America's Soft Landing

According to the BLS, the U.S. economy added 150k jobs in October, a slowdown from the revised 297k added in September. [The Daily Peel... ]() November 6, 2023 | Peel #579 Silver banana goes to... [M&A Science. ]( In this issue of the Peel: - According to the BLS, the U.S. economy added 150k jobs in October, a slowdown from the revised 297k added in September. - DraftKings and Paramount Global had an absolutely ripe day, whereas Fortinet and Sweetgreen suffered share price declines. - Apple delivered earnings of $1.46/sh on $89.5bn in revenue against estimates of $1.39/sh on $89.3bn—not bad. Market Snapshot Happy Monday, apes. Hope you had a nice weekend. It’s gonna be tough to beat the excitement of last week with FOMC meetings, thousands of earnings reports, a jobs report, SBF conviction, and the loss of Chandler Bing, but it’s time to get fired up because we’re running it back again. The only thing equities ran back to close last week was more gains. All earnings szn, equities have bounced off strong numbers, with over 81% of S&P companies reporting so far, and of those, 82% beat their expectations. Energy was the only sector to fall off on the day (buzzkill), and despite the world’s most valuable company shedding half a percent, the rest of the team came to play, especially in small cap world with the Russell 2k’s 2.72% gain setting the high for the day. Treasuries kept up their recent momentum, too, heading lower again as they have since JPow’s dovish hold of the fed funds rate. The 2-year was sent all the way below 4.9% on the back of the nonfarm payrolls report (more below), while the 10-year fell to ~4.5%. Let’s get into it. The Current State of M&A: Global M&A Market Perspective for 2023-2024 [image]() The M&A landscape is evolving faster than ever, driven by economic shifts, technological advancements, and regulatory changes. 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[Access Today]() Banana Bits - Even at 92 years old, our boy Warren Buffett is still out here driving numbers like [40% operating income growth]() and $157bn in cash. - It had been a while since Elon did anything wild, so naturally, he and his OpenAI challenger xAI have released their own chatbot with the most disgusting name you could think of called “[Grok.](” - Tesla and Toyota are going on offense, increasing employee wages as the UAW’s success gets the potential union crowd [hyped up.]() - RIP to all of you in consulting, as it sounds like those raises and bonuses will be [extra thin this year.]() Macro Monkey Says Jobs Day Like Oppenheimer having nuclear bombs, Fed Chair Jerome Powell had interest rates. One was all about causing as much destruction as humanly possible, while the other was all about ending World War II. But, for the first time ever, these things may have one more thing in common: they both got the job done. Take that with a mushroom-cloud-sized grain of salt, but as new government data rolls in, the “soft landing” seems more and more confirmed. At the very least, we know it was a much softer landing than Hiroshima. On Friday, this idea was further solidified by the release of the October nonfarm payrolls (aka jobs) report. According to the BLS, the U.S. economy added 150k jobs in October, a slowdown from the revised 297k added in September and potentially showing signs of a slowing economy. After the summer boom that we had leading to that surprising GDP growth print of 4.7% for the third quarter, maybe we shouldn’t be too surprised we’re slowing down. "... we shouldn’t be too surprised we’re slowing down." Moreover, FOMC’s interest rate view could be back on the “good news is bad news” kind of vibe we saw all in 2022. Meanwhile, unemployment rose from 3.8% to 3.9%, exactly what Wall Street was hoping to see. Slowing job growth suggests a slowing economy, which to investors means that rate cuts may be coming sooner than expected—or, at the very least—more rate hikes aren’t on the horizon. Hence, bad news is good news. The healthcare, government, and construction sectors dominated job gains while manufacturing and transportation/warehousing lost as many roles as Bud Light has lost customers. I wonder if any certain strikes at certain automakers have anything to do with that… "Just barely edging out real gains, this is another sign of a cooling labor market JPow dreams about." Wages continued to grow as well, although they slowed to 4.1% annualized from the 4.3% print in September. Just barely edging out real gains, this is another sign of a cooling labor market JPow dreams about. Labor force participation actually fell a tad, too, from 62.8% to 62.7%. That reduction in labor force participation (buncha lazy bums) is probably the most negative aspect of the report because this doesn’t suggest a decrease in labor demand but a decrease in labor supply. Essentially, that’s a backdoor way to see the price of labor (aka wages) increase as well. And as we all know, JPow absolutely hates wage gains right now because he wants you to be poor so we can stop raising rates. Seems like a fair trade, right? Even if not, it certainly could be a lot worse. Once again, we have macro data suggesting a Goldilocks-like economy that Americans are simply having a tough time believing. Sentiment is still in the toilet (just ask the person next to you how they think the economy is doing), but performance has done nothing but confirm an alleged “soft landing.” But again, as long as we’re landing softer than Hiroshima, we should be all right. What's Ripe DraftKings (DKNG) ↑ 16.46% ↑ - As more and more states decide to have some fun with sports betting, DraftKings continues to secure the industry crown on its head further and further. I guess degeneracy really does always win out. - The company delivered a report so good it might make you want to punch a baby. The $0.61/sh loss was a stark improvement from the $1/sh lost in the same period last year. Revenue blew out expectations, clocking $790mn vs $706mn priced in. - That’s an insane 57% jump in revenue, but growth like that