Apple & Google team up, Avengers assemble?

Tickergeek market update:

Today’s big headlines:

• Apple & Google team up, Avengers assemble?

• Reserve banks & interest rates heat up

• Mr. Beast joins Amazon Prime

• Madrigal Stock Soars on FDA approval

Apple & Google team up, Avengers assemble?🦸🏽‍♂️

What’s happening? Apple broke the internet yesterday, when news broke out that they’re in initial discussions with Alphabet, over the possibility of liscensing and integrating their flagship AI “Gemini” into the Iphone. Despite the recent horror show of Gemini’s image generation launch, Alphabet’s stock soared in reaction to this news and closed up (📈+5.5%).

Is this a game changer for the Iphone? Gemini comes in three forms, Ultra, Pro and Nano, which can run in the cloud and on device and vary in complexity and capability. As of right now, its unclear whether or not Apple will opt for on-cloud or on-device processing, which will impact the latency users will experience.

Finally, AI revenue for Google? According to analysts, an on-device fixed charge per device model appears most feasible for this deal, given the substantial installed Iphone user base.

“This is a major win for Google to get onto the Apple ecosystem and have access to the golden installed base of Cupertino with clearly a major license fee attached to this,“ - Analyst Daniel Ives from Wedbush

What’s our take? At a forward PE of 22 and a forward Free cash flow yield of 4.1%, Alphabet is not only the most reasonably valued of the Magnificent 7, but its even valued below its five year average. We believe Alphabet represents solid value at its current valuation.

Reserve banks & interest rates heat up🏛️

What’s happening? This is pivotal week for three of the world’s largest economies, with interest rate decisions coming from the Bank of Japan(BoJ) on tuesday, The Federal Reserve(FED) on wednesday, and the Bank of England(BoE) on thursday.

Will they hike interest rates? The BoJ has been the only major central bank with interest rates in negative territory for a while now, however, many traders, Goldman Sachs included, now expect the BOJ to raise interest rates for the first time in 17 years at its March meeting this week, bringing forward its previous forecast for an April decision.

Two recent economic reports may provide the Bank of Japan (BoJ) with the impetus to implement its first rate hike since 2007. Firstly, updated economic growth data reveals that Japan successfully evaded a recession last year. Secondly, preliminary outcomes from spring wage negotiations at major Japanese firms indicate that employees are poised to receive their most substantial pay increases in thirty years. This wage growth is crucial for the BoJ, as it is considered a primary driver of sustained inflation, following years of deflation that has hindered the economy.

What about the US/UK? Contrasting with Japan, market participants perceive a negligible likelihood of the Federal Reserve (Fed) or the Bank of England (BoE) altering their interest rates this week. Given the persistent rise in consumer prices beyond the Fed’s preference, coupled with low unemployment and a robust economy, it is highly unlikely that the Fed will reduce rates until inflation begins to moderate and maintains a lower level over an extended period.

Simultaneously, in the UK, two potent indicators suggest that the nation’s interest rates will remain unaltered at this week’s central bank meeting. Firstly, the UK’s inflation rate continues to be twice the central bank’s 2% target. Secondly, recent data reveals that the UK’s economy resumed growth in January following a brief, two-quarter recession. Consequently, the BoE is expected to exercise patience before taking decisive action.

Mr. Beast joins Amazon Prime🐻

What’s happening? In a groundbreaking move, Amazon Prime Video has unveiled a collaboration with the renowned YouTuber, Mr Beast. This partnership will birth a new reality competition series, aptly named “Beast Games”. The series will feature a staggering 1,000 contestants, all vying for the grand prize of $5 million.

Why is this significant? This development is of significant importance, as it marks the largest single prize ever offered in the history of television and streaming. Given Mr Beast’s immense popularity, it is not far-fetched to anticipate viewership numbers on par with those of the hit series, Squid Games. This could potentially generate substantial revenue for Amazon.

Amazon’s decision to partner with Donaldson, who is already well-versed in hosting game shows, is a strategic masterstroke. Donaldson has previously hosted several game shows on his YouTube channel, offering cash prizes up to $500,000.

As the battle for dominance in the streaming industry continues, this move by Amazon adds another intriguing chapter to the ongoing saga.

Madrigal Stock Soars on FDA approval💉

What happened? In a remarkable turn of events, Madrigal Pharmaceuticals’ shares have soared by over 16% following the FDA’s approval of their groundbreaking drug, Rezdiffra. This novel treatment, the first of its kind, is designed to combat metabolic dysfunction associated steatohepatitis (MASH).

How will this benefit Madrigal? The implications for Madrigal are profound. Given that there are currently no approved treatments for NASH, the market potential is vast. A key aspect of Rezdiffra’s appeal lies in its label, which notably does not necessitate a liver biopsy for diagnosis. The impact of an efficacious treatment in a market with minimal competition is evident in the success stories of Abbvie’s Humera and Novo-Nordisk’s Ozempic.

It is crucial to note that Madrigal is not alone in the race to develop treatments for MASH. Several other pharmaceutical giants, including Viking Therapeutics and Akero Therapeutics, are hot on their heels. However, thanks to this recent approval, Madrigal has secured a significant head start.

Additional market-moving events🌎

• Super Micro Computer (SMCI) joins S&P 500: Today the high-flying chip stock officially joined the S&P 500. Inspite of this news, shares of SMCI closed down over 6% for the day on Monday.

• Uber’s sizable Austrailian settlement: The dominant ride-sharing app, has agreed a settlement to the tune of $271.8M in compensation for Austrailian taxi drivers and hire-car drivers who lost income from its move into Australia.

• Thursday Reddit IPO update: Experts say the IPO is already four to five times oversubscribed, indicating its likely the company will achieved its desired $6.5B valuation at a price range of $31-$34 per share.

• Another Boeing Incident: FAA investigating loss of panel before United Airlines operated Boeing 737-800 landed safely in Oregon. A post-landing airline inspection of the 25-year-old plane revealed a missing panel.

Notable earnings this week💵

• Micron Technology (MU) will report on Wednesday after hours. Analysts estimate $5.33B in revenue (+44.33% YoY) and $-0.26 in earnings per share.

• Accenture (ACN) will report Thursday, in pre-market hours. Analysts estimate $15.83B in revenue (+0.10% YoY) and $2.66 in earnings per share (-1.12% YoY).

• Nike (NKE) will report Thursday after hours. Analysts estimate $12.28B in revenue (-0.89% YoY) and $0.74 in earnings per share (-6.33% YoY).

• FedEx (FDX) will report Thursday after hours. Analysts estimate $22.05B in revenue (-0.54% YoY) and $3.53 in earnings per share (+3.52% YoY).

• Lululemon Athletica (LULU) will report Thursday after hours. Analysts estimate $3.19B in revenue (+15.08% YoY) and $5.00 in earnings per share (+13.64% YoY).

• FactSet Research Systems (FDS) will report Thursday, in pre-market hours. Analysts estimate $546.75M in revenue (+6.15% YoY) and $3.88 in earnings per share (+2.11% YoY).

Our selections performance👾

Last week Monday, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,370.40 SEK (📈+2.91%)

• Hims & Hers Health: $14.63 (📈+8.29%)

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