🔥 Global Markets Collapse on “Black Monday”

MARKET UPDATE

Good Morning Investor! On Monday, global markets accelerated their selloff, with Japan’s Nikkei 225 collapsing over 12% in a single day — the biggest drop since 1987. While the S&P 500 dropped 3%, the Nasdaq fell 3.43% followed by the UK’s FTSE 100 and the German DAX 40 both dropping 3%, and India’s Nifty Fifty index dropping 2.7%. Additionally, the volatility index ($VIX) rose 157%, reaching 60.23 — the highest since the pandemic, and the 5th highest level in history.

The real star of the show? Crypto. Bitcoin dropped a whopping 13% with Ethereum following suit and dumping into oblivion, falling by 20%. We’ll discuss the reasoning for this mass panic later in today’s email.

TODAY’S BIG HEADLINES

Global Markets Collapse on “Black Monday”

Palantir Stock Surges Despite Market Selloffs

Hims & Hers’ Growth Steps into Overdrive

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MACROECONOMICS

Global Markets Collapse on “Black Monday” 🔥

Wall Street's Favorite Horror Sequel: As if 2024 wasn't already a rollercoaster ride, global markets have now descended into despair faster than a skydiver with a faulty parachute. A perfect storm of events has sent investors fleeing from equities, diving headfirst into safe-haven assets. Gold, that shiny mistress of uncertainty, has just hit a new all-time high of $2,451 per ounce - up 18.3% year-to-date.

Recession Looming: Friday brought us economic data for the US economy that was about as appealing as a root canal without anesthesia. Fears are mounting that the Fed has been slower to cut interest rates than a sloth on sedatives, potentially pushing the US economy into a recession. Unemployment rose to a three-year high of 4.3% in July, while the economy added a measly 114,000 jobs - well below the 175,000 forecast.

• This triggered the ominously named "Sahm rule" - an economic indicator, indicative of an upcoming recession, which is about as welcome as a hangover on a Monday morning. The New York Fed is now estimating a 55% chance of recession in the next year. The bond market as a result, has begun pricing in as much as 200 basis points of rate cuts before the end of the year.

The Japanese Yen “Carry Trade”: Japanese lawmakers decided to spice things up by raising interest rates for the first time since 2007, then doubled down last week. This triggered a surge in the Yen that left other currencies feeling as deflated as a sumo wrestler's air mattress. The result? A mass selloff of Japanese equities that made the Nikkei 225 look like a going-out-of-business sale.

• It also led to the unwinding of the Yen "Carry Trade" - a financial maneuver more complex than assembling IKEA furniture without instructions where investors capitalized on the ultra-loose monetary policy of the Bank of Japan, which maintained a negative interest rate for about eight years and borrowed yen at very low interest rates and used the capital to purchase investments denominated in another currency in a country that has a higher rate of return.

Global Chaos Bingo: As if economic woes weren't enough, the geopolitical landscape is more uncertain than a weather forecast in London. We've got mass riots over illegal immigration in the UK, the Chinese economy struggling more than a panda on a diet, Lebanon launching an assault on Israel (because the Middle East needed more excitement), and everyone holding their breath over Iran's next move like it's the season finale of a geopolitical thriller.

SOFTWARE & DEFENSE

Palantir Stock Surges Despite Market Selloffs💪

One Green Spark in the Market: While the rest of the market was redder than a sunburned lobster, shares of software innovator Palantir ($PLTR) pulled off a magic trick that would make Houdini jealous. After opening significantly in the red, it rallied into the close, ending the day down just under 3%. But after hours is when this data-crunching Cinderella really went to the ball, with the stock surging a whopping 16% after the company reported its earnings for the second quarter.

Uncle Sam's Sugar Daddy: Palantir reported a beat on both the top and bottom line that was so impressive, it left us wondering if they'd been peeking at the exam answers. They even went as far as raising guidance, proving that when it comes to government contracts, Palantir knows how to sweet-talk Uncle Sam. Here’s a rundown of the report:

• Revenue for the quarter came in at $678 million, beating consensus analyst estimates of $652 million. That's a 27% increase year-over-year, proving that in the world of data, size really does matter. The company’s US commercial revenue also grew by 70%.

