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  • 🚫 $8.5B Merger Blocked by FTC

🚫 $8.5B Merger Blocked by FTC

+ Keurig to Buy Stake In Ghost Energy Drinks for More Than $1 Billion

October 25, 2024

Good afternoon! Waymo just turbocharged its robotaxi ambitions, closing a $5.6 billion funding round led by Alphabet and joined by heavyweights like Andreessen Horowitz and Tiger Global. This cash infusion brings Waymo’s total haul to over $11 billion, fueling its expansion beyond its current hubs in San Francisco, Phoenix, and LA. Co-CEOs Tekedra Mawakana and Dmitri Dolgov said the funds will ramp up Waymo’s footprint in Austin, Atlanta, and beyond, with the goal of getting more riders into driverless cabs.

The timing couldn’t be better for Waymo, as rival Cruise, owned by GM, recently hit pause on operations following a pedestrian accident. While Tesla’s Elon Musk has promised a driverless service “soon,” Waymo is the only player really hitting the road in major metros, logging over 100,000 rides weekly. With this funding boost, Waymo might just keep the wheel firmly in its hands in the autonomous race—ready to leave the competition in the dust.

MARKETS

  • Tech stocks lifted the Nasdaq Composite up 0.56% Friday, reaching an intraday high of 18,519, while the S&P 500 slipped just 0.03%. The Dow lagged behind, down 0.61%, wrapping up a losing week as both the S&P and Dow snapped six-week winning streaks.

  • As Treasury yields climbed, broader market momentum faded. The tech sector rallied on earnings optimism, though the Dow and S&P 500 struggled under pressure from financials. Bitcoin slid, too, following reports of a federal probe into Tether, adding to a mixed close for the markets.

STOCKS
Winners & Losers

What’s up 📈

  • Newell Brands popped 21.59% as the company lifted its full-year outlook, benefiting from brands like Sharpie and Yankee Candles. ($NWL)

  • Spirit Airlines spiked 15.29% after the struggling budget carrier announced plans to cut jobs, sell planes, and shrink its footprint amid fallout from a failed acquisition and engine recall. ($SAVE)

  • Tapestry Inc. jumped 13.54% after a federal judge blocked its acquisition of Capri, creating sharp moves in both stocks. ($TPR)

  • Deckers Outdoor Corp. surged 10.57% following its earnings beat, reporting $1.59 per share against a $1.24 expectation, with revenue hitting $1.31 billion, above the $1.20 billion estimate. ($DECK)

  • Texas Roadhouse gained 3.58% following a report showing third-quarter revenue growth of 13.5%, driven by higher average unit volumes and a 24.1% rise in restaurant margin dollars. ($TXRH)

  • Discover Financial Services rose 4.04% in connection with Capital One’s stronger-than-expected third-quarter results, reflecting positive sentiment in the financial services sector. ($DFS)

  • Reddit nudged up 3.51%. ($RDDT)

What’s down 📉

  • Joby Aviation dropped 14.57% after the air taxi company filed for a $200 million common stock offering. ($JOBY)

  • Coursera declined 9.71% as the company projected fourth-quarter revenue below Street expectations, citing weak demand and retention trends, though its third-quarter results surpassed estimates. ($COUR)

  • AutoNation fell 4.52% after the automotive retailer reported disappointing quarterly earnings and sales, missing expectations on both revenue and earnings per share, impacted by a cyberattack on CDK Global. ($AN)

  • Colgate-Palmolive slipped 4.14% despite beating analysts' estimates on top and bottom lines in Q3 and raising the lower end of its sales forecast, with adjusted earnings of 91 cents per share on $5.03 billion in revenue. ($CL)

  • T-Mobile dropped 3.08% after Raymond James analysts downgraded the stock to "Market Perform" despite stronger-than-expected Q3 results and a higher full-year estimate. ($TMUS)

FASHION
Judge Blocks Coach Owner Tapestry’s Proposed Acquisition Of Michael Kors Parent Capri

Capri Holdings, home to Michael Kors and Versace, had a rough Friday—its stock took a 50% plunge after the FTC blocked its $8.5 billion merger with Tapestry, the parent of Coach and Kate Spade.

