Oil prices surge & the EU targets big tech

Tickergeek market update:

Today’s big headlines:

• Oil prices surge

• The EU continues to target big tech

• Boeing leaders resign as the FAA digs deeper

• Big Pharma spending big money

Oil prices surge📈

What’s happening? Monday morning saw a surge in oil prices, with Brent crude futures escalating by 52 cents to reach $85.95 a barrel, and U.S. crude futures augmenting by 55 cents to hit $81.18 per barrel. This surge is primarily attributed to the escalating tensions in the Middle East and the Russia-Ukraine conflict.

Two significant factors have contributed to the rise in oil prices:

• A decline in the U.S. oil rig count, which fell by one to 509 last week.

• The intensifying geopolitical tension, marked by an increase in attacks on energy facilities in Russia and Ukraine, and dwindling hopes of a ceasefire in the Middle East, has sparked concerns over the global oil supply.

Russia-Ukraine events: Ukraine recently launched attacks on Russian oil infrastructure, targeting at least seven refineries using drones. This impacted approximately 12% of Russia’s total oil processing capacity. This was followed by the most extensive aerial bombardment of Ukraine’s energy system in over two years, with Moscow launching 57 missiles and drones targeting the capital, Kyiv.

Middle East events: Israeli forces laid siege to two more Gaza hospitals on Sunday, trapping medical teams under intense gunfire. Israel reported capturing 480 militants during ongoing clashes at Gaza’s main Al Shifa hospital. Concurrently, U.S. forces intercepted six Houthi unmanned aerial vehicles over the southern Red Sea after the group launched four anti-ship ballistic missiles towards a Chinese-owned oil tanker.

Despite these factors, the strong dollar, which appreciated by 1% over the past week, has been the only force exerting downward pressure on oil prices.

The EU continues to target big tech🎯

What’s happening? The Digital Markets Act, a landmark legislation in Europe, came into effect on March 7th, and it has set its sights on tech behemoths such as Apple (AAPL), Alphabet (GOOGL), and Meta (META). Investigations have been initiated with the objective of probing these three tech giants on allegations of breaching the EU’s new competition laws.

The real concern for investors? Under the Digital Markets Act, officials have the authority to impose fines of up to 10 percent of the tech giants’ global revenue or 20 percent for repeat violations. The ramifications on the share prices of these companies from a fine amounting to 10%-20% of total revenue are significant.

Apple’s investigation: Apple is currently grappling with an antitrust lawsuit from the DoJ in the US, and now an investigation being conducted by the EU. This investigation will concentrate on two primary aspects: the restrictions Apple imposes on developers attempting to link from the App Store to their own websites, and the difficulty Apple creates in replacing default, native apps like Photos or iCloud with third-party alternatives.

Alphabet investigation: EU officials expressed concern over the way Alphabet ranks results in Google Search, stating, “Gatekeepers should not use their power to promote their own services over their rivals”. A preliminary assessment indicates that this may not be the case with how results are presented on Google Search, suggesting that the search result aggregator could be facing trouble.

Meta investigation: In November, Meta introduced a premium subscription that effectively allowed users to opt-out of seeing advertisements on the platform for $10 a month. Critics in the EU argued that users were essentially being asked to pay for privacy. Subsequently, Meta proposed to reduce that monthly price to $6.50, which did not alleviate the critics’ concerns. However, it is unlikely that this investigation will lead to a fine for Meta, given the fact that numerous businesses, such as Netflix and Spotify, already follow this exact business model.

All three of these investigations are mandated to be completed within 12 months under the Digital Markets Act.

Boeing leaders resign as the FAA digs deeper✈️

What’s happened? Boeing (BA) announced on Monday that its incumbent CEO, Dave Calhoun, will be stepping down at the end of the year. This decision comes in the wake of intense scrutiny over the company’s safety standards by both the Department of Justice (DoJ) and the Federal Aviation Administration (FAA).

