Wall Street Breakfast

Let's make a deal

Merger Monday deals in beverages, energy, drugs and entertainment. (0:15) Hedge funds like commodity-linked stocks. (2:35) Apple iPhone sales said to be shoring up. (3:17)

Show Notes
TSA boarding numbers show no signs of the economy slowing down - Apollo
UBS boosts NVDA target as checks confirm demand still 'exceedingly robust'

Episode transcripts: seekingalpha.com/wsb
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Duration:: 6m
Broadcast on:: 08 Jul 2024
Audio Format:: mp3

[music] Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news and analysis. Good afternoon, today is Monday, July 8th and I'm your host, Kim Khan, our top story so far. There are plenty of deals to help merger Monday live up to its name. Karlsberg finally sealed the acquisition of UK SoftDrinks company Britvik, paying $4.2 billion. Jeffery's analyst Kevin Mundy sees upside from the creation of a single company with the leading soft drinks and beer portfolio in Great Britain, as well as the enhancement of Karlsberg's Western European growth and cash flow profile. In addition, the deal has seen strengthening the PepsiCo relationship, including the securement of certain long-term bottling arrangements. In a bid to strengthen its immunology pipeline, Eli Lilly will buy a pharmaceutical company Morphic Holdings for $57 a share in cash, or about $3.2 billion. Morphic is developing a portfolio of aural integrin therapies for the treatment of serious chronic diseases, including autoimmune, cardiovascular and metabolic diseases, fibrosis and cancer. Devan energy will buy grace and no energies will list in basin business in a cash and stock deal, valued at about $5 billion, consisting of $3.25 billion in cash and $1.75 billion in stock. Devan said the deal significantly expands its position in the will of spin basin, with the addition of 307,000 net acres and production from the acquired properties expected to be maintained at about $100,000 barrels a day in 2025, of which 55% is oil. In Paramount and Skydance Media ended their dance and agreed to merger terms. Cherry Redstone gets a $1.75 billion cash infusion, while common shareholders get $15 per share for half their holdings, with a majority potentially facing losses. Howard J. Klein, who leads the House Edge investing group, says its Redstone's "Let them eat cake" moment. He adds that a combination with Sony would have been preferable. Under the combined flag, we'd see Sony's PlayStation Geniuses have these, among other pair of properties, to work on. Nickelodeon, T. James Mutant Ninja Turtles, SpongeBob, Comedy Central, MTV, and the rich sports deals of CBS, among many other big-tie legacy IP possibilities in film entertainment. Not even talk about the golden cash cows like the Godfather, Mission Impossible, Transformers, Indiana Jones Forest Gump, and Top Gun, plus their sequels and dozens of other blockbusters. In today's trading, stocks are slightly higher, with the NASDAQ trailing the S&P and Dow, but there's a little conviction. Commodity-sensitive stocks have gotten the attention of the hedge fund community. Hedge funds bought energy and material stocks at the fastest pace in five months, driven by long buys, according to Goldman Sachs's Prime Services Desk. Collectively, these commodity-sensitive sectors were net bought for a third straight week, they said. After being net sold in six prior straight weeks, materials was net bought for the third straight week they added, on a subsector level, net buying in containers and packaging, and metals and mining outweighed modest net selling in paper and forest products and chemicals. Energy now has been net bought for three of the last four weeks, on a subsector level, both oil, gas and consumable fuels, and energy equipment and services were net bought on the week. Among active stocks today, Wed Bush says Apple's iPhone is seeing more signs of stabilization across various markets based on recent supply chain checks. Analyst Dan Ives says, "We believe, after a better than expected March quarter, spots of optimism for iPhone growth are forming in various markets, and ultimately, we now believe June will be the last negative growth quarter for China, with a growth turnaround beginning in the September quarter. China remains the linchpin of growth for Apple, and now this key region is set to see growth once again, starting with the iPhone 16 in our view." Forgast is cautious on Southwest Airlines, ahead of the carrier's Q2 earnings report. The firm thinks that Southwest will require time to re-accelerate revenue growth and improve its network. Analyst John Stasek says, "With employee costs high in aircraft deliveries delayed, the road to recovery is likely to take longer than anticipated." And UBS reiterated its buy rating on Nvidia and raised its price target to $150 from $120, noting that recent checks indicate the demand for its upcoming Blackwell line is exceedingly robust. Analyst Timothy Arcuri says that based on the recent checks into Blackwell, it's likely that Nvidia could earn roughly $5 per share in 2025, as the order pipeline for NVL72 and NVL36 is materially larger than it was just two months as the budgets for major hyperscalers firm up. In other news of note, there's an energy chart from Torsten Sloch, who is Chief Economist at Apollo Group, making the rounds today. Scott notes that the U.S. is producing more energy than it's consuming to a degree that's never been seen before. Production has outweighed consumption since 2021, which ended a 60-year trend. The chart also shows U.S. energy consumption is lower today than it was in 1999, despite crypto mining and AI data centers, power sucks that didn't exist then. You can check out this fascinating chart at the podcast story on Seeking Alpha. Even in the Wall Street research corner, recent numbers have raised the prospect of the U.S. economy slowing down at a faster pace than expected, but Apollo Asset Management has turned to a rather pecan't data point to underscore the strength of economic activity. The TSA has daily data for the number of people scanning their boarding pass with a TSA agent, and it continues to show no signs of the economy slowing down, they said. TSA checkpoint numbers of total travel throughput have been higher year to date than any of the past year since the outbreak of COVID-19, which includes 2020, 2021, 2022, and 2023. That's all for today's Wall Street lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com/WSA, and make sure you're getting the most out of your portfolio with quant, news, and analysis by heading to SeekingAlpha.com/Subscriptions. [BLANK_AUDIO]