🩸 Theranos Makes a Return

MARKET UPDATE

Good Morning Investor! On Thursday, shares of biopharmaceutical giant Eli Lilly ($LLY) roared an impressive 9% higher after reporting a significant earnings beat - a performance that's sweeter than a spoonful of sugar. The driving force behind this surge? Bumper sales of their diabetes and weight loss drug Zepbound, resulting in the firm raising its future outlook. Looks like Eli Lilly is coping with soaring demand for its weight loss drugs a whole lot better than its competitor Novo Nordisk ($NVO).

Meanwhile, shares of chip designer ARM Holdings ($ARM) surged over 9% off the back of a ratings upgrade from Bernstein to "Market Perform" from "Underperform" with a price target of $100, up from $92. Interestingly, this rally took the share price a full 17% above this price target.

TODAY’S BIG HEADLINES

Theranos Makes a Return

AirBnb Attempts to Diversify Amid US Slowdown

Not So Monster-ous: Beverage Maker Misses Earnings Target

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BIOTECHNOLOGY

Theranos Makes a Return 🩸

Elizabeth Holmes' Hype Machine: If you remember the massive fraud scandal with Elizabeth Holmes and her biotech startup Theranos a few years back, you'll recall her dream of a finger-prick blood test that ended up being a little too good to be true. This resulted in her productless startup eventually reaching a $10 billion valuation - a feat that would make even the most hype-fueled AI startup blush. Alas, it seems Holmes was more smoke and mirrors than substance, and she ended up being hit with a decade-long prison sentence on the basis of a fraud conviction. Looks like her "revolutionary" blood tests weren't the only thing that was drawn up in a fiction.

Austin's Biotech Bounty: Fortunately for the world of science, there have been other biotechs working on this very technology, and they're finally creating similar blood tests that actually work. At present, there are two Austin, Texas-based biotechs leading the charge - Becton Dickinson and Babson Diagnostic. The pair has been rolling out finger-prick blood tests throughout Austin, and they appear to have finally figured out the hurdles in the technology that Holmes and Theranos simply couldn't clear, no matter how much they tried to fudge the numbers.

• Several other biotech companies are also receiving regulatory clearance or plan to launch commercial products by 2025. It seems the race is on to see who can draw the most blood - and profit.

The Spoils of Success: An important lesson from this debacle is that despite Holmes being the one to have come up with an idea that was eventually valued at $10+ billion, Becton, Babson or whichever biotech that eventually successfully implements this technology at scale will be the ones that are rewarded handsomely. It's a classic case of "first mover, worst shower" - Holmes may have been the trailblazer, but it's the ones who can actually deliver the goods that will reap the benefits.

TRAVEL & HOTELS

AirBnb Attempts to Diversify Amid US Slowdown🏡

Airbnb's Hospitality Heartbreak: Despite a travel boom taking place over the past couple of years, Airbnb ($ABNB) has warned that the good times are firmly in the rearview mirror. The company says consumer demand for short-term rentals in the US is starting to cool off faster than a hot tub in the Arctic. Airbnb's stock has been on a bit of a bumpy ride since going public, with its share price down 17% since its IPO at the end of 2020 - not exactly the five-star experience investors were hoping for. And to top it off, the stock is down a chilly 14% year-to-date, driven largely by an adverse reaction to the company's quarterly earnings released on Tuesday after hours. Talk about a harsh check-out.

Airbnb's Ugly Earnings Exposé: After following in the path of others across the economy implying softer consumer demand, Airbnb has announced its intention to diversify its services away from just short-term rentals. Let's unlock the door, and see what's lurking in this ugly earnings report:

• Airbnb beat sales estimates, with its revenue rising 11% year-on-year to $2.75 billion, compared with analyst forecasts for $2.74 billion. However, the growth was slower than the 18% pace recorded at the start of the year, largely due to the timing of Easter and the leap day that fell in the first quarter. Additionally, Airbnb said the average daily price of bookings rose "modestly"

• Airbnb's net income plummeted to $555 million - a whopping 15% drop from the $650 million reported in the same quarter last year, resulting in a subsequent miss on earnings per share of just $0.86 versus the $0.92 expected. Looks like their profits took a bit of a siesta.