isn’t as crazy when your business is still illegal in most of the country. As states legalize online betting, DraftKings hauls in millions more customers simply by showing up. - Kentucky was the latest rollout, with Maine and North Carolina coming soon. As I sit here in Charlotte writing this, I already feel bad for myself and the inevitable bankruptcy I’ll soon declare. Paramount Global (PARA) ↑ 15.44% ↑ - Things at Paramount Global haven’t been this good since the world was nearly completely destroyed by a once-in-a-century pandemic-level health emergency. The stock just had its best day since March 2020. - Apparently, people actually subscribe to this thing. This was news to me as I’m pretty sure Yellowstone is their only relevant title, and my parents watch that, so I know it’s actually trash. - But Paramount+ and PlutoTV together saw a 38% jump in revenue while the former’s subscriber count climbed to 63mn. Shares are up 28% in the last two days alone, confirming that the streaming wars are still on. What's Rotten Fortinet (FTNT) ↓ 12.35% ↓ - Now, this has to be some form of bullying for shares to perform this badly. Just a few months ago, Fortinet lost 1/4th of its value thanks to weak earnings, and now, it’s deja vu all over again. - But Fortinet didn’t reserve all the attention for themselves. Shares in Cloudflare (NET, +13.84%), CrowdStrike (CRWD, +2.98%), and Palo Alto Networks (PANW, -2.73%) bounced around as well with mixed reactions across the whole space. - Guidance was the main problem. Wall Street was shooting for $1.5bn in sales next quarter while management trimmed that to a high-end of $1.44bn. Essentially, it’s confirmation that recent slowdowns for the sector may continue into Q4. - EPS of $0.41/sh still beat the $0.37/sh expected, while revenue of $1.33bn missed by a hair. It could be worse, I guess. Sweetgreen (SG) ↓ 11.87% ↓ - After conducting some thorough research, it’s clear that most people like to eat food that tastes good. With that said, I can’t imagine how on Earth this vegetable company’s sales jumped 24% annually, but shares are still down on earnings day, so all's well that ends well. - Eating healthy sucks, and so do shares in companies pushing that garbage onto us. Despite the sales growth, a wider-than-expected loss at $0.22/sh vs. estimates for a $0.19/sh loss was all that mattered, sending shares down a spiral. - Same-store sales and margin profiles were improved, but cost-cutting initiatives haven’t had the effect analysts have been expecting/hoping/praying for. Thought Banana Earnings Spotlight: Apple Finally, the moment we’ve all been waiting for is here, as the most valuable company in the world takes the stage for third-quarter earnings. We’ve got a lot to get through, so let’s get to it. Tim Appl-, I mean, *Cook took the mic on Thursday and disappointed shareholders far and wide with the fourth consecutive period of quarterly sales declines. Markets seemed to barely react to the report as shares finished down just 0.52%, but on a day like Friday, where the Nasdaq was up 1.38% even with that, it’s not hard to imagine what could’ve been. "Markets seemed to barely react to the report as shares finished down just 0.52% ..." Most of Big Tech was taking off, but Apple’s overall weak quarter held them back and held down indexes for the day as a result. The company delivered earnings of $1.46/sh on $89.5bn in revenue against estimates of $1.39/sh on $89.3bn—not bad. So, sales continued to decline, but they only fell ~0.71%. The top and bottom lines both clocked in solid beats, but Apple’s shadiness about the 4th quarter seemed to be where the jitters got started. Notoriously secretive about their products, Apple tends to do the same thing when releasing financial reports as well. CFO Luca Maestri said Q4 results—the most important quarter for Apple—would be “similar” to last year. Thanks for that, Luca, big help! Results, in fact, will almost definitely be worse as Apple’s fiscal year 2023 allows for one less week in Q4, but estimates currently sit at ~$123bn. "... the Colossus of Cupertino is becoming more and more a services/software company ..." Once again, Apple’s results also indicate that the Colossus of Cupertino is becoming more and more a services/software company than the hardware the firm was built on (no pun intended). $22.31bn in this line vs $21.3bn expected was a strong beat and loved by analysts as Apple’s services line naturally has a better margin profile than everything else. Aside from services, the only other unit to actually see sales improve was the iPhone product line. Macs, iPads, and Wearables all saw declines of varying degrees, with Macs easily seeing the worst annual comps at a disgusting -33%. No wonder markets barely reacted—there’s barely any news to even react to, as pretty much all of this was apparently priced in. The continuing decline in sales seemed to be a big shock, but they still beat on the top line, and every other trend just seemed to get further confirmed. Thanks for nothing, Apple. I can deal with a 0.52% decline as a reaction, but we’d appreciate a little excitement on the way. Seems easy enough. The big question: How will Apple and all of its respective units fare in the fourth quarter? Is Apple becoming a services-first company, and will that translate to a higher multiple? Have we reached peak Apple? Banana Brain Teaser Friday — If a hospital has 360 doctors and nurses, and the ratio of doctors to nurses is 7 to 11, how many nurses are there? Answer 220 Today — Chanelle has won 429 games and lost 431 games of her favorite computer card game. If she wins 3 out of every four games she plays from now on, how many more games must she play to bring her total winning percentage up to 55%? Shoot us your guesses at vyomesh@wallstreetoasis.com. Wise Investor Says “I’m not better than the next trader, just quicker at admitting my mistakes and moving on to the next opportunity” — George Soros 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? 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