In this episode of MarketFoolery, Chris Hill chats with Motley Fool analyst Jason Moser about the latest headlines from Wall Street. They look at Black Friday and Cyber Monday sales figures and a company that really stood out during this period. They've got two merger and acquisition updates for you and much more.

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This video was recorded on November 30, 2020.

Chris Hill: It's Monday, November 30th. Welcome to MarketFoolery. I'm Chris Hill, with me today, Mr. Jason Moser. Good to see you.

Jason Moser: Good to see you.

Hill: It is Merger Monday, sort of. We've got one deal in the making, we have another deal in the, let's call it remaking, but we're going to start with Black Friday.

In-store sales on Black Friday were 52% lower than a year ago; that should not surprise anyone. Online sales were up big; also, not a surprise. This actually did surprise me a little bit though, Jason. Online sales on Friday in the United States made it the second-biggest day ever for online sales. Cyber Monday last year is the biggest all-time, Black Friday this year, second place; that might get bumped down to third place after this year's Cyber Monday. But what did you think of the reports you saw of Black Friday?

Moser: Yeah, I think you hit on something there in regards to today's Cyber Monday, I think you're right. No surprise, online spending on Black Friday grew 21.6%; that was a new record. It was around $9 billion worth of purchases that were recorded. And the forecast for today for Cyber Monday this year, it's slated to become the largest digital sales day ever. Spending is forecast to reach somewhere between $10.8 billion and $12.7 billion; that would represent growth of 15% to 35% from last year. No surprise, really, there.

I think, to me, what really stood out, and again, not surprising, but still stood out, because it's just pretty darn impressive, was Shopify (NYSE:SHOP). Shopify is a stock that, obviously, a lot of our listeners, a lot of our members and subscribers are all very familiar with. And it's been a good year for Shopify stock; stock up around 175%. The numbers that they chalked up for Black Friday were really impressive, $2.4 billion of Black Friday sales, that was about 75% growth from last year. So, clearly, the investments they've been making in that business all along the way are paying off.

And I think the neat thing there is, because we could sit there and criticize Shopify, for example, oh, it's overvalued or it doesn't make a lot of sense because the business doesn't make that much money yet, that may be true, but these are the types of numbers that will, I think, afford it some time. I think as long as they continue to record these types of numbers, the market is going to continue giving it some wiggle room there. We've seen it with Amazon, we've seen it certainly with Wayfair, I think. And Shopify, I don't think it will be any different.

But there were some interesting numbers there within Shopify's report that I think are just worth noting. Average Black Friday cart price globally was just under $91; that was up 11% from a year ago. So, people spent a little bit more. And neat thing here in this mobile world, we always talk about how mobile is really what's leading us forward, but mobile sales on Black Friday this year, if you look at the breakdown between mobile sales and desktop, it was 67% mobile versus 33% desktop. And last year, that was 69% mobile and 31% desktop. So, the difference is, you know, marginal, but more people, it seems, were shopping on desktop this year for obvious reasons. And so, it's just [...] that you can see that data, I think, but yeah, it all goes back toward this digital economy that we're witnessing and it seems like it has a lot of traction, and I don't know that we're necessarily going to be going back anytime soon.

Hill: I'm glad you mentioned Shopify, because we have talked a lot about the big retailers like Walmart (NYSE: WMT) and Target (NYSE: TGT), in particular, the investments that they have made this year for curbside pickup, for delivery, all of that. But worth, as you said, pointing out the investments that Shopify has made. And this is a stock that I do not own, I understand both sides of it, it is definitely on my watchlist, haven't pulled the trigger yet, but I understand the concerns, [laughs] I understand, you know, around valuation, the lack of profitability, and maybe that's why we've seen the rise that we've seen for Target and Walmart this year, because those are just fundamentally, I think, a little easier for people to wrap their heads around.

But as you said, I mean, what is the future going to be? Is it going to be, well, once all this is behind us we're just going to start going back to the mall? No, I don't think so. [laughs] I think there's going to be more online shopping and, to your point, more mobile shopping.

Moser: I think you are right there. I just continue to be impressed with Wayfair, for example. The mobile numbers that they continue to record are really impressive. And that's furniture, man, I mean like, people are shopping [laughs] for furniture on their phones. And in regard to Shopify I think when you look at the future, I don't think it's going to be one or the other, I think -- and we've talked about this before, really, when we talk about Target and Walmart, it really is becoming about omnichannel, right, it's just meeting the consumer wherever the consumer wants to be met. And the more that companies, the more that retailers are able to do this, they're going to be able to take advantage of the digital economy, they're going to be able to take advantage of people wanting to actually physically go to stores.

