💸 It's Earnings Szn

Earnings Szn kicked off, and it ain’t pretty coming from the big banks… April 15, 2024 | Peel #688 Silver Banana goes to... [CapLinked. ]() In this issue of the Peel: - 😱 Earnings Szn kicked off, and it ain’t pretty for the big banks… - 📱 Why buy Apple iPhones when you can just buy Apple stock? - 🔻 M&A activity fell off a cliff last month, deal activity declined 22.6%... Market Snapshot 📸 Banana Bits 🍌 - The WSJ echoes our sentiment about how [garbage the housing market is](=) for buyers - Public BTC miners are becoming [some of the best HODLers]() - Looks like we might be adding [World Wars](=) to the list of things that are BACK in 2024… just wonder how this could [impact]()[my portfolio](=) - Oil prices are already on the move in response to this weekend’s developments in the [Middle East](=) Swipe Right on Caplinked: Your Perfect Match Still stuck with your old VDR? Time to ditch your current shitty relationship and swipe right on Caplinked. Think of it as the badass dating app for your deal-making game. Say 'hell yes' to deals that close faster than your ex can text back. Caplinked isn’t just another pretty face; it's got the brains too—unmatched security, slick interface, and the kind of performance that makes every transaction a victory lap. Ready to stop messing around with the rest and get serious with the best? [Upgrade to Caplinked.]() It’s time to fall hard for your VDR again. Macro Monkey Says 🐒 The Earnings Solstice Last week’s eclipse was probably the single most life-changing, rewarding, and professionally important day of my life. I mean, seeing the world go dark for two whole, entire minutes was crazy—it’s not like we ever get to see the sun go down every single other day or anything. Anyway, now that I’m basically a monk, I’m gonna go become a pseudo-philosopher on LinkedIn and Twitter and disappoint my family even more. But before I flex my room temperature IQ, we have to talk about another celestial occurrence. The earnings solstice arrived last week as well, and as the seasons change and we roll into the most wonderful time of year, we have a lot to talk about, so let’s get into it. The Numbers On Friday, the climate officially changed into Q1 earnings szn. Many of the big banks and asset managers dropped their pants-* I mean numbers and overall, investors ain’t too happy. Let’s find out why. JPMorgan Chase & Co. (JPM) The Death Star of Corporate America, JPMorgan, got the solstice started with a sizable beat on both revenue and earnings, but a big swing-and-a-miss on guidance. It was an unexciting report from the world’s most valuable bank. Solid growth across the board, fueled mostly by rate hikes, an even-further-improving balance sheet, and strong net interest income, were the big takeaways from Q1. But obviously, investors hated it as shares fell almost 6.5% in response. The disappointment came from weak guidance in net interest income, calling for “only” $90bn in 2024, implying less than 1% growth. Reading is boring, so check out our full coverage of [JPM’s earnings here]() for more. Wells Fargo & Company: The third-largest U.S. bank by deposits reported similarly to JPM by beating on both sales and earnings, but obviously, that’s not good enough for Street analysts. Shares fell on the report, but only by 0.39%, for the exact same reasons as Jamie Dimon’s death star above. A weak outlook on net interest income drove Friday’s decline. Rate hikes had been massively supportive of bank earnings over the past 2 years, but the spike from basically 0% to over 5% is starting to shift into more of a detractor, especially in these banks’ mortgage businesses. Once the largest mortgage originator in the U.S. only 2 years ago, Wells Fargo has been dismantling this business as rate hikes have had a similar impact on mortgage demand that OJ Simpson (RIP) had on Nicole Brown-Simpson. The lack of profitability in this segment has led to a shift in strategy from Wells and although beneficial in recent years, investors are losing their excitement. Citigroup Following in the footsteps of their older and larger brethren above, Citigroup beat estimates across the board, but shares still fell 1.7% on the day. Net income fell 27% annually while revenue fell 2%, mostly as a result of selling part of the business last year. Investment banking revenue jumped 35%, but trading revenues got slammed, primarily on the fixed income side. However, one of the more notable trends for long-term shareholders is the continued depletion of the bank’s deposits. This isn’t unique to Citi, but the bank currently does not pay an APY on its customer deposits, driving the continued declines. Clearly, not paying depositors a dime is a bold strategy, as these deposits provide the backing for Citi’s usual lending business. Similar to how energy companies are reluctant to pass on declines in oil prices, banks don’t like to pass on high rates to consumers. The Takeaway? [Source]() Earnings szn is not off to a hot start. Given retreating inflation and a healthy labor market, earnings growth is shifting into the lead off spot in terms of downside risks