A Zooming Rebound

Zoom released a promising earnings report for Q2 this year, indicating that it might still hold its ground post-pandemic... [The Daily Peel... ]() August 22, 2023 | Peel #527 Silver banana goes to... [Caplinked. ]( In this issue of the Peel: - With the recent rate hikes by JPow, the IPO market was affected, but this year indicates a revival. Notably, Arm, a semiconductor design firm, is planning to go public. This IPO will provide insights into the current IPO market, the semiconductor sector, and the AI industry's standing. - Palo Alto Networks surged by after outperforming earnings expectations, and Nvidia stocks rose ahead of their quarterly release. Icahn Enterprises dropped following a negative short-report, and Johnson & Johnson declined due to an oversubscribed exchange offer for Kenvue shares. - Zoom, which had faced significant stock value drops in 2022, released a promising earnings report for Q2 this year, leading to a surge in after-hours trading. This indicates that Zoom might still hold its ground post-pandemic. Market Snapshot Happy Tuesday, apes. Phew, that was a relief. Regardless of their direction, I was starting to forget markets could move more than 0.1% in a day. But thankfully, August is coming to a close, and with that, traders are making the dreaded journey back from the Hamptons to the handcuffs of their desks. Glad to have you back! Equity markets sure were on Monday, at least. The Nasdaq ripped compared to recent moves, gaining just shy of 1.6% on the day as big tech names like Nvidia and Tesla decided they had enough red days. Investors were feeling more risk-on than as of late, with sectors like consumer staples and energy pulling back while bankrupt companies like Tupperware rip almost 20%. Treasuries were feeling the risk-on nature of the day as well, with the selloff continuing, concentrated more so on the short end of the curve, and pushing highs in yields even higher. Let’s just see how far we can go before something breaks. Sounds fun right? Let’s get into it. Your VDR Doesn’t Have to Suck. [image]( Using a sh**ty VDR is an excellent way to ruin a workday. That is unless you actually enjoy being a file monkey. Or if you’re hazing your team by making them suffer through the same outdated tech you used as a junior analyst. In either case, we have to ask — are you OK? For the rest of us, the right VDR is paradise. And [CapLinked's](=) mission is to make sure you’re never the victim of an impossible-to-use VDR. Here are some totally proven things* that happen to you when you switch to CapLinked and ditch your clunky VDR… - You’ll never answer the same DD question in three different places again. - Your clients will trip over themselves to close deals. - Your VP will finally notice you (in a good way). Instead of investing in sales guys pestering you to hang out, Caplinked has spent its money where it counts. You know, on creating a world-class VDR that will make your day easier. Want to see it for yourself? [Request a quote now & get $50 to GrubHub or Uber Eats](=) *CapLinked can’t guarantee any of these things will actually happen to you. But hey, a VDR provider can dream, right? Banana Bits - Treasury yields continue to push higher and higher, [setting further records](=) with ease - In case our piece on housing yesterday didn’t scare you enough, the national index for Housing Affordability of first-time home buyers [hits a record low]() - Maybe a [PE shop will be able to help Subway](=) stop making its bread out of rubber or plastic or whatever it was that was poisoning us this time - Now that Google is officially a boomer tech company (lol), [long-time executives continue to jump ship,]( largely in bids to play a role in AI startups Macro Monkey Says Strong-Arm-Ing the IPO Market Whether it’s the NFL, NBA, MLB, or any other league, getting drafted is often one of, if not the most important day in an athlete’s life. In corporate America, it’s basically the same thing for companies on IPO day. As explained by Leo in the movie that got you into Finance, [The Wolf of Wall Street,](=) an IPO, or Initial Public Offering, is exactly what it sounds like. It’s when a company officially “goes public,” meaning shares can now be sold to you, me, or any other a**hole with a few dollars and a brokerage account. "The goal when initially selling shares is, needless to say, for the company that is going public to raise as much money as possible." Generally, companies like to go public at the peak of their private valuation. The goal when initially selling shares is, needless to say, for the company that is going public to raise as much money as possible. As you can see here, the popularity of IPOs is highly dependent on the macroeconomic environment we’re in: [image] [Source]() So, JPow’s rate hikes weren’t limited to just putting the real estate market completely on ice or jacking up your credit card’s interest rate; they also put the IPO market right to sleep. But so far this year, we’ve seen quite a few early signs that deal activity could be coming back to life. We had big consumer names like Cava debut just a few weeks ago, JNJ’s spinoff of its (former) CPG division Kenvue just went live, and now, British semiconductor design firm Arm plans to publicly list according to recent filings from its owner, Softbank. Softbank owns 75% of Arm outright, with the other 25% nestled in the firm’s notorious Vision Fund. Per the filings, Masa and the Softbank gang plan to retain a controlling interest even as Arm shares enter your Roth IRA. You might not know Arm, but I can just about guarantee you use their services all day, every day. Arm is a designer of semiconductor architecture, seeking to optimize the performance of chips through their actual physical design. Oh yeah, I almost forgot to mention—their designs are in 99% of smartphones globally. Obviously, the company is really hyping up the AI train now, but given the firm’s utter dominance over the chip design market globally, it’s an important player in geopolitics as well. "... given the firm’s utter dominance over the chip design market globally, it’s an important player in geopolitics as well. " After a botched sale to Nvidia due to antitrust concerns from *checks notes* literally every country on Earth, the firm confidentially filed