What You Need To Know for November 14th

Crypto Goes Risk On, Bankers Drum Up M&A Prospects, and More

November 14, 2024

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The post-election rally in equities has started to stall out a bit on somewhat sticky (but expected) inflation data, while speculative assets in Crypto have continued rallied aggressively over the past few days. As of now, Thursday futures are down slightly. Let’s dive deeper into what’s going on 👇️ 

Earnings Corner 📜 

Shopify (SHOP) reported earnings that beat estimates, with revenue of $2.16B up 26% y/y (vs. $2.12B expected) and EPS of $0.35 (vs. $0.27 expected). The e-commerce company processed a record $69.7B in gross merchandise volume (vs. $68.1B expected). Mgmt. has doubled down on marketing efforts and noted the acquisition of major new clients, including Lionsgate Entertainment, Reebok, and Vera Bradley. SHOP also released a bright outlook for the holiday season, projecting sales growth in the mid- to high-twenties (vs. 22.8% expected). The stock was up 26.6% at Wednesday’s close

Cava (CAVA) reported earnings that beat estimates, with revenue up 39% y/y and EPS more than doubling. Traffic was up 12.9%, the strongest gain in a year and a half, fueled by rising brand awareness, menu innovation, and a revamped loyalty program. Comparable sales and average ticket also grew by 18% and 5.2%. Mgmt. raised its FY projections, with more store openings than expected and comparable sales growth of 12%-13% (vs. 8.5%-9.5% last quarter). The stock was up 1.5% at Wednesday’s close. Cava’s market cap has almost tripled since its IPO last November, implying a valuation of $47.8MM for each of its 352 stores

Hertz (HTZ) reported earnings that missed estimates, with the troubled car rental company posting its fourth quarterly loss in a row. Mgmt. announced a $1B impairment charge, as vehicle depreciation rose 89% to $547 per vehicle each month, but they noted that charges are expected to soon normalize to $300 per vehicle. This news comes as Hertz is selling 30,000 Teslas, following a failed attempt to attract customers through EV offerings. The stock was up 10.8% at Wednesday’s close and 22.3% over the last 5 days

Home Depot (HD) reported earnings that beat estimates. Sales growth of 6% was driven by the acquisition of SRS Distribution, along with hurricane-related repairs and prolonged warm weather. Mgmt. raised their fy comparable sales outlook to -2.5% (vs. a 3-4% decline previously) but cautioned that demand for building products remains suppressed due to high interest rates. The stock was up 0.7% at Wednesday’s close

Spotify (SPOT) reported earnings that beat estimates, with revenue of 3.99B euros up 19% y/y (vs. 4.02B euros expected) and EPS of 1.45 euros (vs. 1.72 euros expected). However, mgmt. released optimistic Q4 projections, with revenue of 481MM euros (vs. 432.7MM expected) and monthly active user growth of 25 million (vs. 19.3 million expected). The stock was up 11.4% at Wednesday’s close

On Holdings (ONON) reported mixed results, with revenue growth of 34% beating expectations, but EPS missing. Mgmt. noted that brand awareness has boomed over the quarter, due to successful Olympic sponsorships and a new partnership with Zendaya, and raised its FY guidance. On achieved a 60.6% gross profit margin and saw its DTC channel account grow 450 bps to compromise 39% of sales mix. The stock was down 0.7% at Wednesday’s close

Cisco (CSCO) reported earnings that beat estimates, although revenues declined for the fourth consecutive quarter, on the back of poor networking income. The stock was down 2.9% after Wednesday’s close.

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Today’s Headlines 🍿 

  • Crypto is on fire. Bitcoin surged above $93,000, up 33% since Election Day. Investors are riding high on optimism that Trump will deliver on his pledge to make the US the “crypto capital of the planet,” pull back regulations, sack Gary Gensler, and establish a strategic BTC reserve

  • Core CPI, which excludes food and energy costs, increased by 0.3% for the third consecutive month in October. This measure of underlying inflation also rose 3.3% compared to the same period last year, indicating persistent inflationary pressures. The consistent firmness in core inflation highlights the ongoing challenges faced by Federal Reserve officials in their efforts to achieve their target inflation rate. As of now, another 25bps rate cut is expected by the Fed in December

  • Introducing “DOGE”: Trump has announced the creation of a new "Department of Government Efficiency" to be led by Elon Musk and Vivek Ramaswamy. This department, despite its name, will not be an official government agency but rather an external advisory group. The goal of the DGE, Trump announced, will be to “dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies”

