Internal | August 16th, 2024

GOOD MORNING

Here's everything you need to know today: Yo, Skydance, we’re hearing the Bronfman family is on its way to steal your studio. According to a WSJ scoop, Edgar Bronfman Jr. has his eye on Paramount’s parent company, National Amusements, and is gearing up to make a bid to wrest control from the Redstones. Yes, that’s the same Bronfman Jr. who sold off Universal Studios, then dumped Warner Music at a loss, and drove the family business, Seagram, straight into the dot-com abyss. Now, he wants back into the Hollywood game.

But don’t pop the champagne (or in this case, mid-market gin) just yet. Paramount’s agonizingly long $8 billion merger with Skydance is on the verge of closing, so Bronfman’s move looks like a last-minute attempt to play his way into a deal that was supposed to bring some much-needed stability to the studio. Giving the Redstones an offer to start negotiations on their whole empire right now is like handing poker chips to your aunt with a gambling problem, especially since are already getting messy; according to multiple reports on Thursday, Paramount’s cost-cutting measures ahead of the Skydance merger include laying off 15% of all U.S. employees.

Wall Street, however, loves itself some billionaire brinksmanship and lower overhead. Paramount stock closed up over 7% on Thursday. 

Let’s dive into more detail below.

BREAKING NEWS
When “The Jetsons” first hit TV screens in the early 1960s, many imagined a future where we’d live among the clouds, eat microwave dinners prepared by robots, and fly around in cars. Flying cars for everyday consumers might still seem far off, but with the Civil Aviation Administration of China already reviewing the type certification for such aircraft, the future may be closer than we think.

Before we all take to the skies, there’s still a significant focus, and financial and technological push, toward optimizing EV chargers and cars. One manufacturer based in Hangzhou, China, is making unprecedented moves in this space, pushing the boundaries of what’s possible.

WHAT HAPPENED
Using U.S. Department of Energy data, a May survey from Pew Research Center found that nearly six in ten Americans now live within two miles of a public EV charger. The U.S. had over 61,000 publicly accessible charging stations as of February, more than double the 29,000 reported in December 2020.

The findings are just as striking socially. Americans near EV chargers are not just likely to own an EV; they’re enthusiastic about them. Proximity to chargers strongly correlates with higher adoption of eco-friendly vehicles and support for phasing out gasoline-powered cars by 2035. This reflects growing confidence in the U.S.’s ability to expand the charging infrastructure, making widespread EV adoption increasingly feasible.

Charging an EV is also far cheaper than fueling a gas-powered car—about $0.05 per mile versus $0.13 per mile, a 61.5% savings. With easy, affordable charging becoming a reality, more Americans will inevitably own EVs, supported by the 500,000 at-home chargers already installed in California alone. But before Elon Musk can declare victory and head to Mars, remember—being first in the EV race doesn’t guarantee crossing the finish line first, especially with new contenders like Hangzhou China's Zeeker entering the fray.

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BREAKING NEWS
Walmart just dropped its latest earnings, and (we don’t say this a lot) they absolutely crushed it. America’s OG big box store saw revenue hit a whopping $169.34 billion for the quarter, up nearly 5%, and they even managed to get people to buy something other than groceries for a change and blew past Wall Street expectations like a toddler through a bag of Skittles at, well, Walmart.

Walmart seems to have taken a broad view of this newly shaky economy and decided to play chess while everyone else was still figuring out their checker's board. We only say that because we also got a peek at the broader consumer spending landscape on Thursday morning, which is not nearly as rosy as Walmart’s balance sheet.

WHAT HAPPENED
The good news is that Walmart’s rolling in it. That revenue number was impressive bu its operating income grew even more at 8.5%. Global e-commerce surged 21%, and U.S. same-store sales climbed 4.2% despite catering to shoppers who’ve been bludgeoned by inflation and are now more price-sensitive than ever. Need a cheap bulk pack of toilet paper or a 99-cent bag of off-brand chips? Walmart’s got you covered. But it might be the only one.

Second-quarter results throughout the consumer discretionary world showed real scarring from inflation, and the next quarter is not looking great. We learned Thursday morning that July retail sales defied expectations, jumping 1%, waaay above the 0.3% economists were banking on (and that’s even with auto sales stripped out.) But here’s the twist: consumer sentiment just took a dive. On Wednesday, the University of Michigan’s index dropped to 67.7 from 71.6, so we might be looking at the platonic ideal of “spending while anxious.” That means people are still opening their wallets, but the nervous energy is palpable, like they’re stocking up for the storm that hasn’t quite hit yet.