for the market. Banks are also experiencing a divergence in what investors are watching for. Net interest income, earnings, and revenues remain the top priority, but now that rates have become a decent hurdle rate, their lending businesses are earning extra scrutiny. It’s gonna be about 21 years before the next eclipse reaches totality that’s visible here in the U.S., but we don’t have to wait long at all for some other banks to drop their pants-* I mean the latest quarterly numbers. Goldman Sachs, Morgan Stanley, and Bank of America all report in the first few days of this week, so we’ll find out soon if these banks can bring up the vibe of the sector. What's Ripe 🤩 Globe Life (GL) 📈11.5% - Pandas are fuzzy, cute, and surprisingly deadly for an animal whose ears look like that. Last week, short-seller Fuzzy Panda Research showed us why. - Fuzzy Panda’s publication of its short position and allegations of insurance fraud at Globe Life sent shares down over 50% Thursday. But… - Shares bounced back, as is usual with these short reports. They dive on the news, bounce back on the firm’s response, and then we sit on our thumbs and wait. Apple (AAPL) 📈0.9% - Shoutout to Apple for carrying the WSO Alpha portfolio out of the gutter on Friday, but investors are hyped to see the firm get in on the AI game. - The Kingpin of Cupertino announced fresh AI capabilities coming to the next gen of Macs. The laptops will include Apple’s new M4 microchips. - Rumors are pouring out, too, that a slew of new AI features are coming for the iPhone 16, so this might actually be the first new iPhone worth buying since they took away the home button. What's Rotten 🤮 Zoetis (ZTS) 📉7.8% - Zoetis is trying to kill your pet, and for maybe the first time ever, Wall Street cares about something other than money. Well, maybe in addition to money… - The pet healthcare provider is down >10% since Tuesday’s close as the WSJ reports that two of its popular drugs are coming under heavy scrutiny. - Drugs called Librela and Solensia are making cats and dogs even sicker than they already were. So, make sure your pet discusses this with their doctor. Intel (INTC) 📉5.2% - Intel is now about as welcome in China as A-Rod is in the Red Sox dugout. The CCP has given a retaliatory boot to Intel and AMD. - In 2023, the Chinese market made up ~27% of Intel’s revenue, and now, telecom firms in China are forbidden from using their chips. - U.S. gov’t officials are hyped about this, seeking to get more advanced chips from U.S. firms out of the country. Thought Banana 🤔 Burgers & French Fry Missions It’s no secret the hiring market in banking hasn’t exactly been ideal for graduating seniors over the past few years. Now, you apes know we’re all about spreading positivity, so we’re here to let you know that it only got worse—much worse—in March. What Happened? [Source](=) According to Factset, M&A activity fell off a cliff last month, with deal activity declining 22.6% while total deal value plummeted 38.7%. Some of this is random and attributable to the small sample size, but it’s an interesting trend that post-rate-hike deal activity reached its peak (so far) in January of 2023. We’d expect that normalization of higher rates along with the Fed’s pivot to a more dovish outlook in December would encourage further activity, but March officially marks a declining trend beginning in October of last year. [Source]( As we can see in the above table, only 2 sectors have seen growth in deal volume compared to March of last year, including “Non-Energy Materials” and “Miscellaneous,” meaning pretty much every relevant sector dropped like a rock. Financial services and tech have actually led the way lower, generally being the sectors driving high-deal values… and hiring for a lot of you youngblood apes. So, instead of Mergers & Acquisitions, looks like we should be more focused on Burger & French Fry Missions. But, if you want lock up that spot on a deal team, maybe it’s time to check out the [WSO Academy](). Or don’t, it’s your parents to disappoint 🤷‍♂️. 💭 The Big Question 💭: When will M&A activity pick back up? What sectors will lead the way? How does the declining M&A market impact each bank? Banana Brain Teaser 💡 Previous 🗓 A bicycle store purchased two bicycles, one for $250 and the other for $375, and sold both bicycles at a total gross profit of $250. If the store sold one of the bicycles for 450, what could be the store’s gross profit from the sale of the other bicycle? Answer: $175 or $50 Today 🕐 Makoto, Nishi, and Ozuro were paid a total of $780 for waxing the floors at their school. Each was paid in proportion to the number of hours he or she worked. If Makoto worked 15 hours, Nishi worked 20 hours, and Ozuro worked 30 hours, how much was Makoto paid? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “Know what you own, and why you own it.” — Peter Lynch How Would You Rate Today's Peel? 😁[All the bananas]() 😐[Meh](=) 😩[Rotten AF]() Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]() // [WSO ALPHA]() // [ACADEMY]( // [COURSES]() // [LEGAL]( [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353