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  • 🧐 $SMCI Auditor Resigns?!

🧐 $SMCI Auditor Resigns?!

+ Russia Fines Google More Than The World's Entire GDP

October 31, 2024

Good afternoon! French newspaper Le Monde just dropped a bombshell: the Strava fitness app, beloved by runners and cyclists, is giving away the movements of high-profile bodyguards—think Biden, Trump, Putin’s security teams. Yep, turns out you can track some of the world’s most protected leaders by following their bodyguards’ jogs. The U.S. Secret Service says it’s not worried about any threats, but Le Monde found enough data to trace private trips, like Macron’s secret weekend in Honfleur.

Le Monde identified 26 U.S. agents, 12 French, and six Russian security personnel casually sharing their movements. In one case, a Secret Service agent’s Strava activity even revealed Biden’s hotel location before his high-stakes meeting with Xi Jinping in San Francisco. The takeaway? Strava might be fun for tracking steps, but it’s sparking serious conversations about the need for better data privacy regulations.

MARKETS

  • What goes up must come down. After hitting a fresh all-time high earlier this week on Big Tech earnings optimism, the Nasdaq took a nosedive, logging its worst day in almost two months. Microsoft and Meta led the tumble, each posting earnings that raised red flags over ballooning AI expenses. The Nasdaq slid 2.7%, the S&P 500 dropped 1.9%, and even the Dow wasn’t spared, losing 0.9%—a rough end to the month for all three major indexes.

  • Wall Street was banking on a strong showing from Big Tech, but Thursday’s earnings reports delivered a reality check. Mixed results from other tech heavyweights left investors grappling for direction, with market jitters clearly lingering into after-hours trading.

STOCKS
Winners & Losers

What’s up 📈

  • Peloton surged 27.82% after posting a strong fiscal Q1 performance and raising its full-year profit outlook. Additionally, Ford executive Peter Stern was announced as the next CEO, starting in January. ($PTON)

  • Paycom soared 21.35% on a solid Q3 report, beating sales and earnings expectations, alongside issuing strong guidance for the current quarter. ($PAYC)

  • Roblox increased 19.89% after reporting impressive Q3 results with bookings hitting $1.13 billion, a 34% increase year-over-year. ($RBLX)

  • Carvana rose 19.29% as it beat Q3 earnings and revenue expectations and forecasted full-year EBITDA “significantly above” its previous target range. ($CVNA)

  • Twilio climbed 14.28% after posting better-than-expected Q3 earnings and issuing a bullish EPS forecast for the next quarter. ($TWLO)

  • Booking Holdings popped 4.76% on strong Q3 earnings of $83.39 per share on $7.99 billion in revenue, beating estimates of $77.52 per share and $7.63 billion, respectively. ($BKNG)

  • Comcast increased 3.39% following a Q3 earnings beat with $1.12 per share and revenue of $32.07 billion, exceeding estimates. The company is also considering spinning off its cable networks business. ($CMCSA)

What’s down 📉

  • EstĂŠe Lauder tumbled 20.90% after withdrawing its annual forecast and slashing its quarterly dividend, citing continued weak demand in China. ($EL)

  • Roku dropped 17.33% as disappointing Q4 guidance overshadowed its report of hitting $1 billion in revenue for the first time. ($ROKU)

  • Robinhood fell 16.73% after reporting Q3 earnings of 17 cents per share, missing the expected 18 cents, with revenue also coming in below estimates at $637 million versus $658 million. Marketing promotions were cited as a drag on revenue. ($HOOD)

  • Coinbase declined 15.34% after missing Q3 earnings expectations with 28 cents per share on $1.21 billion in revenue, below estimates of 41 cents and $1.26 billion. ($COIN)

  • Super Micro Computer slipped 11.97% following a 33% plunge the previous day after revealing Ernst & Young’s resignation as auditor due to concerns over board independence and accounting practices. ($SMCI)

  • Uber slid 9.29% after Q3 gross bookings missed estimates, reporting $41 billion versus the expected $41.24 billion, despite beating revenue expectations at $11.2 billion. ($UBER)

  • eBay dropped 8.17% after issuing disappointing Q4 guidance with revenue expected between $2.53 billion and $2.59 billion, below analyst expectations of $2.65 billion. Q3 earnings and revenue, however, exceeded expectations. ($EBAY)

  • Palantir fell 4.88%. ($PLTR)

COMPLIANCE
Super Micro Computer’s Auditor Ernst & Young resigns

Super Micro’s rollercoaster ride hit a nosedive as Ernst & Young (EY) resigned as its auditor, citing “integrity concerns” that raised red flags on the company’s accounting practices.