  • TikTok looks safe: Trump, who previously attempted to ban TikTok during his first term, has now pledged to prevent such a ban from taking effect. This shift in stance comes as TikTok faces a potential prohibition in the United States by mid-January if ongoing legal proceedings don't favor the company

  • Wall Street Bonuses are going up: Bankers are set to experience its first bonus increase in three years, with investment bankers in debt underwriting expected to see bonuses rise by 25% to 35% for 2024. Equity capital markets professionals are projected to receive increases of 15% to 25%, while M&A advisors can expect more modest gains of 5% to 10%. This anticipated bonus bonanza is driven by a recovery in dealmaking, favorable market conditions, and recent Federal Reserve interest rate cuts

  • Elliott has acquired a stake exceeding $5 billion in Honeywell International and is urging the company to split into two separate entities: Honeywell Aerospace and Honeywell Automation. The activist investor argues that this separation would lead to streamlined strategies, better resource allocation, and improved operational efficiency, potentially resulting in share-price gains of 51% to 75% over the next two years. The activist also labeled quantum computing a “distraction”

  • More Private Credit consolidation: Stonepeak is buying private credit investment firm Boundary Street, a $700mm AUM LMM fund focused on tech and telecommunication companies

  • DirecTV will walk away from the merger deal with DISH should DISH creditors not come to agreement over debt exchange terms. Creditors were previously hesitant to take a discount and extend out, so it looks like this might fall apart by November 22nd

  • Spirit Airlines is reportedly preparing to file for Chapter 11 bankruptcy protection in the coming weeks, following failed merger talks with Frontier Airlines. This development comes after Spirit's previous merger attempt with JetBlue was blocked by regulators, leaving the ultra-low-cost carrier facing significant financial challenges including mounting losses and large debt maturities

  • Diamond Sports, the former regional sports network company, reached a deal with Amazon to stream 16 regional networks on Prime Video. Diamond, still in bankruptcy protection, reached a deal with FanDuel’s parent company to rebrand the Bally Sports networks to the FanDuel Sports Network

  • Blackstone backs Brigade with a $300 million investment to further build out their private credit and CLO platforms

  • Citigroup CEO Jane Fraser has declared that it's "game on" for mergers and acquisitions in the US, as clients who were previously hesitant are now ready to move forward with deals. Fraser attributes this shift to Trump's election victory, noting that companies across industries are recognizing the need for scale to remain competitive in the current business environment

  • Blackstone is in advanced talks to acquire a minority stake in American Industrial Partners (“AIP”), a $16B AUM industrials focused middle-market private equity shop. AIP’s latest fund, their 8th fund, raised $5B

  • D.E. Shaw is raising $1B for its latest private credit fund, Alkali Fund VI. The fund, which is expected to pursue a multi-strategy investment approach, will primarily focus on corporate debt, structured credit, synthetic securitizations, and other specialty asset classes. This latest fundraising brings the total commitments across the Alkali fund series to approximately $3.9B since its launch in 2012

  • Stanley Black & Decker is weighing price hikes ahead of potential tariffs. The toolmaker expects a 60% tariff on Chinese goods following Trump’s inauguration in January, a move that would erode annual operating profit by $200MM. Stanley Black & Decker also has plans to move manufacturing to other Asian countries and Mexico

  • Klarna, the Swedish “Buy Now Pay Later” firm, is tapping Goldman, JPM, and MS for their IPO next year, with the goal of a roughly $15B valuation

  • AMD, Nvidia’s largest competitor, will be laying off 4% of their 26k person team. This is a targeted effort as the company shifts resources to higher growth opportunities

  • Super Micro Computer announced it will need more time to submit its quarterly 10-Q to the SEC. At this rate the stock is set to be delisted by the NASDAQ starting next week

  • Chipotle has a new CEO. Former COO Scott Boatwright joined the chain’s leadership in 2017 following 18 years with Arby’s. Boatwright declared that he will transform the fast-casual giant into a “global lifestyle brand” and expand its North American footprint to 7,000 restaurants

  • X’s rival Bluesky gained 1.25mm users over the past week. Bluesky is still tiny, with only 15.2mm users, well below Meta’s Threads 275mm users

  • Pfizer is looking to divest its hospital drugs unit. Facing pressure from activist short seller Starboard Capital, Mgmt. is exploring the sale of the biosimilars business along with other non-core assets

Man Who Called Nvidia at $1.10 Says Buy This Now...

In 2004, one man called Nvidia before just about anyone knew it existed. Now, he says a new company could become the next to soar like Nvidia. The biggest tech firms are loading up on shares. Nvidia, Apple, Google, AMD, Intel, and Samsung are all invested in this company. It also signed a MAJOR deal with Apple to get its AI tech into the iPhone and iMac. And its tech is also found in products from Samsung and Google.

