Striking Out ⛈️ - CrowdStrike’s Tech Tumble

Good afternoon! Women’s sports just netted a $250 million goal, courtesy of Disney CEO Bob Iger and his wife, Willow Bay. Their landmark investment catapulted Angel City FC to the top of the charts, now holding the title of the world’s highest-valued women’s pro sports team. Doubling the previous $120 million National Women’s Soccer League record, the LA-based club also boasts top marks in revenue, attendance, and sponsorship income. From Hollywood hits to headline-making investments, this move signals a major win in the ongoing surge for women’s sports.

MARKETS

• Markets stumbled as a major IT outage exacerbated an ongoing selloff. All three major indexes ended the day in the red, with the S&P 500 closing out its worst week since April and the Nasdaq breaking its six-week winning streak.

• The CBOE Volatility Index, a key measure of investor anxiety, surged to its highest level since April, climbing over 25% in just five days as the small-cap rotation rally faltered.

• Oil prices plunged after US Secretary of State Anthony Blinken announced that a cease-fire between Israel and Hamas is nearly finalized.

• Gold also saw a selloff, with investors cashing in profits after the commodity reached a new all-time high this week, and shifting funds into riskier assets in anticipation of a probable Fed rate cut.

STOCKS
Winners & Losers

What’s up 📈

• Intuitive Surgical ($ISRG) climbed 9.34% on a robust earnings report.

• Arm Holdings ($ARM) surged 3.20% following an analyst upgrade and a higher price target from Morgan Stanley.

• Schlumberger ($SLB) rose 1.97% despite an earnings miss, buoyed by strong international revenue growth.

What’s down 📉

• SunPower ($SPWR) plummeted 55.01% after signaling potential business closure.

• Comerica ($CMA) sank 10.50% due to lower net interest income and a bleak forecast.

• Plug Power ($PLUG) descended 13.87% after management declared a $200 million stock offering.

• Travelers ($TRV) burrowed 7.73% following a mixed earnings report, missing revenue expectations, and higher-than-expected catastrophe losses.

• Halliburton ($HAL) dropped 5.63% on a mixed earnings report with disappointing revenue.

• American Express ($AXP) slid 2.68%, beating profit estimates but missing on revenue.

NEWS
Striking Out : CrowdStrike’s Tech Tumble

Ever had a bad day at work? At least you're not CrowdStrike ($CRWD), who just managed to trigger a global IT meltdown, causing chaos and costing billions. So next time you spill coffee on your keyboard, remember—it could be worse.

In case you missed it, a botched software update by CrowdStrike disrupted banks, airports, and hospitals worldwide. If you're reading this on a Windows PC, brace yourself.

CrowdStrike quickly clarified that it wasn’t a cyberattack, just a bug in their Windows update. The mishap turned into a PR disaster for the cybersecurity giant, with their stock plummeting 11.10%, while Microsoft also took a hit, down 0.74%.

To Buy or Not to Buy?

Cybersecurity has always been considered recession-proof, but CrowdStrike’s debacle reminded everyone of the high stakes. Despite the fiasco, analyst Dan Ives from Wedbush still sees a long-term upside for CrowdStrike, albeit with a "major black eye."

He praised CrowdStrike's CEO, George Kurtz, calling him one of the best in tech and noted that the company’s strong brand and global presence might help it bounce back. Meanwhile, competitors like SentinelOne and Palo Alto Networks saw their shares rise, indicating potential shifts in market trust.

• While CrowdStrike deals with the fallout, rivals are basking in the spotlight. SentinelOne and Palo Alto Networks gained 7.80% and 2.16% respectively. However, the broader cybersecurity ETF dropped about 1.44%, showing the sector's overall vulnerability.

• Investors are advised to adopt a “wait and see” approach to gauge how CrowdStrike handles the aftermath and how competitors might capitalize on the situation. Analyst Dan Ives suggests that the impact on CIOs' decisions and potential legal actions will unfold over time, possibly creating new opportunities for CrowdStrike’s rivals.

From grounded flights at LaGuardia to halted Amazon warehouses, the disruption was felt across the board. CrowdStrike’s CEO took to social media to reassure that the issue was contained and not a cyberattack, while the FTC hinted at the broader risks of concentrated market power.

Final Thoughts

CrowdStrike’s epic fail serves as a stark reminder of the thin line between robust cybersecurity and catastrophic failure. As the dust settles, all eyes are on how the company will recover and how the cybersecurity landscape will shift in the wake of this unprecedented event.

Stay tuned, stay secure, and maybe consider a backup plan for your backup plan.

