What You Need To Know For November 21st

Bill Hwang is Sentenced, The Jersey Mike's LBO, and the Comcast Spinoff

Author

HY Harry
November 21, 2024

In partnership with

In partnership with

Welcome back!

Weak Target earnings spooked investors (we’ll get into that below), with the S&P Consumer Discretionary Index down -.57% on Wednesday. The market was generally waiting for Nvidia earnings, which were pretty good but may not have been enough to satisfy growth-hungry investors. Let’s get into it.

Earnings Corner 📜 

Walmart (WMT) reported earnings that beat estimates. The company saw non-grocery merchandise sales increase for the second consecutive quarter, after 11 quarters of decline. Comparable sales were up 5.3% for Walmart and 7% for Sam’s Club. E-commerce sales were up 22%, and mgmt. noted that the segment was very close to profitability, as it benefited from rush delivery fees. Walmart raised its FY net sales outlook to 4.8%-5.1% growth (vs. 3.75%-4.75% previously). The stock was up 3.3% at Wednesday’s close, hitting an all-time high.

Snowflake (SNOW) reported earnings that beat estimates, with revenue of $942MM up 28% y/y (vs. $897MM expected) and adjusted EPS of $0.20 (vs. $0.15 expected). Mgmt. released FY 2025 product revenue guidance of $3.43B (vs. $3.36B previously), suggesting 29% growth. Projections also include a 5% operating margin, up from 3% previously, as mgmt. emphasized their efforts to cut costs. The stock was up 19.9% after Wednesday’s close.

Nvidia (NVDA) reported earnings that beat estimates, with revenue of $35.08B up 94% y/y (vs. $33.16B expected) and EPS of $0.81 (vs. $0.75 expected). This quarter saw Nvidia’s major partners, including Microsoft, Oracle, and OpenAI, receive shipments of the newest Blackwell AI chips. According to NVDA’s CFO, 13,000 chip samples were shipped to customers. Mgmt. projected Q4 sales of $37.5B (vs. $37.08 expected), implying y/y growth of 70%. This represents a slowdown from the last 3 quarters, where the company saw explosive growth of 122%, 262%, and 265%. The stock was down 2.5% after Wednesday’s close and could dictate stocks as a whole today.

Target (TGT) reported its biggest earnings miss in two years. Mgmt. blamed a “deceleration in discretionary demand” and noted higher costs associated with rushing inventory during October’s brief port strike. Target’s poor performance is a stark contrast to Walmart’s earnings beat earlier this week – of interest is the fact that 60% of TGT’s revenue comes from discretionary items, while this category only makes up 40% of Walmart’s sales. Mgmt. also cut its earnings forecast. The stock was down 21.4% at Wednesday’s close, hitting a 52-week low.

Lowe’s (LOW) reported earnings that beat estimates. Mgmt. raised its FY sales guidance to $83B-$83.5B (vs. $82.7B-$83.2B previously), but still projected a y/y decline in sales. According to the CEO, Lowe’s is “still feeling pressure in the home improvement market” – particularly in remodeling projects. The stock was down 3.3% after Wednesday’s close.  

Palo Alto Networks (PANW) reported earnings that beat estimates. PANW profited from solid growth in cybersecurity services spending, given rising digital threats. Mgmt. announced a 2-for-1 stock split and released a FY 2025 revenue outlook of $9.12B-$9.17B, in line with analysts’ estimates of $9.13B. The stock was down 4.8% after Wednesday’s close.

TJX Cos. (TJX) reported earnings that beat estimates, with revenue up 6% y/y. Mgmt. announced that Q4 was “off to a strong start,” with solid holiday performance materializing. However, the street was disappointed by a comparable sales growth outlook of 2%-3% (versus 3% expected). The stock was down 1.2% at Wednesday’s close.

A Message from 10 East

Where Sophisticated Investors Access Private Markets

10 East is a co-investment platform where sophisticated investors access private market investments alongside a veteran team with a decade+ track record of strong performance. 

The firm is led by Michael Leffell, former Deputy Executive Managing Member of Davidson Kempner.

Members have the flexibility to participate on a deal-by-deal basis across private equity, credit, real estate, and venture capital.

Benefits of 10 East membership include:   

  • Flexibility – members have full discretion over whether to invest on an offering-by-offering basis.   

  • Alignment – principals commit material personal capital to every offering. 

  • Institutional resources – a dedicated investment team that sources and diligences each offering.  

Plus, there are no upfront costs or commitments associated with joining 10 East.