The court’s move wasn’t just a tap on the wrist; it’s a signal that antitrust watchdogs are serious about keeping mid-tier luxury competitive. While Capri shareholders are licking their wounds, Tapestry's stock saw a 13% pop, signaling investors might be happy to see the extra cash redirected elsewhere.

Blocking the Luxury Stack

U.S. District Judge Jennifer Rochon ruled in favor of the FTC, calling the planned merger an anti-competitive power move that would kill choice for shoppers who prefer “accessible luxury”—think designer handbags without the four-figure price tags.

According to the FTC, combining brands like Coach, Kate Spade, and Michael Kors would hand Tapestry a whopping 59% share of the accessible-luxury market.

For consumers, the FTC says, this would mean fewer handbag options and higher prices—a tough pill for budget-conscious buyers who’ve already faced years of inflation.

Investors and Analysts React

Capri was banking on the merger as a lifeline for its slumping Michael Kors line, but Tapestry, in better financial health, might have wiggle room to explore other options. The company even hinted it might appeal the decision, calling it “incorrect on the law and the facts.”

But the reaction was clear: Tapestry stock shot up as investors speculated the brand could use its funds to bolster shareholder value, like through buybacks. Capri, on the other hand, faces a murkier path forward as it deals with the fallout.

Big Win for the FTC, but the Battle Rages On

The FTC under Lina Khan has been on an antitrust tear, challenging mergers across tech, retail, and beyond. This victory is another feather in its cap and signals to the market that regulators aren’t backing down anytime soon.

With more cases queued up, from Kroger-Albertsons to Google’s looming breakup, the FTC is signaling it’s ready to play hardball in keeping markets competitive. Whether these battles reshape corporate America’s playbook remains to be seen—but for now, Tapestry and Capri might have to keep their handbags separate.

NEWS
Market Movements

AQUISITION
Keurig to Buy Stake In Ghost Energy Drinks for More Than $1 Billion

Keurig Dr Pepper is spicing up its lineup, grabbing a 60% stake in Ghost Energy for $990 million, with plans to fully own it by 2028.

Known for its quirky flavors like Sour Patch Kids, Ghost is a standout in the energy drink crowd—a market that’s brewing up serious competition. It’s KDP’s biggest buy since the $19 billion Dr Pepper Snapple acquisition in 2018, and the move pushes Keurig even further from its coffee roots into the ultra-buzzy energy drink space.

Why Ghost? Why Now?

Ghost isn’t your average energy drink; it’s lifestyle-focused and sports colorful flavors that give it shelf appeal. Keurig’s move here isn’t just about caffeine; it’s about capturing a younger, more fitness-conscious crowd leaning away from traditional coffee.

With energy drinks on a growth tear, KDP is taking no chances, even investing another $250 million to slide Ghost into its own distribution system by 2025.

Keeping Up with the Competition

The energy drink aisle is packed, with Monster and Celsius as top players, but KDP’s been busy building its presence—last year it scooped up 30% of C4 Energy’s parent company, Nutrabolt, for $863 million.

Coca-Cola’s backing Monster, Pepsi’s tied up with Celsius, and now Keurig’s doubling down on Ghost. The move could keep KDP in the energy game, while its traditional soda and coffee segments face tighter margins from price-conscious buyers.

Energy Drinks: KDP’s Fresh Flavor

Keurig’s bold move into Ghost shows it’s ready to go head-to-head with soda’s biggest rivals. With consumer tastes shifting, energy drinks are KDP’s shot to stay relevant in a crowded beverage market—and the quadrupled growth Ghost has seen over three years is a good place to start.

Ghost’s founders will stay on to steer the brand as it joins Keurig’s lineup, keeping an eye on that high-energy, high-growth crowd KDP’s now banking on.

Calendar
On The Horizon

Next Week

After a calm stretch, get ready for a packed week. The big headline? Thursday’s Consumer Price Index (CPI) report, which will serve as a key gauge for inflation and the Federal Reserve's ongoing fight to bring prices down. If inflation shows signs of cooling, expect markets to cheer. But if the report disappoints, more volatility could be on the horizon.

Before that, Tuesday kicks off with the NFIB optimism index, giving insight into small business sentiment—a vital metric since small businesses make up nearly half of U.S. GDP. Then, on Wednesday, we’ll get a look at wholesale inventories, a key factor for understanding the pace of manufacturing and GDP growth.