NEWS
Market Movements

• Starbucks ($SBUX) shares jumped 6.9% following reports that Elliott Investment Management has taken a significant activist stake in the company

• Warner Bros. Discovery ($WBD) is reportedly considering splitting the company in two, aiming to boost its share price

• The ultra-wealthy have seen their wealth soar by $49 trillion, thanks largely to stock market gains

• Netflix’s ($NFLX) ad-supported tier is expanding, but it hasn’t yet become the game-changer the company hoped for

• Meta ($META) has been hit with a $220 million fine by Nigeria’s competition watchdog

• AMD ($AMD) claims its new laptop chips can outperform Apple’s, intensifying the competition in the tech space

• OpenAI introduces GPT-4-o Mini, a smaller model set to replace GPT-3.5 Turbo

• AI companies are leveraging YouTube subtitles to train their models

TECH
Spec-tacular Deal — Meta’s Visionary Investment

Mark Zuckerberg is betting big on the idea that people secretly want to take pictures with their sunglasses. Meta is considering buying a 3% to 5% stake in EssilorLuxottica, the eyewear giant behind Ray-Ban, for about $5 billion—a drop in the bucket for Meta, which boasts a market cap of nearly $1.2 trillion. This potential investment offers a glimpse into Meta’s wearable tech ambitions, beyond their successful VR headsets like the Oculus Quest 2 and Meta Quest 3.

• Meta and EssilorLuxottica have been BFFs since they launched smart glasses together in 2021. The first version? Meh. But the latest Ray-Ban Meta Smart Glasses, released in October 2023, have been a hit, selling more in a few months than the original did in two years. These new shades let users livestream directly to Instagram and Facebook and even boast AI that can answer questions like, “What kind of flower is this?”

• EssilorLuxottica, a powerhouse formed in 2017 by merging lens tech innovator Essilor and luxury brand mogul Luxottica, owns big names like Prada, Vogue Eyewear, LensCrafters, and Sunglass Hut. They've also been on a buying spree, snapping up medtech firms and trendy brands like Supreme to expand their domain.

Even a small stake in EssilorLuxottica could help Meta outshine competitors like Apple and Snap by making wearable tech that’s actually stylish. While the deal isn’t finalized yet, Meta has already cleared antitrust hurdles in the US, according to Bloomberg. This partnership could be the key to making high-tech eyewear not just functional, but fashionable.

EARNINGS
AmEx-ceptional Earnings — When the Rich Swipe Right

American Express is living its best life in 2024, thanks to affluent customers who can’t get enough of travel, dining, and entertainment. On Friday, the credit card titan bumped up its full-year profit forecast, riding high on robust spending from its premium cardholders.

The company didn’t just meet expectations in the second quarter—it exceeded them. With a focus on well-heeled clients, AmEx has managed to sidestep broader economic woes that have left rival lenders warning of sluggish demand due to high borrowing costs.

CEO Stephen Squeri highlighted the strategy in a statement: “Increased scale, combined with our premium, high credit quality customers, our well-controlled expense base, and our successful investments... fuels the earnings power of the core business.”

By the Numbers

• 2024 Earnings Per Share: Updated to $13.30-$13.80 (previously $12.65-$13.15)

• Q2 Profit: $3.02 billion, or $4.15 per share (up 39% year-over-year)

• Excluding One-Time Gains: $3.49 per share (beating analysts' estimate of $3.24)

• Revenue: Jumped 9% to a record $16.33 billion (falling short of the $16.59 billion estimate)

• Shares: Fell 2% in premarket trading

Adding to its culinary credentials, AmEx recently acquired the restaurant-booking platform Tock from Squarespace, aiming to strengthen its presence in the dining sector. Analysts believe this move will bolster AmEx’s efforts within the small-and-medium-enterprise market, which the company sees as promising despite a recent slowdown in SME spending growth.

In essence, AmEx is betting that as long as its wealthy customers keep swiping, the good times will keep rolling.

Calendar
On The Horizon

After a data drought, next week brings a storm of reports and updates. Here’s what to watch for:

• Housing Market Insights: Tune in on Tuesday for the Existing Home Sales report, followed by New Home Sales on Wednesday. These reports will shed light on the current state of the housing market.

• Economic Health Check: Wednesday is also key for the PMI reading, offering a snapshot of economic activity. Thursday brings a trio of updates: Durable Goods Orders, Wholesale Inventories, and an early look at Q2 GDP.

• Inflation Watch: Friday packs a punch with the Personal Consumption Expenditures Price Index (PCE). Combined with Wednesday’s PMI report, this could heavily influence the Fed’s decision on whether to cut rates in July or September.

Earnings Season Heats Up

Next week also marks a busy stretch for earnings reports, with major companies set to reveal their quarterly performances. Here’s a day-by-day breakdown:

• Monday: Verizon, Truist Financial, SAP, and NXP Semiconductors kick off the week.

• Tuesday: Expect big names like Alphabet, Tesla, Coca-Cola, Visa, GE, UPS, Comcast, Spotify, Paccar, GM, and Capital One to report.

• Wednesday: AT&T, IBM, Chipotle, Ford, Thermo-Fisher Scientific, Waste Management, and General Dynamics will share their numbers.

• Thursday: A mix of sectors with AstraZeneca, AbbVie (healthcare), Deckers Outdoor, Skechers (footwear), plus Union Pacific, Unilever, Honeywell, and Valero.

• Friday: The week wraps up with reports from Bristol-Myers Squibb, Colgate, and 3M.

With a blend of economic data and corporate earnings, next week is set to provide crucial insights and potential market movers. Stay tuned!