Plus, Philip Morris and Altria called off their merger, WeWork’s CEO stepped down, and Saudi Aramco is finally going public.
Stocks opened mixed this morning with the Dow adding 59 points, or 0.2%, on the open. The S&P 500 traded just above the flatline adding 0.06%, while the Nasdaq was down slightly by -0.04%.
The story on everyone’s minds this morning is the formal impeachment inquiry of President Donald Trump, opened by House Speaker Nancy Pelosi yesterday afternoon. “The president must be held accountable. No one is above the law,” Pelosi said. At the center of the investigation is Trump’s phone call with Ukraine President Volodymyr Zelenskiy. According to a rough transcript of the call released this morning, Trump asked the president of Ukraine to work with his personal lawyer, Rudy Giuliani, and the U.S. attorney general, William Barr, to “look into” his political rival, Joe Biden, and asked Zelenskiy to investigate whether Ukraine could locate a hacked Democratic National Committee computer server during the 2016 campaign. At question is whether Trump pressured the eastern European country to investigate Biden in exchange for military aid that Trump had halted in the days before the call. Trump has reacted to the announcement in his typical fashion, calling the impeachment inquiry “Witch Hunt garbage.”
On the trade war front, Chinese companies are on the verge of purchasing more pork from the U.S. as an outbreak of swine flu has led to domestic shortages. A report from Bloomberg said the volume of purchases of U.S. pork may amount to 100,000 tons, and that Chinese firms have made inquires about prices from exporters including Smithfield Foods and Tyson Foods. The pork imports may be a continuation of China’s efforts to ease trade tensions with the U.S. ahead of the two sides’ meetings in Washington next month. While there has been some speculation that President Trump may shift his focus to a mini-deal with China to deliver a win amid the impeachment process, Raymond James analysts Ed Mills and Chris Meekins wrote in a note to clients that “Trump doubled down in his criticism of China in his speech before the UN… and did not sound like someone on the verge of a ‘mini deal.’ However, the path forward remains very uncertain. We have repeatedly seen President Trump turn towards positive developments in trade disputes at times of political and stock market uncertainty.”
Philip Morris International and Altriahave called off their merger. “While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement,” said Altria CEO Howard Willard. The news comes amid a shake-up at Juul Labs, which Altria owns a 35% stake in, as regulatory scrutiny weighs on the vaping industry. It was announced this morning that Juul’s CEO, Kevin Burns, had resigned and would be replaced by former Altria exec K.C. Crosthwaite. “It appears to us the talks fell apart over Juul,” Bonnie Herzog, an analyst at Wells Fargo, wrote in a note to clients. “Obviously the timing of the merger wasn’t right given escalating negative regulatory headlines. But we still see the merits of the combination and wound’t be surprised if talks resume at some point in the future when the environment is better.”
Saudi Aramco will finally kick off its much-anticipated IPO around October 20. The state-run oil giant has recovered from this month’s attacks on it faster than expected and is currently up to a capacity of 11.3 million barrels per day a week ahead of schedule. Saudi Aramco is holding analyst meetings starting today, and is targeting a monster valuation of at least $2 trillion. In other IPO news, WeWork CEO Adam Neumann has stepped down amid growing calls for his resignation over the company’s governance structure and fluctuating valuation, which has delayed its IPO. Vice Chairman Sebastian Gunningham and CFO Artie Minson will take over as co-CEOs. Neumann will remain as a non-executive chairman and will still hold a controlling stake in the company.
Nike shares hit an all-time high this morning after it delivered a better-than-expected earnings report. On the heels of the earnings beat, Cowen raised its price target for Nike to $103—13% higher than the current price—and said that “the durability of Nike’s global growth potential” makes the stock a Buy. “Management’s confidence seems as high as we can remember as investments continue to generate record high returns on capital,” the firm said in a note to clients. Shares of Nvidia are up just over 2% this morning after Goldman Sachs raised its price target on the chipmaker to $192 from $179. “While the competitive landscape in the gaming GPU business may prove marginally more challenging this 2H versus recent years, we expect the company to deliver strong sequential growth in FY3Q in the Gaming segment supported by the normalization in channel inventory and the launch of its new products,” Goldman analysts wrote in a note.
Stocks We’re Watching
Myriad Genetics (NASDAQ: MYGN): Shares of this genetic testing specialist jumped 11% yesterday after positive comments from analysts at Piper Jaffray. Last quarter, Myriad said in its earnings call that UnitedHealth had decided to cover Myriad’s GeneSight tests, and Piper Jaffray believes that favorable regulatory tends could allow the company to keep GeneSight on the market.
US Nuclear Corp (OTC: UCLE): Shares of UCLE are up 129% so far this year and nearly 40% over the last month. Earlier this month, US Nuclear reported an increase in sales in its last quarter of 172% to $1,530,523, as well as an increase in gross profit of 173%. “We had a very successful and productive second quarter in 2019. Key metrics are increasing, with sales revenue up 172% from the same period last year,” said US Nuclear President, CEO, and Chairman Robert I. Goldstein said. “The increase in sales revenue can be attributed to strong sales growth of our signature products, including: air quality monitors, tritium monitors, and forensic drones. Being first to market with our scientific drones allowed us to establish ourselves at the forefront of this fast-growing industry and we look forward to capitalizing on our momentum.”