Calhoun’s departure is one of several high-level position changes occurring within the company. Upon the announcement, Boeing’s shares initially rallied, only to relinquish most of their gains by the close of the day.

Why is this happening? Here’s a brief recap of Boeing’s recent tribulations. In January, a panel on a 737 MAX 9 Alaska Airlines jet blew out mid-flight at an altitude of 16,400ft. Prior to this, two crashes involving Boeing 737 MAX jets in 2018 and 2019 resulted in the tragic loss of 346 lives.

Furthermore, a Boeing 747 experienced an engine fire shortly after takeoff from Florida in January. Earlier this month, a Boeing 777 jetliner bound for Japan was forced to make an emergency landing shortly after takeoff from San Francisco when a wheel detached and plummeted into an airport parking lot, causing damage to several cars. Last week, New Zealand authorities initiated an investigation after a Boeing 787 Dreamliner abruptly lost altitude mid-flight from Sydney to Auckland, resulting in injuries to some passengers.

The incoming management team will be tasked with addressing the company’s safety issues. They are expected to accomplish this within the 90-day timeframe stipulated by the FAA.

Big Pharma spending big money💊

Amgen’s new weight loss drug: The pharmaceutical company Amgen (AMGN), a long-time favourite of Nancy Pelosi’s, is targetting the weight loss industry currently dominated by the powerhouses Eli Lilly (LLY) and Novo Nordisk (NVO), with a new weight loss drug named “MariTide”, an injectable that may require less frequent dosing than its competitors Wegovy and Zepbound, infact its currently being trialed as a monthly injection.

Trials have yielded rather promising results, displaying that the drug appears to help patients maintain their weight loss trajectory even after they stop taking it. Could Amgen begin to take market share in this $100 million industry?

Novo Nordisk’s $1 billion acquisition: Speaking of the Danish giant, Novo Nordisk (NVO) have announced that they will be acquiring privately-held German biotech Cardior Pharmaceuticals for up to 1.025 billion euros ($1.12 billion). Cardior is a leader in the discovery and development of therapies that target RNA as a means to prevent, repair and reverse diseases of the heart.

The acquisition is an important step forward in Novo Nordisk’s strategy to establish a presence in cardiovascular disease. The acquisition will also include Cardior’s lead compound CDR132L, currently in phase 2 clinical development for the treatment of heart failure.

New FDA approved gene therapy by Kyowa Kirin (KYKOF): The FDA has just recently approved a new gene therapy for fatal neuron disease in children known as metachromatic leukodystrophy, a devastating genetic disorder that eats away at affected children’s neurons. The therapy named LENMELDY is a first of its kind treatment for MLD, which is otherwise fatal. It won’t be helpful for many patients living with MLD today. But when given in time, it appears to be near-curative for some.

Additional market-moving events🌎

• Subway Ditches Coke for Pepsi: The Subway sandwich chain have announced a partnership with Pepsico (PEP) beginning in 2025. This is a significant blow to Coke (KO) given the fact that Subway has been their largest client for quite some time now.

• Dutch bros drops: Popular coffe chain Dutch Bros (BROS) has announced an issuance of 8 million new shares worth $272 million, thus diluting shareholders to raise funds, the stock is down 5% since the announcement.

• Trump company merger approved: DWAC shareholders have officially approved a merger with Donald Trump’s social media company, and will potentially trade under the ticker symbol DJT. The important bit, is that Trump will be locked in for six months, unable to sell his shares.

• China blocks US chips: Chip stocks Intel (INTC) and AMD have fallen on news that the Chinese communist party have taken the decision to impose restrictions on and limit their chips in government server computers.

Notable earnings next week💵

• McCormick & Company (MKC) will report Tuesday. Analysts estimate $1.56B in revenue (-0.35% YoY) and $0.58 in earnings per share (-1.69% YoY).

• 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: 1,287.00 SEK (📉-1.94%)

• Hims & Hers Health: $16.52 (📈+14.17%)

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