March 15th - The Week Ahead

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Welcome back!

Futures are up slightly, even as oil has topped $100 and the Trump administration is threatening strikes on Iran’s export facilities if the Strait of Hormuz cannot be opened. The S&P 500 was down -1.5% last week. Over the weekend, the U.S. struck targets on Kharg Island, a vital export terminal. The U.S. did not hit key infrastructure as this was meant as a warning shot towards reopening the Strait of Hormuz. The U.S. is planning a coalition to escort ships, but the announcement and operations regarding this are still in discussion.

There’s been a ton of noise in the market due to geopolitics and the deterioration of software moats, as many of you have seen in our WSR IC pieces. The Fed will announce their rate decision on Wednesday, but per Polymarket, the odds of “no change” in rates is at 99.7%. The more interesting market we’re looking at is whether rate cut odds will change for June - currently Polymarket traders are expecting “no change” (62%) vs. 30% expecting a 25bps decrease.

Some exciting news btw:

We are moving to 3x/week in April. This is really exciting to ensure our emails are reaching you as we move into 3x/week - feel free to reply to us a “Hello” or a little note for us!

Let’s get into it!

The Week Ahead Of Us 🔍

Here’s a look at earnings this week.

• Monday: Dollar Tree, WW International

• Tuesday: lululemon, DocuSign, Academy Sports, Bob's Discount Furniture

• Wednesday: Micron, Williams-Sonoma, General Mills, Five Below, Jabil Inc, Macy's

• Thursday: Alibaba Group, Accenture, FedEx, Darden Restaurants, Signet Jewelers

Here’s a look at economic data this week (estimates are in quotations).

• Monday: Empire State manufacturing survey (4.1), Industrial production (0.1%), Capacity utilization (76.2%)

• Tuesday: Pending home sales (-1.0%), Home builder confidence index (37)

• Wednesday: Producer price index (0.3%), Core PPI, PPI y/y, Core PPI y/y, Factory orders (0.2%), FOMC interest-rate decision

• Thursday: Initial jobless claims (215,000), Philadelphia Fed manufacturing survey (11), Wholesale inventories, New home sales (715,000)

• Friday: None scheduled

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Earnings Corner 💸 

• $ADBE ( ▼ 7.58% ) Top and bottom line beat with revenue at $6.4B vs. $6.28B and an EPS of $6.06 vs. $5.88 as strong subscription demand across Creative Cloud and Acrobat drove growth. AI products such as Firefly are gaining traction with AI driven revenue more than tripling, but is negligible relative to the headwinds Adobe is facing. Adobe also announced CEO Shantanu Narayen will step down once a successor is appointed. Q2 guidance came in above expectations, but shares fell.

• $DG ( ▼ 3.02% ) Top and bottom line beat as same store sales rose 4.3% driven by higher customer traffic and spending across consumables and seasonal categories. The company guided same store sales growth of 2.2%–2.7%, roughly in line with expectations, signaling a more cautious consumer environment.

• $ULTA ( ▼ 14.24% ) Revenue beat at $3.90B while EPS slightly missed. Net sales rose 11.8% as higher ticket sizes and transaction growth drove comparable sales gains. Guidance came in slightly below expectations with same store sales projected at 2.5–3.5%, signaling more moderate growth.

• $LEN ( ▲ 2.62% ) Revenue missed at $6.62B while EPS also came in below expectations as high mortgage rates and affordability pressures weighed on housing demand. Revenue fell 13% y/y as lower home deliveries and price incentives aimed at boosting affordability pressured results. New orders guidance of 21k–22k homes came in below expectations.

• $DKS ( ▼ 2.75% ) Revenue and EPS beat as strong holiday demand drove comparable sales up 3.1%. However, guidance of $13.50–$14.50 came in below expectations as costs tied integrating with the recently acquired Foot Locker business are expected to pressure profits.

