Peloton is for sale... NOT

February 15, 2022 Good morning traders! Welcome back to The Daily Setup. Markets were down again yesterday thanks to ongoing concerns over Russia. Here’s what’s on the docket today: - Sea wrecks its ship - Peloton is not for sale - AMD is buying Xilinx So have a cup of coffee, read through the newsletter, and let’s make today a good one. Nick How’d the markets look? Market Outlook 👀 DOW 34,566.17 -0.49% S&P 500 4,401.67 -0.38% NASDAQ 13,790.92 -0.00% BITCOIN $42,200.96 -0.64% Sea, Peloton, and AMD BIGGEST MOVER Shipwrecked Shares of Singaporean tech giant Sea Ltd. (SE) hit a proverbial iceberg during Monday’s trading session following an announcement by India banning its most popular mobile gaming app. The company’s shares gapped lower at open and stayed off the lows for most of the day before closing down [18.45%](. [The Indian Ministry of Electronics and Information Technology](, citing security risks, banned SE’s “Free Fire” game along with other apps of Chinese origin. Free Fire was the [most downloaded game in India in 2021]( and was just one of 54 game titles on the banned list. Other companies that saw their games banned in India include titles by Tencent ([TCEHY](), Alibaba ([BABA](), and Netease ([NTES](), all of which were down between .29%-1.84% on the day. - Tensions have been rising between China and India over the last few years with casualties on both sides along the Himalayan border. India’s announcement Monday is a clear shot at some of China’s most profitable tech companies. - Analysts at [JP Morgan slashed their price target]( on the stock 40% from $420 down to $250. - The company’s stock price has plummeted 65% since October 2021’s all-time high of $372.70. While India is the 2nd most populous country with 1.4B people, it [represents only 3%]( of Sea Ltd’s overall mobile gaming sales. The company also generates revenue through their e-commerce and digital payments/financial services business. It is quite possible that Monday’s price action put SE into oversold territory. With that in mind, I am keeping Sea Ltd on my watchlist and looking for support to build above the $120 price before getting long. My short term upside target would be the gap close of $152.08. Peloton Not for Sale Unless you’ve been stuck under a Peloton treadmill (not by choice) for the last few weeks, then you know that Peloton is in big time crisis mode. With the stock down [81%]( since its all-time high of $171.09 in January 2021, the company saw a pop in its stock price last week on rumors of a sale. The likes of Amazon, Nike, and Apple were said to be circling the carcass of Peloton (PTON) as the company named former Spotify and Netflix CFO Barry McCarthy as their new CEO. Well, McCarthy quickly put those rumors of a sale to bed on Monday, and just like that, shares of PTON closed Monday’s trading session down [5.33%](. - [In the interview](, McCarthy stated, “If I thought it was likely that the business was going to be acquired in the foreseeable future, I can’t imagine it would be a rational act to move across the country...” - [McCarthy went on to say]( that Peloton is, “a connected fitness company, not a bike company.” Keep telling yourself that Barry. - According to people familiar with the matter, Peloton is said to be creating a [rowing machine and dedicated strength product](that nobody ever asked for. Barry McCarthy’s interview sounds like a lot of tough talk and posturing. He still has to deal with activist investor Blackwells Capital, who have continued to call for a sale. Then there’s the fact that gyms are now open throughout the country. More and more people are heading out of their homes for workouts and using their pelotons to hang their dirty clothes on. Shares of PTON have put in a triple bottom at the $23 level since mid-January. A break of that area could result in another swift move lower. The lower risk play I am considering is to wait for a slight pullback to the $25 area to get long and then place a sell stop below the triple bottom. AMD Does What Nvidia Don’t Nvidia (NVDA) may have more market share for GPUs while [outperforming AMD stock](, but there’s one thing Advanced Micro Devices (AMD) has over their rival: a record chip industry acquisition. While Nvidia had to leave Arm at the altar, AMD and semiconductor company Xilinx will be [tying the knot]( to the tune of $50B. In a polite "f*ck you!" to Nvidia, AMD executives emphasized their compliance with regulatory bodies, stressing that the "complementary" nature of the deal was a key area of focus when dealing with watchdogs. - The deal was [announced in October 2020]( at $35B but the rise in AMD’s stock value pushed the price tag to reach $50B. - Acquiring Xilinx does help AMD diversify. Not only does it provide them with Xilinx’s in-roads with the auto, industrial, and aerospace sectors but it could also help them [snipe market share from Intel]( in the critical cloud-computing and data center markets. - Xilinx [shareholders received 1.7234 shares of AMD]( common stock and cash in lieu of fractional AMD shares while the company was delisted from the NASDAQ. AMD stocks were up +1.18% by market close. Well this seems like a good lesson on how to complete a major acquisition in 2022. Maybe Nvidia let all the success get to their head when announcing that deal with Arm, failing to realize that acquiring the chip designer whose IP is used by all their competitors would piss off the FTC. AMD played it a lot cooler, going after a manufacturer whose strengths covered their weaknesses without threatening that good 'ol American spirit of competition. Now they have a play for the data center market, Nvidia has nothing, and Masayoshi Son wishes he invested in Xilinx. BlockFi Bends the Knee Token Talk Coinbase might have just [taught your grandpa about Bitcoin]( at the Superbowl, but as tokens become more mainstream so does regulatory pressure on the market. Crypto lender BlockFi just learned that the hard way after agreeing to pay the SEC a [$100M settlement]( for failing to list its high-yield lending product as a security. The regulatory body seems out for blood as the agency’s director of enforcement said other crypto lenders “[should take immediate notice of today’s resolution]( and come into compliance with the federal securities laws.” - $50M of the penalty goes to the SEC while the other $50M is going to various [state regulators](, including: NJ, TX, KY, AL, and VT. - BlockFi plans on releasing a new product, compliant with SEC securities regulations, renamed to [BlockFi yield](. To date, their (now defunct) lending product has accumulated $14B in crypto assets from nearly 600K retail investors. - Allegedly, BlockFi marketed the product as safe as it claimed loans were “overly collateralized” by institutional borrowers. Turns out that around [70% of those institutional loans were not collateralized.]( We already knew that regulatory pushback against crypto was inevitable after the heat began to turn up [last year](. This penalty raised against BlockFi is the largest settlement to be assessed in crypto enforcement action so far. Of course the crypto lender is still privately valued at $3B (what’s $100M to that?) but already other players like Coinbase have shelved their own interest-earning products. The buck definitely doesn’t stop here as the SEC is reportedly probing lending networks: [Celsius, Gemini, and Voyager Digital](. Buckle up folks, because it’s going to be a bumpy ride. Cisco Could Scoop Up Splunk Deals and Rumors Data analytics producer Splunk (SPLK) made the news last November after [CEO Doug Merritt peaced-out]( due to multiple crappy earnings reports. Apparently nobody told Cisco (CSCO) the news because the tech conglomerate has reportedly offered to purchase SPLK for [$20B](. Neither company has made any kind of comment, but maybe that’s because CSCO leadership finally got around to reading Merritt’s earnings reports and are having second thoughts. - Naturally the rumors had their effect on the stock of both companies. SPLK saw [+9.04%]( growth while Cisco was affected [-0.56%]( by market close Monday. - SPLK wasn’t doing incredibly under Merritt, but they aren’t totally dead in the water either. Last year private equity firm Silver Lake sank $1B into the company, and analysts believe that their growing cloud business and blue chip customer base [aren’t yet reflected in sales.]( The question remains: why would Cisco have any interest in a software company that isn’t looking so great on paper? Well the decision is likely part of a broader narrative about CSCO’s pivot towards software. Traditionally, the giant is known for selling routers and switches, but software accounted for [30% of total revenue in 2021]( alone. They already have a [working relationship with Splunk](, so perhaps they are privy to information the rest of us are unaware of, and if analysts are right, then this could be a shrewd investment, in my opinion. Both companies have earnings reports coming up this week, so we can expect those results to factor into the deal going forward. Link Roundup 📿 Other News Other News Link Roundup - As If People Didn’t Hate Zuckerberg Enough – Texas Sues Meta Over Facial Recognition Software ([link]() - “Lookin’ for Love in All the Wrong Places” – Romance Scams Soar 80% in 2021 ([link]() - The Proof is in the Putin – Oil Climbs Towards $100 on Russia-Ukraine Tensions ([link]() - How to Lose 40% of Your Investment in 2 Months – Soros Bought 2% Stake in Rivian in Q4 2021 ([link]() - Going across the pond – Moderna In Talks to Open U.K. Factory ([link]() Meme of the day: Did anyone else get this yesterday? [via @kylascan]( Questions or concerns about our products? 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