And so, I think the future is going to be a little bit of both, but certainly Shopify is keying in on their specialty and I think more growth is going to be coming in, obviously, that digital space. Shopify is absolutely one of the companies dictating the development of that space. Even next year, when I think it's probably safe to assume that we get a little bit more back to normal and the in-person shopping experience is a little bit less risky, we'll see people wanting to get out, we'll see people wanting to go to stores and have fun with that experience, but that, I don't think, is going to really deter people from shopping online.

Hopefully, ultimately what I'd love to see is just this whole Black Friday/Cyber Monday thing, I really like the fact that we're stretching it out to be just this whole month, so it's not really about fewer sales, it's just about timing, right, we're just stretching it over the course of the month as opposed to really isolating it on individual days. I'd like to see that continue to where these concepts, these retailers are not just leveraged to a couple of particular days toward the end of the year.

Hill: Just real quick before we move on to our next story. On that point, are you seeing this in your own personal life, because I have, in the last week, noticed that the promotional emails I get from different retailers are basically saying, [laughs] hey, our Black Friday sale is going to last for the next 10 days, it's like, you know, the subject line in the email is "Black Friday Sale," and then you look, it's like, oh, this is actually going through December 9th.

Moser: Yeah, I feel like I've seen a lot of that. I mean, just anecdotally, I do feel like I've seen a lot more of that, and I think that's the right thing to do. Again, it's just a bit of a different time, but hopefully, as we've seen throughout this whole year, this year has been an accelerator for change in a lot of good ways, and maybe this will be one more thing, one more change that we'll witness over the course of the coming years, and I think ultimately that would be a good thing.

Hill: General Motors (NYSE:GM) is no longer taking an equity stake in Nikola. I think this is the third time in the past five weeks we're talking about this, you know, because the drama just continues. So, it's still going to be a fuel cell partnership between GM and Nikola, but in terms of significance, Jason, this is literally and figuratively a smaller deal. [laughs] It's smaller in terms of the money, and it's just in terms of potential outcomes, and by that I mean, potential upside for both, it's a smaller deal.

Moser: It's a much smaller deal. And I think that ultimately is a good thing probably for both companies, definitely more so for GM. It feels like this was the inevitable outcome. [laughs] I think the real story here is that Nikola is still an $8 billion market cap company. To me, that's just amazing to think about, given the fact that they don't really make any money to speak of. You don't want equity in a company like that, right. I mean, that's something where you want to maybe partner up and not be completely levered to their success. In the previous deal, I think GM was going to take something like an 11% equity stake. I mean, 11% of nothing is still nothing. At $8 billion that's one thing, but $8 billion based on those sales, you got to at least think about that. So, I think this puts GM in a much more transparent and lower risk position.

The new deal is actually, it's a nonbinding memorandum of understanding with Nikola for global supply to provide GM's Hydrotec Fuel system for Nikola's Class 7/8 semi-trucks. So, the key [laughs] there to that long winded sentence, I think, is "nonbinding," right. I think this really just kind of gives GM the opportunity to dictate exactly how much they're going to participate in whatever potential upside there is with this. And Nikola will pay upfront for capital investment for the capacity, they'll discuss potential to supply agreement for more of GM's battery technology. So, I think all in all this is a much more sensible way to go about it.

I mean, it's a very nascent market, we've seen Tesla talk about getting into this market as well. I think this is going to be a story that unfolds for a number of years, this entire market in these semi-trucks. It's just Nikola is a bit under the gun here. They need to produce something. They need to demonstrate that they can be sustainable here, otherwise GM can just wash their hands of it and walk away. And ultimately, I think that's the right thing.

Hill: The $8 billion market cap that you're talking about with Nikola, that is [laughs] after the 25% drop that is happening in the stock right now. So, coming in today, it's north of a $10 billion market cap. And that stock is just getting pounded today.

Moser: And it should. I'm just very surprised that the market is still willing to give this thing that type of credit. It just seems like -- you know, we're in a market where valuations are clearly a big question mark, and so you're going to see this kind of stuff play out here. Yeah, I would encourage investors who are interested in Nikola to be very, very careful here because the fundamentals don't dictate what the market is paying up for this stock today. And obviously investing is all about the future, maybe Nikola's future looks a little bit brighter now that GM isn't necessarily stuck between a rock and a hard place, I don't know, but, man, they really need to bring the goods in 2021, right, I think $8 billion, that's going to be a distant memory.