• Palantir also reported record levels of profit, generating $134 million in net income. This resulted in GAAP earnings per share (EPS) of $0.06, up a colossal 500% year-over-year, while adjusted EPS grew 80%, reaching $0.09.

• The real money shot was the significant cash flow generation. Palantir reported an adjusted free cash flow of $149 million, giving the company a 22% margin! That's more cushion for the pushin' than a memory foam mattress.

Calculating the Future: The real showstopper was management's decision to raise the company's full-year guidance. Palantir now anticipates revenue of $2.75 billion at the high end of the range, above estimates of $2.70 billion, proving they're more optimistic about the future than a fortune cookie writer on ecstasy. It also expects adjusted free cash flow in the range of $800 million - $1 billion.

• For the third quarter, Palantir’s guidance also exceeded expectations, anticipating $697 - $701 million in revenue.

Government Gossip and Commercial Conquests: Palantir's Government revenue is stronger than ever, growing faster than a politician's nose during election season, with US government revenue growing 24% year-over-year to $278 million, while government revenue in total grew 23% to $371 million. Meanwhile, their commercial revenue grew by 33%, reaching $307 million. It seems Palantir's customer base is expanding faster than waistlines at an all-you-can-eat buffet, growing 41% year-over-year.

HEALTHCARE

Hims & Hers’ Growth Steps into Overdrive🚅

Hims & Hers' Roller Coaster Ride: Despite Monday's market-wide selloff that was more brutal than a dentist appointment, Hims & Hers Health ($HIMS) rallied almost 2% leading into the close. However, Hims proceeded to zigzag more than a squirrel crossing a busy street, with its share price dipping 9% in after-hours trading following the release of their quarterly earnings.

Don’t Judge a Stock by its Performance: These earnings are, however, more deceptive than a magician's sleight of hand. The company actually reported a beat on both top and bottom lines, boasted record free cash flow, and raised its guidance for the year. Despite the market's hasty judgment, we're still very content shareholders, feeling more optimistic than a weather forecaster predicting sunshine. Here's a rundown of the report

• Hims reported Revenue of $315.6 million, up 52% year-over-year, and beating analyst estimates of $301.6 million by quite a wide margin.

• Net income of $13.3 million, resulting in GAAP earnings per share (EPS) of $0.06, above estimates of $0.05 per share.

• Subscribers grew during the quarter to 1.9 million, up 43% year-over-year, representing accelerated growth from the 41% seen in the first quarter, coming off of a larger base!

• The real standout however, was the record level of free cash flow, reporting $47.6 million, up a jaw-dropping 376% year-over-year. This gives the company a very healthy FCF margin of 15%. That's more green than a leprechaun's wardrobe.

• The firm also called out early strength in its weight loss offering which expanded earlier this year to include injectable weight-loss drugs.

Fifty Shades of Guidance: Taking a page out of Palantir's book (because good ideas are meant to be shared), Hims raised its full-year 2024 revenue guidance by 11%., to a range of $1.37 billion to $1.40 billion and Adjusted EBITDA guidance to a range of $140 million to $155 million — the firm generated $39.3 million in adjusted EBITDA for the second quarter.

• Despite reporting similarly spectacular results, shares of Palantir surged while Hims dipped. This brings into question the "efficient market hypothesis" - or as we like to call it, the "Pin the Tail on the Stock Market Donkey" theory.

MORE NEWS

Additional market-moving events🌎

Nvidia Delays: Nvidia reportedly delays its next range of Blackwell AI chips due to a design flaw. (The Verge)

Casino Taxes: DraftKings ($DKNG) plans to start taxing winning bets in states like New York and Illinois where sports betting taxes are above 20%. The mobile wagering app wants to juice profits as it loses market share to rival FanDuel ($FLTR). (CNBC)

Musk in Court Again: Elon Musk is suing OpenAI and Sam Altman again, taking aim at OpenAI’s deal with Microsoft and the definition of artificial general intelligence. (The Verge)

Recession Outlook: Goldman Sachs raises U.S. recession odds to 25% from 15%, but countered by saying that they continue to see recession risk as limited. (Fortune)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection.

Here’s how the stocks have performed since:

• Hims & Hers Health: $17.84 (📈+23.29%)

• PayPal: $60.47 (📉-0.28%)

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