Today’s Headlines 🍿 

  • The latest on the new Treasury Secretary: We’re 2 weeks past President Trump’s election win, but due to political jockeying it’s still unclear who the next Treasury Secretary is. After initial debate between Cantor Fitzgerald boss Howard Lutnick and Hedge Fund manager Scott Bessent, Lutnick is out of the running after being named the lower-tier, commerce secretary. Trump was supposedly unhappy with the initial options, bringing in former Fed Governor Kevin Warsh and Apollo Global CEO Marc Rowan for final round interviews on Wednesday. Right now, the odds favor Scott Bessent, with Kevin Warsh in 2nd place. Bessent has been a key advisor to Trump, but the fact that this is taking so long opens things up for Warsh (although he’s more of a free trade guy) and Rowan, the private equity and “golden age of private credit” billionaire

  • Spirit Airlines has filed for Chapter 11 bankruptcy, and analysts from Deutsche Bank suggest that JetBlue Airways and Frontier Airlines are likely to benefit from this situation due to their operational overlap with Spirit. The bankruptcy could provide JetBlue and Frontier with increased flexibility in managing capacity on overlapping routes, especially as Spirit reduces its operations. This development follows Spirit's unsuccessful attempts to merge with JetBlue and Frontier, leading to significant financial losses and looming debt payments exceeding $1B

  • Blackstone has agreed to acquire Jersey Mike's sandwich chain in an $8B deal. Expected to close early next year, the deal will keep founder Peter Cancro in the CEO seat, while boosting his net worth to $7B. BX aims to expand the chain both domestically and internationally post-purchase. Guggenheim and Morgan Stanley advised Jersey Mike’s while Barclays and Bank of America advised Blackstone. The transaction will be financed with via whole business securitization (“WBS”), an increasingly popular trend for Restaurant Franchise fees to be securitized at a lower cost of capital

  • Amcor, a Switzerland based packaging giant will acquire US based Berry Global in a $8.4B combination of two large packing companies. Berry focuses on trash bags and bottles while Amcor is more focused on food and drink, plus healthcare packaging. This is an 8.5x EBITDA transaction and an important step in consolidating a pressured industry

  • Bill Hwang has been sentenced to 18 years in prison. He’s also a mere mortal now (from a net worth standpoint). The Archegos Capital Management founder claims his current wealth is only around $55M, a dramatic fall from his peak net worth of over $30B. Prosecutors were seeking a 21-year prison term and $10B in restitution for fraud and market manipulation related to Archegos' collapse in 2021, with the restitution part remaining unclear at the moment and coming at a later date

  • Gautum Adani, the billionaire head of India’s Adani Group has been indicted in New York federal court for allegedly paying more than $250 million in bribes to Indian government officials. Adani allegedly sought to obtain lucrative solar energy supply contracts and misled U.S. investors

  • Google Antitrust Worries: The Department of Justice is preparing to ask a federal judge to require Google to sell its Chrome browser and implement measures related to its artificial intelligence and Android operating system. This move comes as part of the DOJ's efforts to address Google's monopoly in the search market, following a ruling in August that found the company had illegally monopolized this sector. Chrome could be worth up to $20B as an independent entity

  • Delta Air Lines is set to introduce Shake Shack cheeseburgers for first-class passengers on select flights starting December 1, primarily on routes longer than 900 miles from Boston, with plans to expand to other markets in 2025. The meal will feature a 100% Angus beef patty on a toasted potato bun, customizable with toppings like lettuce, tomato, and ShackSauce, and will be accompanied by chips, a Caesar salad, and a dark chocolate brownie

  • Brad Jacobs and QXO Inc. have reportedly made an offer to acquire Beacon Roofing Supply Inc., a publicly traded distributor with a market value of about $6.2B, as part of its strategy to grow through digital commerce. The potential acquisition aligns with Brad Jacobs’s latest rollup strategy and QXO's goal of modernizing the $800B building products distribution industry, with the company having raised $5B specifically for acquisitions

  • Shares of H&R Block and Intuit dropped after reports that President-elect Donald Trump's Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, is considering developing a free tax filing app. This development follows the Biden Administration's pilot Direct File program and comes amid criticism of the U.S. tax code's complexity, with the DOGE highlighting that Americans spend 6.5B hours annually preparing and filing taxes

  • Murdoch Wins: Activist investor Starboard’s proposal to end the dual-class share structure at the Murdoch Family’s News Corp. got struck down during a vote at the media company’s annual meeting. In a “Succession” like fashion, the family has retained control despite activist pressures

  • A former employee of Nomura Holdings Inc.'s securities subsidiary has been charged with robbery, attempted murder, and arson of an elderly client’s home. In response to the allegations, Nomura, Japan's largest brokerage, stated that it is implementing strict measures to strengthen its internal systems and regain client trust

  • Ford plans to cut approximately 4,000 jobs in Europe, representing about 14% of its European workforce, with the majority of reductions targeting operations in Germany and the UK by the end of 2027. The job cuts come as part of the company's strategic response to slowing momentum in the electric vehicle market, and will include reducing production of Explorer and Capri EV models at its Cologne, Germany facility. These workforce reductions are pending consultations with unions and local governments