Deflating Expectations: Airbnb's guidance came in softer than a deflated soccer ball, expecting net sales for the third quarter in the range of $3.67 billion and $3.73 billion, below analyst expectations for $3.84 billion. They're also expecting Adjusted EBITDA for the third quarter of $1.83 billion, below forecasts for around $2 billion. Despite the miss, that still marks a quarterly uptick in Airbnb's adjusted EBITDA margin.

Jack of All Stays: Airbnb's CEO Brian Chesky highlighted how tech giants Amazon and Apple had humble beginnings selling books and Macs, before going on to say that the company intends to diversify its services to include adjacent travel and holiday services. Sounds a lot like a certain Booking Holdings ($BKNG) to us.

CONSUMER DISCRETIONARIES

Not So Monster-ous: Beverage Maker Misses Earnings Target🐻

Monster Takes a Sip, Misses the Gulp: Energy beverage titan Monster Beverages ($MNST) reported earnings in after hours on Wednesday evening, resulting in its share price collapsing over 9% - a performance as flat as a can of soda that's been left out in the sun. It seems this report lacked the fizzy finesse displayed earlier this week by industry disruptor Celsius Holdings ($CELH). Talk about a major case of the burps.

Monster’s Sober Nightmare: Monster unfortunately reported a double miss, with profits being quite a notable letdown. The company's alcoholic beverages also saw a dramatic drawdown of sales, being spurred on by the growth of non-alcoholic brands. Looks like Monster's boozy business is sobering up faster than a teetotaler at a frat party. Let's crack open a cold one, and dive into this report:

• Monster’s revenue for the second quarter came in at $1.9 billion, below consensus estimates of $2.02 billion, a roughly 2.5% increase year-over-year. This figure does change to 7.4% when adjusting for adverse foreign currency impacts brought upon the business due to its international exposure. Apparently, Monster's global reach is like a caffeine buzz - it has its ups and downs.

• Net income increased by 2.8% to $425.4 million, resulting in a diluted EPS of $0.41, up 5.0% year-over-year, and below analyst expectations of $0.45 per share.

• Net sales to customers outside the United States, on a foreign currency adjusted basis, increased 13.7%, reaching $746.0 million, highlighting the company’s international exposure.

A Buyback Boost: Monster did however continue returning capital to shareholders through its share repurchase program, purchasing $3.0 billion worth of its own shares — roughly 56.6 million shares at $53 each. Apparently, they think their stock is a steal.

Slices of the Pie: Monster revealed the net sales figures for each of its different revenue segments, and the results are a mixed bag of flavors: The energy drinks segment's sales increased 3.3% to $1.74 billion. The strategic brands segment's sales increased 9.6% to $109.2 million - a nice boost, but still a relatively small slice of the pie. The alcohol brands segment's sales decreased 31.9% to $41.6 million - ouch, that's a nasty hangover.

MORE NEWS

Additional market-moving events🌎

CVS’ New Savings Plan: CVS Health announced plans to implement a $2 billion cost-cutting initiative during its earnings call. (YF)

Document-Free Travel: Abu Dhabi’s Zayed International Airport is leading the race to become the world’s first document-free airport. (CNN)

UK Pension Reform: Rachel Reeves to announce plans to create ‘Canadian-style’ pension model in the United Kingdom. (FT)

Italy to Tax Super-Rich: ‘Fiscal favours’ introduced in 2017 end as the Italian government tries to raise revenue by doubling its flat tax rate for foreign super-rich. (Telegraph)

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. Lastly, on August 6th, we initiated a position in Celsius holdings.

Here’s how the stocks have performed since:

• Hims & Hers Health: $15.97 (📈+10.19%)

• PayPal: $64.39 (📈+6.16%)

• Celsius: $39.92 (📉-1.14%)

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