M&A Transactions💭 

Quad Lock, manufacturer of accessories intended for mobile devices, reached a definitive agreement to be acquired for $331.61M by Thule Group (STO: THULE). Jefferies advised on the sale.

Nabiax, provider of colocation and hosting services, has entered into a definitive agreement to be acquired for $1.08B by Aermont Capital.

iseek Communications, provider of cloud and data communications services, entered into a definitive agreement to be acquired for $265.29M by HMC Capital. Grant Samuel Group advised on the sale.

Intelliswift, provider of information technology services, has reached a definitive agreement to be acquired for $110.0M by L&T Technology Services (NSE: LTTS).

IMG Arena US, operator of a sports data platform, reached a definitive agreement to be acquired for $450.0M by Endeavor (NYS: EDR).

GI Alliance, provider of healthcare services, reached a definitive agreement to be acquired for $2.8B by Cardinal Health (NYS: CAH). The transaction values the company at $3.9B. Barclays advised on the sale.

Aquis Exchange (LON: AQX), a United Kingdom based company that engages in cash equities trading exchange, has reached a definitive agreement to be acquired for $292.03M by SIX Group. EV/EBITDA was 37.65x and EV/Revenue was 9.71x.

Advanced Diabetes Supply, provider of testing supplies, has reached a definitive agreement to be acquired for $1.1B by Cardinal Health (NYS: CAH). Bank of America, Houlihan Lokey, MTS Health Partners, and Robert W. Baird & Co advised on the sale.

Logix City Center, operator of a commercial space, was acquired for $118.86M by Bhutani Group.

Hotel Miguel Angel, operator of a luxury hotel, was acquired for $227.34M by Lopesan Hotel Group and Stoneweg Asset Management.

Agro Kanesho (TKS: 4955), engaged in the business of producing and selling agrochemicals, reached a definitive agreement to be acquired for $101.1M by Idemitsu Kosan (TKS: 5019). EV/EBITDA was 10.6x and EV/Revenue was 1.38x.

Adam Resources & Energy (ASE: AE), is engaged in the business of crude oil marketing, tank truck transportation of liquid chemicals and dry bulk, reached a definitive agreement to be acquired for $127.52M by Tres Energy. EV/EBIDTA was 4.81x and EV/Revenue was 0.04x. GulfStar Group and Houlihan Lokey advised on the sale.

ThoughtWorks, a global technology consultancy company, was acquired for $1.75B by Apax Partners. EV/Revenue was 1.69x. Lazard advised on the sale.

Wonder, operator of a cloud kitchen platform, acquired Grubhub for $650.0M.

Private Placement Transactions💭 

Rakuten Card, provider of credit card services, has entered into a definitive agreement to receive $1.1B of financing from Mizuho Financial Group.

Zelos Tech, developer of fully autonomous delivery vehicles, raised $100.0M of Series B1 venture funding led by Blue Lake Capital and CDH Shanghai Dinghui Bai Fu Wealth Management Co. and Ltd..

Uala, developer of a digital banking application, raised $309.68M of Series E venture funding led by Allianz X at a pre-money valuation of $2.45B.

Neo, provider of banking and financial services, raised $259.63M of Series D venture funding led by TLG Capital Management, Evolution VC, Golden Ventures, Afore Capital, and Valar Ventures.

Writer, developer of a full-stack generative AI platform, raised $200.0M of venture funding from Accenture Ventures, Salesforce Ventures, and Adobe Ventures at a pre-money valuation of $1.7B.

Trace Neuroscience, developer of a genetic therapy, raised $101.0M of Series A venture funding led by Third Rock Ventures.

GreenScale, developer of a sustainable data center infrastructure, raised $1.3B of venture funding led by DTCP.

Firefly Aerospace, manufacturer of orbital launch vehicles, raised $175.0M of Series D venture funding led by RPM Ventures at a pre-money valuation of $1.83B.

Alentis Therapeutics, operator of a clinical-stage biopharmaceutical company, raised $181.4M of Series D venture funding led by Novo Holdings, OrbiMed, and Jeito.

Wonder, operator of a cloud kitchen platform, raised $950.0M of Series C venture funding led by GV, American Express Ventures, and Alpine Group.

Metsera, operator of a clinical-stage biopharmaceutical company, raised $215.0M of Series B venture funding led by Venrock and Wellington Management.

Noteworthy Chart 🧭

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Until next time!

Obviously, none of this constitutes financial or investment advice.

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