are able to integrate technology in general and the Internet in particular to the beat the other guy.
Take this rumored tie-up between Walmart WMT and Jet.com, an outfit that has a novel way to price merchandise so it comes in under Amazon's (AMZN) pricing. I know the site is cheesy: "Prices drop as you shop!" the site screams out. But you can beat Amazon's prices with it, something no one else has been able to do consistently, and it can be a potent arrow in Walmart's quiver. (Amazon is part of TheStreet's Growth Seeker portfolio.)
Or, to put it another way, Walmart must beat Amazon, it just must, and CEO Doug McMillon is determined to do so. Think about the challenge of this tremendous bricks-and-mortar retailer. It's capable of having ultra-low prices because it has tremendous scale. The buying power of Walmart is so strong that it can roll pretty much any supplier.
But it has huge infrastructure and human costs -- all those service people and managers plus their leases and construction -- that it's very hard to compete. Sure, Doug's doing everything he can with his current menu. Ever since he told stockholders at his annual meeting that the chain "must stop talking about digital and physical retail as if they're two different things," I knew he meant business.
His order and pickup strategy's a good one, but it's being implemented by others. He needs something special not only to pull away from his competitors but to orchestrate a pincer move against Amazon of low-price bricks-and-mortar and low-price web, and Jet.com might be the answer.
For almost anyone else, buying a money-losing website that looks as awful as this one could cost you your job. But McMillon has the family backing, the balance sheet and the directive to spend to win and Jet.com could do it for him. In fact, he almost has to do it because Amazon's last quarter shows the company's a total juggernaut and it can't be stopped using conventional bricks-and-mortar weapons.
McMillon gets it. He knows long-term survival is at stake. I wonder when we hear from Nordstrom (JWN) , Macy's (M) , Kohl's (KSS) and JC Penney (JCP) next week if they will acknowledge how they are still being crushed by Amazon, maybe more than ever because they don't have the balance sheets to compete. The only companies that really can right now are those that offer amazing bargains and convenience, meaning the dollar stores, TJX (TJX) and Ross (ROST) . That's a tiny cohort of winners for certain.
Apple (AAPL) knows it, too. When CEO Tim Cook talks about having a service revenue stream that can be as big as a Fortune 100 company, he's talking about having a $30 billion minimum, which could make investors pay a higher price to earnings multiple for its stock. Think about it. Right now his earnings streams are regarded as episodic. If the iPhone 7's good, the stock goes into the teens. If it isn't, the stock goes down to the purgatory of the low $90s, where this miraculous run started.
Of course, there are plenty of analysts who dismiss this whole service revenue stream because many are conditioned that Apple is simply a hardware/new product story that's running out of gas -- this is the "best days are behind them" thesis you hear so often. That's why the stock sells at 8x earnings. The only stocks that are cheaper are those of the airlines, which are battling a strong dollar, price wars all over the map, fears of terror wherever the destination is and now the Zika virus! Can you imagine that the company with the best balance sheet in the world and the one with the most coveted product that we pay more than $500 for is relegated to that miserable doghouse.
But yesterday Cook tweeted out: "July was a record breaker for the App Store. Highest-ever monthly billings and money paid to developers." Now, those of us on the blue team know that the spike could be caused by the potentially ephemeral nature of Pokemon Go and its attendant App Store downloads. That could spike anyone's business. But the fact is that he also addressed the developers' gains, which makes it clear that it isn't just the mad hunt for Charmander, or any other character for that matter, behind the huge surge.
So those analysts who have dismissed the stream are now starting think, maybe it's real. Of course it is, because Cook knows his company's valuation is dependent upon the Internet, not the hardware. If it were just the hardware, the stock would not be stuck at these levels.
Or take Clorox (CLX) , the consumer packaged-goods company that has among the highest organic growth rates. It reported excellent top-line growth yesterday. Part of that is innovation as the company keeps coming up with line extensions the public loves. But part of it is because, as CEO Benno Dorer said on Mad Money last night, his company goes where the customer goes. That's why he has expanded his digital advertising and marketing budget from 30% of all spending to 40%. And it's going higher.
Dorer needs that edge, he knows the other companies he competes with, like Procter (PG) and Unilever (UL) and Colgate (CL) , are far bigger than his company. He needs that edge, and his edge is ads on Google (GOOGL) or Facebook (FB) . That's where the customer resides. That potential Clorox customer is spending nearly an hour a day on Facebook, according to research. And we wonder why that company was able to report such an amazing number. (Apple, Procter, Google and Facebook are part of TheStreet's Action Alerts PLUS portfolio.)
Oh, and let's be clear, I think one of the reasons why Facebook's stock hasn't lit it up since it reported that amazing number is people are concerned that the brilliant Chief Operating Officer Sheryl Sandberg might leave Facebook to go to work for Hillary Clinton if Clinton is elected to the White House. It is a natural to believe that Sandberg could be appointed either Secretary of State or of Treasury.
The Internet battles rage everywhere. Netflix (NFLX) is being singed by Amazon with original programming, and go check how much time Time Warner (TWX) and Twenty-First Century Fox (FOX) spend talking about their stakes in Hulu on their conference calls. They want Hulu to be their Internet stalking horse not just because it is loved but because being involved with Hulu allows them to be able to say they get it, they get the future. Investors pay more for getting the future than being in the past.
Or take Square SQ. Many are focused today on the fact that the company's stock is running because it reported better-than-expected revenues. I think that's a mistake. I believe it's going higher because it explained its credit exposure to merchants in a way that we are no longer concerned that Square is some sort of wayward bank masquerading as a tech company. I know after going over the quarter that Square's being prudent in its use of capital and not taking on too much risk issuing small loans to its small and medium-sized clients, which get paid back from the cash register every day. That relief, that idea that Square really is an Internet payments play, and not some sort of LendingClub (LC) , is really driving the stock.
Now, the Internet can't save or even matter to some companies. But after each quarterly reporting season, I realize that's a shrinking universe. I think you have to say the Internet is a beast, and you have to feed it, or it eats you, and the smartest companies have figured it out and they're feeding the beast in record numbers with records amount of money because they don't want to be eaten.