Thursday isn’t just about CPI—weekly jobless claims will also roll in, giving an update on the labor market. And to finish the week strong, Friday’s Producer Price Index (PPI) will provide an early look at inflation from the perspective of manufacturers, followed by earnings reports from JP Morgan and Wells Fargo, signaling the start of a new earnings season.

As if that weren’t enough, we’ll also hear from nine Federal Reserve officials throughout the week. Wall Street will be analyzing their every word for hints of what’s to come in monetary policy.

Earnings:

  • Monday: ON Semiconductor ($ON), Waste Management ($WM), Ford ($F), and Boot Barn ($BOOT).

  • Tuesday: Alphabet ($GOOGL), Advanced Micro Devices ($AMD), Visa ($V), McDonald’s ($MCD), Pfizer ($PFE), PayPal ($PYPL), Royal Caribbean Group ($RCL), Corning ($GLW), Stanley Black & Decker ($SWK), JetBlue Airways ($JBLU), Snap ($SNAP), Chipotle ($CMG), Mondelez International ($MDLZ), Electronic Arts ($EA), and Xerox ($XRX).

  • Wednesday: Microsoft ($MSFT), Meta Platforms ($META), Amgen ($AMGN), Starbucks ($SBUX), DoorDash ($DASH), Eli Lilly ($LLY), Caterpillar ($CAT), Kraft Heinz ($KHC), Wingstop ($WING), Booking Holdings ($BKNG), Coinbase ($COIN), Robinhood ($HOOD), Carvana ($CVNA), Etsy ($ETSY), IMAX ($IMAX), and FAT Brands ($FAT).

  • Thursday: Apple ($AAPL), Amazon ($AMZN), Mastercard ($MA), Shell ($SHEL), Merck ($MRK), Uber ($UBER), Comcast ($CMCSA), Cigna ($CI), Altria ($MO), Estee Lauder ($EL), Kellanova ($K), Peloton ($PTON), Intel ($INTC), and SharkNinja ($SN).

  • Friday: Exxon Mobil ($XOM), Chevron ($CVX), Dominion Energy ($D), Charter Communications ($CHTR), Wayfair ($W), and Jeffs’ Brands ($JFBR).

NEWS
The Daily Rundown

  • 🛍 Consumers Delay Purchases Ahead of Election: With pre-election nerves rising, Americans are holding off on spending, creating a slowdown across various sectors. Construction, manufacturing, and textile businesses report a drop in demand, with many projects on hold. Nearly a third of financial decision-makers have paused or cut investment plans, while half of Americans feel the election outcome will impact their net worth. Meanwhile, Fed rate cuts are expected to ease borrowing, boosting small businesses in the coming months.

  • 📈 Gold Shines Amid Election Uncertainty: Gold reached a new high this week and could surpass $2,800/oz. as the election nears. Concerns over the election, inflation, and geopolitical tensions drive demand. Central banks are also bolstering their gold reserves, and retail buyers are flooding the market through purchases at Costco and online. Gold is up nearly 31% this year.

  • 🔢 Largest Prime Number Discovered: Amateur mathematician Luke Durant identified the world’s largest known prime number, M136279841, with over 41 million digits. Durant, a former Nvidia programmer, spent $2 million and a year using GPUs across 24 servers to achieve the feat, highlighting the potential of accessible, distributed computing for complex calculations.

  • 🏠 U.S. New Home Sales Surge: New home sales in the U.S. rose at their fastest pace in a year, signaling a renewed boost in the housing market as buyers return.

    🎬 Joker: Folie à Deux Moves to Home Release: Following a disappointing performance at the box office, Joker: Folie à Deux is leaving theaters for home release.

  • ⚖️ Los Angeles DA Seeks Resentencing for Menendez Brothers: The Los Angeles County District Attorney is asking a judge to resentence the Menendez brothers, potentially revisiting their high-profile case.

  • 🌴 Hawaii Battles Invasive Beetle: Hawaii is working to control an invasive beetle species capable of killing trees and flying up to two miles, threatening local ecosystems.

  • 📬 Phoenix Ballots Damaged in Mailbox Fire: In Phoenix, ballots were damaged after a mailbox was set ablaze, impacting voting materials in the area.

RESOURCES
The Federal Reserve Resource

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