EY’s exit sent the stock tumbling 33%, its worst drop in six years, and now leaves Super Micro scrambling for a new auditor just as the DOJ investigates allegations of revenue inflation from a former employee. For a company that surged with AI-driven demand earlier this year, the timing of these setbacks couldn’t be worse.

Trust Issues and Rival Gains

This isn’t the first time Super Micro has come under fire for its numbers. Earlier this year, Hindenburg Research spotlighted the company for “glaring accounting red flags,” leading Super Micro to delay its annual financial report while it reassessed internal controls.

Meanwhile, rivals like Dell may seize this moment to gain ground in the lucrative AI server market, where Super Micro has been a major player. As the stock continues to slump, the company’s competitors are watching closely.

Delisting Risks Add Pressure

Super Micro’s troubles don’t end with its audit chaos. The company faces a November 16 deadline to regain compliance with Nasdaq rules or risk being delisted, a position it previously found itself in back in 2018.

With time running out to find a new auditor, analysts are sounding alarms about the company’s future on the exchange. EY’s exit is a stark reminder of the fragility of market trust, and Super Micro now finds itself on thin ice with both Nasdaq and investors.

Facing the Climb Back

Amid the upheaval, Super Micro is sticking to its core business promises, assuring stakeholders that its customer commitments and product roadmap remain on track. Yet, with its stock down over 75% from March highs and sentiment shaky, Super Micro’s future looks precarious.

For a company that soared on the AI hype, rebuilding credibility with investors will require more than just words—it’ll need clear, clean financials and an auditor willing to sign on the dotted line.

NEWS
Market Movements

  • 🤖 Big Tech Ramps Up AI Spending, Stocks Face Profit Pressure: Meta and Microsoft are investing heavily in AI infrastructure, with Microsoft’s quarterly AI spending hitting $20B and Meta forecasting higher AI costs next year. Limited AI chip supply and profit concerns have contributed to recent stock declines across the sector. ($META), ($MSFT)

  • 🚗 BYD Tops Tesla in Revenue Amid Strong Domestic Demand: Chinese EV maker BYD has reported $28.2B in Q3 revenue, surpassing Tesla’s $25.2B as domestic subsidies fuel demand, though BYD now faces new E.U. tariffs impacting its outlook. ($BYDDF), ($TSLA)

  • 🛠️ Boeing Resumes Union Talks with Federal Mediation: Boeing has returned to negotiations with the union representing 33,000 striking workers, facilitated by Acting U.S. Labor Secretary Julie Su. ($BA)

  • ✈️ U.S. Airlines Soar on Profits and Fare Hikes: American Airlines raised its profit forecast, and Delta projects a strong Q4, driven by reduced capacity and higher fares. Airline stocks have gained 23% since July, nearly tripling the S&P 500’s performance. ($AAL), ($DAL)

  • 📺 Comcast Considers Spinning Off Cable Networks Amid Industry Shifts: Comcast is exploring the separation of NBCUniversal’s cable networks as a potential step toward a broader media reconfiguration. With assets like Bravo, Syfy, and CNBC, the move could spark consolidation among traditional cable players, especially as Comcast shifts focus to its streaming platform, Peacock. If successful, the spin-off could pave the way for more streamlined media companies in an industry increasingly dominated by streaming. ($CMCSA)

  • 💊 Novo Nordisk Ends Wegovy and Ozempic Shortages in U.S.: Novo Nordisk has fully restored U.S. availability of its popular weight-loss drug Wegovy and diabetes treatment Ozempic, potentially impacting compounding pharmacies as the FDA considers removing the drugs from its shortage list. ($NVO)

  • 🛍️ EU Launches Compliance Probe into Temu Over Digital Services Act: The European Union has opened an investigation into Temu, assessing its compliance with the Digital Services Act amidst concerns over illegal product sales. Temu faces potential fines up to 6% of its annual revenue if violations are found. ($PDD)

LEGAL
Russia Fines Google More Than The World's Entire GDP

Russia just dropped a $20 decillion fine on Google—yes, that’s 20 followed by 33 zeros.

