Cocoa, the new Nvidia & Krispy Kreme and McDonalds team up

Tickergeek market update:

Today’s big headlines:

• Cocoa, the new Nvidia

• Krispy Kreme & McDonalds team up

• JP Morgan sends SMCI surging

• Neumann is buying back WeWork

Cocoa, the new Nvidia🍫

What’s happening? In an unprecedented turn of events, cocoa prices have skyrocketed to $10,000 per metric ton, marking a historic first and triggering a ripple effect among confectionery giants.

The trajectory of cocoa prices this year resembles a scene from a horror movie, with a staggering surge of over 100%. This colossal escalation is primarily attributed to supply bottlenecks.

Here’s the rundown: Adverse weather conditions coupled with disease outbreaks have severely impacted cocoa production in West Africa, the region responsible for approximately 70% of the global cocoa supply. Ivory Coast and Ghana, the two predominant producers, have been grappling with a lethal mix of torrential rain, scorching heat, and disease. Consequently, cocoa arrivals at ports in these countries have plummeted by 28% and 35% respectively since the onset of the season, compared to the corresponding period last year.

The ripple effects of these price hikes are already being felt in the confectionery industry. Hershey, a leading candy manufacturer, has projected stagnant earnings growth for the year, attributing it to the spiraling cocoa prices.

Krispy Kreme & McDonalds team up🍩

What’s happening? In a dramatic turn of events on Tuesday morning, Krispy Kreme’s (DNUT) shares soared by over 27% following the announcement of an impending alliance with burger giant McDonald’s (MCD). Meanwhile, McDonald’s shares remained relatively stable.

Here’s the rundown: Krispy Kreme has declared that by the culmination of 2026, their doughnuts will be accessible to customers across the nation in any McDonald’s outlet. A phased implementation of this collaboration is set to commence in the latter half of this year, which is anticipated to significantly bolster Krispy Kreme’s revenue, hence the substantial surge in share price.

This development comes hot on the heels of Subway’s declaration of its intent to sever ties with long-standing partner Coke (KO) in favor of a partnership with Pepsico (PEP). The fast-food industry is indeed witnessing a seismic shift.

Is DNUT stock a buy? the considerable leap in share price has resulted in Krispy Kreme now trading with negative earnings and a forward Free Cash Flow yield of 1.90%. Analysts are currently projecting a positive EPS by 2025. However, until it achieves profitability, the risk associated with this venture might be deemed too high for some investors’ comfort.

JP Morgan sends SMCI surging📊

What’s happened? On Monday, a large shift was observed in the financial world when an analyst at JP Morgan significantly raised the investment bank’s price target for Super Micro Computer (SMCI) to $1,150 per share. This news propelled SMCI’s shares to rally by 7%, followed by an additional 2% surge on Tuesday.

To provide some context, SMCI is a key player in the tech industry, specializing in building servers for Nvidia. This strategic partnership positions SMCI as a direct beneficiary of the meteoric rise in demand for Nvidia’s cutting-edge products and services.

The company’s performance metrics are nothing short of astounding. Over the past 12 months, SMCI has seen an exponential growth of 840%, catapulting its valuation to a hefty $61 billion. This impressive trajectory has earned SMCI the coveted title of this year’s top performer in the S&P 500, with a whopping 265% addition to its market cap.

Neumann is buying back WeWork💰

Wait what? On Monday, the business world was abuzz with the news that Adam Neumann, the ousted co-founder and former CEO of WeWork, has made a staggering offer of up to $500 million to buy back the office rental company he established in 2010.

Neumann, through his property company Flow Global, has put forth this bid in collaboration with a consortium of half a dozen financial partners, in a bold move to reclaim the reins of the company.

The saga of the failed IPO: WeWork had ambitious plans to go public back in 2019, with a projected valuation of around $50 billion. However, the proposal left investors disgruntled. Neumann’s demand for his shares to carry twenty times the voting power of standard shares, coupled with the stipulation that his wife would have a say in his successor as CEO, were met with widespread disapproval. This led to Neumann’s eventual resignation from his role.

Fall from grace: The precipitous plunge in WeWork’s valuation has been nothing short of breathtaking. Once valued at a peak of $47 billion, the office rental company has seen its fortunes dwindle dramatically. The advent of the “work from home” trend exerted significant pressure on the office rental market, leading to the company filing for Chapter 11 bankruptcy in November. This marked a significant downturn in the company’s trajectory, underscoring the volatile nature of the market and the challenges faced by businesses in adapting to rapidly changing work environments.

Additional market-moving events🌎

• UK imposes sanctions on China: After a series of chinese-backed cyber attacks targetting MPs and the Electoral Commission, during which hackers allegedly accessed the personal details of about 40 million voters. Britain have now imposed sanctions on China.

• TTWO’s GTA problem: Shares of Take-two interactive (TTWO) have been trading down over the past month, largely due to news emerging that their upcoming blockbuster video game release GTA VI will be delayed until 2026.

• Comms stocks are the worst: Communications giants Verizon (VZ) and BCE inc (BCE) have recently seen significant drops in share price, leaving both stocks trading at roughly the same prices they were trading at as far back as the year 1998, yikes.

• Apple flirting with Baidu: Shares of Baidu (HKG: 9888) have rallied on news that the smartphone maker will be making use of its AI services in its chinese-based products. This is likely a forward thinking move to appease the chinese government.

Notable earnings this week💵

• Cintas (CTAS) will report Wednesday. Analysts estimate $2.39B in revenue (+9.13% YoY) and $3.58 in earnings per share (+14.01% YoY).

• Paychex (PAYX) will report Wednesday. Analysts estimate $1.46B in revenue (+5.72% YoY) and $1.37 in earnings per share (+6.20% YoY).

• Carnival Corporation (CCL) will report Wednesday. Analysts estimate $5.42B in revenue (+22.29% YoY) and -$0.18 in earnings per share.

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: 1,310.00 SEK (📉-0.18%)

• Hims & Hers Health: $16.10 (📈+11.26%)

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