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November 19, 2021

Nvidia nears $1T in market 🧢

Good morning traders,

Welcome back to The Daily Setup. Markets were up yesterday, with the S&P 500 and Nasdaq setting new records. Here’s what’s on the docket today:

  • Dicerna Pharmaceuticals gains nearly 80%
  • Nvidia beats earnings and nears a $1T market cap
  • CVS announces store closures

So let’s act busy for a bit, drink some coffee, and cut out early for the weekend. See ya at happy hour.

Jeff

BIGGEST MOVER

A Match Made in RNAi

Therapeutics Heaven
*looking up what RNAi means so I sound intelligent while writing this article*

Shares of Dicerna Pharmaceuticals (DRNA) skyrocketed to the tune of +78.49% during Thursday’s trading session following an announcement that the company’s research partner, Novo Nordisk (NVO), would be acquiring them for $3.3B. Dicerna develops “investigational ribonucleic acid interference (RNAi) therapeutics.”,or, in layman’s terms, is a technology that silences or renders genes responsible for disease ineffective.

  • The deal will allow Dicerna to continue using Novo’s proprietary GalXC RNAi platform that could help the company develop treatments for diseases like Type II Diabetes and obesity. *pretending I didn’t just eat cookies at 10am*
  • Novo will offer $38.25/share in cash and will be financed mainly by debt.
  • The deal is expected to close in Q4 2021, which we are currently in, and according to Novo, would have an initial negative impact on profit growth in 2022.
  • Despite the costs associated with the acquisition of Dicerna, Novo does not expect their profit outlook for 2021 or the company’s share buyback program to be affected. *scratches head*
  • Shares of NVO closed Thursday up a whopping 0.52%.

Like every other time in human history when there is a positive event, satan’s helpers *read lawyers* have to get involved. Following Thursday’s news of the deal, the global investor rights law firm of Halper Sadeh LLP issued a press release stating that they are investigating whether the sale price of $38.25/share is fair to Dicerna shareholders. And this, ladies and gentlemen, is why we can’t have nice things. I’m keeping an eye on DRNA and NVO for any news regarding the deal that may emerge in the coming days or weeks.

 

When the chips are

not even a little bit down

^ Nvidia after every earnings call

Nvidia surpassed $800B in market cap Thursday after beating quarterly earnings estimates again (and again and again), raising murmurs that the computer chip manufacturer could be the first $1T semiconductor company. The star of the earnings-call was NVID’s data center, which grew its revenue 55% this quarter.

  • Their gaming sector wasn’t anything to scoff at either, beating expectations by $40M and continuing to net the lion’s share of the company’s revenue. Let’s check in on the gaming sector at Nvidia HQ.
  • Nvidia has Meta to thank for some of the recent surge, as the metaverse is likely to increase demand for cloud computing processors and utilize Nvidia’s Omniverse, a software platform used to create virtual spaces. Guess everyone’s just spitting verses out here.
  • NVID stock was up 8.25% when markets closed Thursday, and is up 141.54% YTD. Their astronomical growth has led some to speculate that it could become the biggest company on the planet.

Most thought that Nvidia couldn’t meet their targets this quarter, but they said f*ck that noise and vaulted an almost impossibly high bar. To pull it off again next quarter, they’ll need to do something really big– like, oh, I don’t know, acquire British chip designer Arm for $40B. The deal’s far from a sure thing– it rang antitrust bells the world over– but if it somehow gets the regulatory green light, NVID may well keep its ridiculously hot streak alive.

 

Store Closing, Everything Must Go

^ my friends and I doing yoga at one of the HealthHubs

CVS Health (CVS) is taking the wrecking ball to its retail footprint, announcing plans to close 900 stores over the next three years. The company’s rationale behind the move is customer behavior shifting to online, and this surely has nothing to do with the hordes of shoplifters targeting drug stores in cities like San Francisco and Chicago in recent months. CVS shares were up 2.81% on the day, continuing a strong 2021 where they have risen 40%.

  • CVS will focus on store concepts such as MinuteClinic (think: urgent care) and Pornhub HealthHub, which focus on screening for chronic ailments and offer space for wellness activities like yoga.
  • The company apparently doesn’t think ‘rona vaccines will be an annuity that continuously drives consumers into stores to buy candy bars and toothpaste after receiving their quarterly boosters.
  • CVS will take an impairment charge of about $1B in fiscal Q4 tied to the announcement.

While no specific store locations were disclosed, it doesn’t take a high priced consultant to point out that closing stores in areas hard hit by shrinkage (the actual retail term used to describe theft) could offset redevelopment costs in transforming traditional stores to HealthHubs. Whether or not people indeed go to the drug store for yoga remains to be seen.

Pass the Bill to Know What’s In It

Crypto Corner

The recently passed infrastructure bill contained cryptocurrency specific provisions that impose onerous tax reporting requirements on brokers. Those are all the big words I know… With Congress being Congress however, they neglected to properly define brokers. A group of House representatives are trying to fix this (well, make it less awful) by assigning a definition to brokers and not subject other players in the crypto space like miners and software developers to tax reporting.

  • The Keep Innovation in America Act also addresses a section of the infrastructure bill that defines cash to include digital assets and requires reporting on large transactions.
  • Without the fix, developers could head overseas to avoid any confusion caused by the original bill’s overly broad scope.
  • This fix was originally put into the infrastructure bill as an amendment but was killed by Senator Richard Shelby (R) in retaliation for other Senators shooting down unrelated Defense industry amendments he had championed. Congress could teach middle school girls a thing or two about pettiness.

Clarity will certainly be good for the crypto industry as a whole, but blockchain technology companies who do not broker transactions should benefit most from Congress clarifying things by passing this law. Watching the geriatrics in Congress attempt to regulate the crypto space while demonstrating zero understanding of it is like watching a Yoko Ono concert: There’s a lot of noise and squawking, and you leave wondering what on Earth just happened.

Can’t Keep an Average Department Store Down

Rumor has it

Shares of Macy’s, everyone’s favorite department store, *said no one ever* rallied harder Thursday than trying to find one of their salespeople to help you. The company announced that they are working with consulting firm AlixPartners to help review their business structure. The news comes six weeks after activist investor Jana Partners urged the department store to separate its e-commerce business from its brick-and-mortar stores, which is a move that Jana feels could help double Macy’s share price. To say investors reacted positively to the news is an understatement, as the stock closed the day +21.21% and is now up 232.27% year-to-date.

  • In a separate announcement, Macy’s reported their Q3 earnings report that easily topped analysts’ expectations according to FactSet.
  • Macy’s reported Q3 EPS of $1.23/share on $5.4B in revenue vs. estimates of $0.31/share on $5.19B in revenue. This may also have something to do with the big jump for the day.
  • The company also raised their fiscal year sales guidance to between $24.12B-$24.28B from $23.55B-$23.95B.
  • Jana Partners said, “Macy’s decision to engage with advisers to review its business was commendable.” *image of an owner patting a dog on the head comes to mind*

It remains to be seen whether Macy’s will move forward with separating their e-commerce division as more consumers shop online. That said, the company does have some incentive to do so after it was announced in October that Saks Fifth Avenue is looking to go public with a $6B valuation.

Author:
Jeff Bishop

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