  • Comcast Corp. has confirmed its plan to spin off several cable-TV channels, including MSNBC, CNBC, and USA Network, into a new publicly traded company. The NBC broadcast network, Peacock streaming service, and Bravo channel will remain with the parent company, while the spinoff will also include digital assets like Fandango and Rotten Tomatoes. The move will be executed as a tax-free spinoff, separating Comcast's cable channel portfolio from its core broadcasting and streaming businesses. These businesses aren’t going to be viewed as attractive by Wall Street, as they face severe cord cutting pressures. It’s very likely these businesses get consolidated in some shape or form over time

  • Trump has nominated Linda McMahon, a former Small Business Administration head and CEO of WWE, to lead the Education Department. McMahon's appointment comes as Trump aims to restructure the department, which he has previously suggested could be eliminated, and she is expected to advocate for policies promoting school choice and reducing federal involvement in education

  • Jaguar Fumbles a Rebrand: Jaguar's latest ad campaign, aimed at rebranding the luxury carmaker, has drawn criticism for featuring no actual cars and focusing instead on artistic visuals and androgynous models, leading to confusion and disappointment among viewers. Some commentators have likened the backlash to Bud Light's recent marketing missteps

M&A Transactions💭 

The iPhone Assembly Plant of Pegatron (TAI: 4938) was acquired for Tata Group for $175.0M.

Delta Agribusiness, provider of agronomy advisory services, has reached a definitive agreement to be acquired for $475.0M by Elders (ASX: ELD).

SiEnergy, provider of regulated natural gas distribution services, has reached a definitive agreement to be acquired for $273.0M by NW Natural Holding (NYS: NWN).

Own Company, developer of a cloud data protection platform, was acquired for $1.9B by Salesforce (NYS: CRM).

Nuvei, a provider of payment technology solutions, was acquired for $6.3B by Novacap, Advent International, Caisse de depot et placement du Quebec, and Mr. Philip Fayer. EV/EBITDA was 19.89x and EV/Revenue was 4.63x. Barclays and TD Securities advised on the sale.

Fiber Materials, developer and manufacturer of composite materials, has entered into a definitive agreement to be acquired for $165.0M by Tex Tech Industries. Morgan Stanley advised on the sale.

AZ NGA, provider of accounting and financial advisory services, was acquired for $240.0M by Oaktree Capital Management. Jefferies advised on the sale.

Vee Healthtek, provider of technology consulting services, was acquired for $250.0M by TA Associates Management. Avendus Capital advised on the sale.

TradePMR, provider of technology, brokerage, and custodial services, has reached a definitive agreement to be acquired for $300.0M by Robinhood (NAS: HOOD).

ID&E Holdings (TKS: 9161), a Japanese based company engaged in the business of construction, has reached a definitive agreement to be acquired for $424.69M by Tokio Marine Holdings (TKS: 8766). EV/EBITDA was 723.25x and EV/Revenue was 92.6x.

Private Placement Transactions💭 

CNNP Rich Energy, operator of a subsidiary company of China National Nuclear Power Company, raised $1.11B of venture funding from Nuclear Construction Industry Fund Management, Zhejiang Zheneng Electric Power Company, and Sichuan Chuantou Energy at a pre-money valuation of $4.71B.

The Exploration Company, developer of a reusable spacecraft, raised $160.0M of Series B venture funding led by Balderton Capital and Plural VC at a pre-money valuation of $300.0M.

HealthKart, provider of health and nutritional supplements, raised $153.0M of venture funding led by ChrysCapital and Motilal Oswal Alternates.

Kong, developer of an application programming interface platform, raised $175.0M of Series E venture funding led by Tiger Global Management and Balderton Capital at a pre-money valuation of $1.92B.

Enfabrica, developer of converged networking and memory fabric silicon, raised $115.0M of Series C venture funding led by Spark Capital.

Cresta, developer of a customer experience platform, raised $125.0M of Series D venture funding led by WiL and Qatar Investment Authority.

Cyera, developer of a data storing and security platform, raised $300.0M of Series D venture funding led by Accel and Sapphire Ventures at a pre-money valuation of $2.7B.

This Stock is Our Top Momentum Trade - Up 220%

Bank of America forecasts gold reaching $3,000 by 2025, catapulting this under-the-radar stock into the spotlight. With smart money pouring into gold and insiders loading up, this hidden gem is just getting started.

This is a sponsored advertisement on behalf of Four Nines Gold. Past performance does not guarantee future results. Investing involves risk. View the full disclaimer here: https://shorturl.at/73AF8

Noteworthy Chart 🧭

What does Bill Ackman actually invest in? Take a look below:

Meme Cleanser 😆 

Finance Merch Referrals ☕️ 

Until next time!

Obviously, none of this constitutes financial or investment advice.

Looking to start your own newsletter? Join beehiiv through us and you’ll get 30 days free and 3 months of a 20% discount.