to go public earlier this year. Now, that time is getting closer, and while getting in early could lead to big Ws (or big Ls) in your portfolio, much more importantly, this one move gives us a pulse on: - The IPO market in this new environment of non-zero rates - How investors feel about the global semiconductor market - A check-in on the AI bubble/hype cycle So yes, this one trade will center around pretty much the three most important stories in markets this year. Obviously, our only question is: How are you placing your bets? What's Ripe Palo Alto Networks (PANW) ↑ 14.84% ↑ - Alright, Palo Alto, you got us on that one. After reporting earnings late on Friday, a move usually reserved for when companies are about to shoot themselves in the foot, shares boomed on the strong results. - The cybersecurity stock based out of not-Palo Alto, CA (Santa Clara, actually) reported an adjusted EPS of $1.44/sh vs. analysts’ consensus guesstimate of $1.28/sh. Sales came just about in line at $1.95bn vs $1.96bn expected. - Part of Monday’s big gains come from the best possible source: very low expectations. Analysts had been expecting problems, but with cost-cutting initiatives and strong performance across hardware, those concerns were proven idiotic, apparently. - Now, analysts have spent their time scratching out their notebooks and bumping up price targets, with both BofA and Deutsche raising significantly. Nvidia (NVDA) ↑ 8.47% ↑ - Meanwhile, when you’re Nvidia, you don’t really need a reason to go up in 2023. - But it definitely helps when you have one. Shares in the market’s favorite stock ripped Monday as investors gear up / batten down the hatches for Nvidia’s quarterly release on Wednesday. In anticipation, price targets are already moving wayyyy up. - HSBC analysts put the wind in the stock’s sails yesterday with a reiterated Buy rating and jack-up of their price target all the way to $780/sh, the second-highest on the Street (behind the $1k PT from Wells). Idk man, you sure AI is in a bubble?? What's Rotten Icahn Enterprises (IEP) ↓ 6.48% ↓ - For a firm with such an Icahnic investor, shares have been saying “Icahn’t” for a good few months now. Getting attacked by a short-report and stock serial killer like Hindenburg will do that to you, however. - With a reputation (or former reputation? Idk if it’s that bad yet) for skill as an investor somewhere between Warren Buffett and Bill Ackman, Carl Icahn’s 87-year-old a** has done a great job at burning that reputation of late. - Shares continued to sell off as investors seemed to be realizing that whether or not Hindenburg’s allegation of less-than-standard financial reporting was actually true, they didn’t want to stick around to find out. - If only Icahn could go back to his glory days when he was a 75-year-old young buck, focused solely on cashing checks & snapping necks. Johnson & Johnson (JNJ) ↓ 2.98% ↓ - For most of us, especially the aspiring YouTubers, podcasters, and…newsletter writers…among us, being oversubscribed is a dream. For JNJ shareholders, it’s a nightmare. - On Friday, Johnson & Johnson’s $35bn exchange offer for Kenvue shares officially expired, meaning investors had to lock in their decisions for how much Kenvue for JNJ they wanted. The offering was well oversubscribed, meaning JNJ would likely tender more shares than originally anticipated, causing a slight dilutive effect. - Obviously, everyone on Wall Street is trying to arbitrage this thing. The final proration of JNJ to Kenvue shares won’t be announced until Wednesday, but as of now, that ~7% discount JNJ was shooting for to entice investors to snatch up some Kenvue could be in question. Thought Banana Earnings Spotlight: Zooming to the Top It’s official, apes: we’ve finally gone full circle. The epitome of pandemic-era, high-flying stocks, Zoom dropped its latest earnings report for Q2 of this year late yesterday. After a brutal 2022 where shares lost >60% of their value, after already losing 67% from its peak going in to 2022, the stock was feeling like it was 2020 again. Shares surged 4.38% in the after hours market yesterday. Needless to say, investors were pleased with what they saw, including results like: - Earnings per share of $1.34 vs expectations for $1.05 - Sales of $1.14bn vs estimates for $1.12bn - A solid 1% gain in enterprise clients - Raised full-year guidance to $4.67/sh on $4.495bn - Confirmation the business isn’t falling apart post-pandemic "... analysts were worried about Zoom’s viability at the size it had reached." As nice as all the others are, that last bullet is likely driving the outsized upside move. As companies tightened their belts and operations moved more towards this whole idea of actually working in an office (crazy, I know) coming back to life, analysts were worried about Zoom’s viability at the size it had reached. Now, the post-C-19 price discovery may have worked its way through the cycle. If you recall, shares traded as high as $560 back in October 2020. Back then, hardly anyone thought gaining to a post-market closing price of $70.25 would ever be a good thing. But things change. Most analysts just seem glad that enterprise clients continue to move higher, very similar to how every time you try to open a meeting link, the number of web pages opened only increases. The big question: Can Zoom’s business continue to perform at a level well enough to drive a $20bn valuation? Banana Brain Teaser Yesterday — Complete the words below using three consecutive letters in alphabetical order, e.g.: _ _ A _ U S Add A, B, and C, and it becomes ABACUS. - D O _ I _ _ - _ R A _ I _ - _ _ A _ U E - Domino - Arabic - Opaque Today — What phrase is hidden here? Genie's Gift Skydiving Elvis Shoot us your guesses at vyomesh@wallstreetoasis.com. Wise Investor Says “An IPO is like a negotiated transaction, the seller chooses when to come public, and it’s unlikely to be a time that’s favorable to you.” — Warren Buffett How would you rate today’s Peel? [All the bananas](=) [Decent](=) [Rotten AF]( Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? [Be smart like your friend.](=) [ADVERTISE](=) // [WSO ALPHA](=) // [COURSES]( // [LEGAL]( Don't want The Daily Peel? [Unsubscribe here](. Click to [Unsubscribe]( from ALL WSO content IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States