This “symbolic gesture,” as the Kremlin puts it, demands that Google unblock Russian state-supported media on YouTube, which the tech giant restricted following Russia’s invasion of Ukraine. While the sum is way beyond Google’s own market value, Moscow’s message is loud and clear: follow our rules, or face the fines.

From Courts to Chaos

Google initially expected any disputes over blocked Russian channels to play out in U.S. or U.K. courts. Instead, Russian media companies have taken the fight global, with cases popping up from South Africa to Turkey.

In one wild twist, South Africa’s High Court even approved the seizure of some Google assets, part of a broader Russian push to target Western companies ignoring local rulings.

When Courts Become Weapons

Legal experts are calling this “lawfare”—using courts as geopolitical pawns. Russia’s recent laws let its courts go after Western companies as payback for sanctions, and as the fines pile up, experts warn this is just the start.

The ongoing fines, doubling weekly, represent a fundamental shift in how international companies are forced to think about geopolitical risk, especially as Russian and Western courts butt heads.

Just a Symbolic Sting?

Google, for its part, is playing it cool, saying these legal hurdles won’t hit the bottom line. Alphabet shares held steady, reflecting Wall Street’s confidence that these fines won’t put a dent in the company’s trillion-dollar valuation.

For now, Google is calling Russia’s bluff—but with fines stacking up, it’s clear the stakes are high if this legal storm doesn’t blow over.

Calendar
On The Horizon

Tomorrow

Brace yourselves: the US jobs report is coming, and it’s the one that could make or break the markets…again. This is the same report that sent shockwaves in August, and if October’s numbers fall short, we might be in for a repeat. Economists are projecting just 120,000 new jobs, a major dip from September’s jaw-dropping 254,000. And thanks to hurricanes and strikes muddying the picture, no one’s totally sure what to expect. The unemployment rate? It’s expected to hang tight at 4.1%.

Luckily, the earnings frenzy has calmed down a bit, so Friday’s looking pretty chill—unless, of course, the job numbers stir the pot.

NEWS
The Daily Rundown

  • ⚾ Dodgers Clinch World Series Over Yankees: The Los Angeles Dodgers secured the World Series title, beating the Yankees 4-1. Highlights included Shohei Ohtani’s shoulder injury in Game 2 and a dramatic Game 5 comeback after a series of Yankee defensive errors, capping the win with a 7-6 victory.

  • ✈️ New U.S. Rule Mandates Automatic Flight Refunds for Cancellations: Passengers now receive automatic refunds for significant flight delays or cancellations without needing to request them. The rule, which defines delays as three hours for domestic and six hours for international flights, also requires airlines to refund services like lost baggage fees.

  • 🐟 Atlantic Cods’ Record-Breaking Feeding Frenzy: Scientists documented the largest known predation event as Atlantic cod consumed 10 million capelin in just four hours off Norway’s coast. The study used sonic imaging and showcased a rare ecological phenomenon, accounting for just 0.1% of capelin in the region.

  • 🌧️ Spain Faces Devastating Flash Floods: Flash floods have swept through Spain, killing at least 95 people and causing widespread damage. Emergency services are working to rescue affected residents and assess the full scale of destruction.

  • 🧛 Archaeologists Reconstruct Face of 400-Year-Old “Vampire”: In Poland, archaeologists have reconstructed the face of a woman buried 400 years ago with a sickle across her neck, a burial method once used to prevent the dead from "rising" and associated with vampire folklore.

  • 🌶️ Chili’s Bucks the Trend in Casual Dining Boom: Chili’s continues to thrive while other casual dining chains struggle, posting a 14% rise in same-store sales and a 6.5% boost in foot traffic last quarter. Promotions like the Big Smasher burger and TikTok-famous Triple Dipper are luring customers, while competitors like TGI Fridays and Red Lobster face closures and bankruptcy concerns.

RESOURCES
The Federal Reserve Resource

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