Hill: (NYSE:CRM) is going to announce earnings on Tuesday after the market closes, and that is when Salesforce is also expected to announce the acquisition of Slack. This is reportedly a half cash, half stock deal. This started late last week, Jason, on reports of this pending deal. And shares of Slack up 40% in the past week alone.

Moser: Yeah. Well, I mean, I never had a horse in this race. I mean, I never owned the Slack stock and never recommended it, and I've never been impressed, really, with the platform or the business, to be honest, and that's probably why I've not had a horse [laughs] in this race, so to speak. To me, this really is the best outcome Slack bulls could ever hope for; it's just an opinion, but there you go.

I think it's safe to say that Slack needs Salesforce more than the other way around, far more than the other way around. And to me, it's very fascinating to see a company decide to go the acquisition route so soon after getting on to the public markets. I mean, it's only been on the public markets a little bit more than a year and they're going to go ahead and accept the deal; that to me is very telling. Right now, Slack trading at somewhere in that $42 range or whatever, it was listed, I think, at $38, it opened at $38.50 the first day. So, basically, all of the gains that this stock has witnessed are due to this news, and I think there are a lot of reasons for that.

I mean, when you look at the way that Slack has performed throughout its existence, its very short existence as a public life, it's just not been very impressive. They were reporting total users for a stretch, then they stopped reporting those total users to kind of try to move the goal line, so to speak, and change the way they define success. At the end of 2019, they had something in the neighborhood of 13 million daily active users I think it was, and you compare that something like Microsoft and Teams, you can sit there and criticize however Microsoft accounts for those users, but the fact is, the Teams has 115 million users, and I don't think Slack is anywhere close to that. And then when you look at the actual numbers, management is forecasting sales growth for this current quarter of 32% versus 60% a year ago. And while you could argue that Slack is a software company and enjoys robust margins, those margins disappear really quickly when competition heats up.

So, to me, I think the market has been trying to tell us something all along the way here with Slack, maybe it's not as good of a story as some may have hoped. I guess we shall see. I think it's an interesting deal for Salesforce; I'm not sure exactly what they'll do with it.

Hill: It's a big deal for Salesforce, just in terms of the market cap of Slack, which right now is around $24 billion. I mean, Salesforce has made big acquisitions in the past, but those big acquisitions were more in the range of $5 billion to $15 billion, so this is a deal that is, kind of, on par with what we saw a few years back when Microsoft bought LinkedIn, that was somewhere in the neighborhood of $26 billion, $27 billion. So, this really, kind of, [laughs] sets up a Salesforce vs. Microsoft battle.

Moser: It absolutely can. I think that's going to give Microsoft a little bit more to pay attention to. I think Slack on its own wasn't really a very big threat for Microsoft; I think that was becoming very clear. And to your point about Salesforce acquisitions. Yeah, I mean, you go back to 2018, they acquired MuleSoft for $6.5 billion; that was a data integration company. And in 2019 they paid $15 billion to acquire Tableau Software to bring it more into that, sort of, digital transformation market. This deal is probably going to be somewhere in the $25 billion range, give or take. And the nice thing for Salesforce, it sounds like it's going to be half shares, half cash. And they are able to use their share price when it's been doing very well, so it's going to be, sort of, a cheap form of currency. And I think that helps keep their balance sheet, I think, in order there.

To me, again, the thing that this made me immediately think of -- I guess, it was a couple of years ago, remember when the rumor was going around that Salesforce might acquire Twitter?

Hill: Yes.

Moser: And we all, kind of, looked at each other quizzically, we're like, what, really? Why? Yeah, exactly. [laughs]

Hill: ... why? [laughs] We're all asking the same one-word question. Why?

Moser: Now, [laughs] this doesn't make me ask that question, why? necessarily as much. You know, I understand basically, kind of, what Slack could do in Salesforce's universe to be a better value-creator, but this does remind me a lot of that period of time, and Slack reminds me a lot of Twitter. It just reminds me of a management team that has been very slow to iterate a service that is more or less the same thing it's always been since we've been using it. And it's losing share to a much larger competitor trying to reframe what their success looks like all along the way. So, to me, this was kind of like Twitter 2.0, Slack was. It does make a little bit more sense, the acquisition, than Salesforce buying Twitter for sure, but you know, Slack I think is not a business that comes without its challenges and Salesforce is going to have its work cut out for it.

Hill: All right, we got to wrap up because I got to do some Cyber Monday shopping.

Moser: [laughs] Me too.

Hill: Jason Moser, thanks for being here.

Moser: Thank you.

Hill: As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.

That's going to do it for this edition of MarketFoolery. The show is mixed by Dan Boyd, I'm Chris Hill, thanks for listening, we'll see you tomorrow.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.