And Walmart has those pre-storm prices.

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BREAKING NEWS
Starbucks (and activist hedge fund Elliott Management) has decided that if anyone can brew up a turnaround, it’s Brian Niccol. But the guy who transformed Chipotle from a guac-stained E. coli laughingstock to a burrito empire isn’t coming cheap. To pry him away from his tortilla kingdom, Starbucks is handing Niccol a compensation package that’s as bloated as a Frappuccino with extra whip: rich, sugary, and definitely served in a to-go cup.

Because Brian Niccol will get to work from home… as the CEO of a $106 billion company.

WHAT HAPPENED
Niccol officially becomes Starbucks’ CEO on September 9, and while he’ll technically be in charge, don’t expect to see him behind the counter asking how you want your latte. With a pay package that could hit $116.8 million in his first year, Niccol’s more likely setting up his home office in Newport Beach, California, as we type, because why would any in-demand executive in his right mind swap the SoCal sun and surf for literally Seattle? So, Niccol has convinced Starbucks’ board that he can mind the coffee counter in WFH scenario. So what did he give up for this unprecedented perk (even Bank of America CEO Brian Moynihan usually works his way down from his home in Boston to BofA’s Charlotte HQ on a weekly basis)? It seems like not a lot; his base salary will be a tidy $1.6 million, with another $7.2 million in cash on the table if he manages to work some magic.

But here’s the real kicker: Starbucks is tossing in a $10 million cash bonus and $75 million in equity just for Niccol to make the leap from Chipotle. That’s right, he’s getting paid a fortune to trade burritos for beans, and he might not even have to leave his house to do it. The equity will vest over the next three to four years, assuming he and Starbucks manage to pull its stock price out of the grinder.

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1. Walmart Raises Annual Profit Forecast on Strong Demand

Walmart increased its annual profit forecast after a strong Q2 performance driven by higher sales of low-cost essentials and increased advertising revenue. The retailer continues to benefit from inflation-weary consumers seeking bargains.

2. Warren Buffett's Berkshire Hathaway Adjusts Portfolio, Sells Apple Shares

Berkshire Hathaway made notable portfolio changes in Q2, reducing its Apple stake by half while initiating positions in Ulta Beauty and Heico Corp. Buffett's move reflects a shift towards a more diversified approach.

3. Starbucks New CEO Set for $113 Million Compensation Package

Starbucks' new CEO, Brian Niccol, will receive a lucrative compensation package worth up to $113 million. The company is betting on Niccol’s leadership to reverse recent business challenges.

4. Nvidia Continues Rally Amid Strong AI Demand

Nvidia stock maintained its upward momentum, benefiting from increasing demand for AI-related products. The company’s market valuation remains near the $3 trillion milestone.

5. Walmart Attracts Higher-Income Shoppers

Walmart reported that wealthier consumers contributed to its recent sales boost, as the retailer gained market share among households searching for bargains amid inflation pressures.

6. Google Faces Breakup Risk After Monopoly Ruling

Following a court ruling that Google violated antitrust laws, the tech giant could face a potential breakup. Investors are bracing for months of uncertainty regarding the company's future structure.

7. China's Economic Slowdown Weighs on Global Oil Demand

China's continued economic deceleration, marked by sluggish consumption and a struggling property market, is impacting global oil demand, leading to downward revisions by OPEC and the IEA.

8. Lockheed Martin Acquires Terran Orbital

Lockheed Martin announced its acquisition of Terran Orbital, strengthening its position in the growing small satellite manufacturing sector. This move aligns with Lockheed's strategy to expand in space technology.

9. Retail Sales Surge in July, Easing Recession Concerns

U.S. retail sales increased by 1% in July, surpassing expectations and alleviating fears of a recession. Consumer spending showed resilience, bolstered by strong results from major retailers like Walmart.

10. Boeing Receives Vote of Confidence from United Airlines CEO

United Airlines CEO Scott Kirby expressed renewed confidence in Boeing's recovery under new leadership following a meeting with the aerospace company's CEO. Kirby highlighted Boeing’s positive trajectory.

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