On The Move 📈 📉

• Klarna $KLAR ( ▲ 8.82% ) stock surged as Chair Michael Moritz purchased 3.47M shares worth $50M, even as the stock remains down roughly 60% from its IPO price.

• ServiceTitan $TTAN ( ▼ 6.41% ) stock fell after reporting Q4 revenue of $253.99M and a net loss of $41.74M YoY, despite naming Abhishek Mathur as CTO.

• Once Upon a Farm $OFRM ( ▼ 7.27% ) is down after forecasting slower sales growth and weaker margins.

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Today’s Headlines 📖🍿 

• Q4 GDP revised sharply lower: Q4 growth was cut from 1.4% to 0.7%, well below the 1.5% forecast, marking a slowdown from 4.4% in Q3. January core PCE rose 0.4% MoM and 3.1% YoY, keeping inflation above the Fed’s 2% target as stagflation risks resurface.

• Mortgage rates hit highest level since September: The average 30-year fixed rate increased to 6.41% after hitting a multiyear low of 5.99% just two weeks ago, as bond yields surged following the Iran conflict.

• Meta is reportedly planning layoffs that hit 20% or more of its 79k person workforce, according to Reuters.

  • However, Meta reps said, "This is a speculative report about theoretical approaches." Regardless, Zuck is now stranger to mass layoffs, and Meta has been overspending on AI development & talent with little to show up for thus far.

  • Meta will delay its new AI model, “Avocado,” as it has underperformed vs competing models from Google, OpenAI, and Anthropic. Executives have even discussed temporarily licensing Gemini models as a result.

• More on the latest in Iran: Six U.S. crew members were killed when their military refueling plane crashed in Iraq, marking 12 U.S. service members who have been killed since the Iran war began. Iran’s new supreme leader was wounded early in the war, with the Iranian media claiming excellent health while Trump says he’s hearing that the supreme leader is “not alive.” Additionally, Trump has called on allies to send warships to the Strait of Hormuz, hoping for assistance in freeing it up as the chokehold has pushed oil prices to ~$100 a barrel.

• Fertilizer shortages rattle farmers: Farmers in the US and Canada are facing supply shortfalls as the war in Iran disrupts over 30% of global nitrogen fertilizer exports through the Strait of Hormuz, driving prices up more than 30% and threatening planting season margins.

• Blue Owl Capital urges investors to reject Saba tender: The firm’s OBDC II BDC is pushing back against a Saba and Cox Capital offer priced at a 33% discount to NAV, saying shareholders would be giving up a “high-performing” portfolio. Saba is betting investors prefer immediate liquidity amid private credit volatility.

• JPMorgan prepares $30B+ in LBO debt sales: The bank is preparing to launch high-yield bonds and leveraged loan deals to fund the buyouts of Electronic Arts, Sealed Air, and Qualtrics. Despite Iran war volatility and AI-driven pressure, JPMorgan is betting investors will step in for attractively priced debt.

• Vivid Seats’ debt sinks deeper into distress: The company’s $390M term loan due 2029 is now quoted in the 30s cents on the dollar range, down from the mid-50s in November, after Q4 revenue fell 37% to $126.8M and a $428.7M net loss.

• Carlyle overhauls flagship European buyout team ahead of fundraising return: The firm prepares to relaunch its flagship European fund after a two-year pause, following a troubled 2018 vintage that posted a negative IRR and 1.1x MOIC on exits.

• TikTok fee: The Trump Administration will receive $10B from Oracle, Silver Lake, MGX and other investors as a fee for brokering the TikTok deal. The administration will also share profits with ByteDance, who still owns nearly 20% of the company.

• Agentic AI could push unemployment past 30% for recent college grads according to ServiceNow CEO Bill McDermott, who says that it will “be challenging for young people to differentiate themselves in the corporate environment” as companies increase automation to cut jobs and lower costs.

• Anthropic is reportedly in talks with Blackstone and other PE firms to form a joint venture embedding Claude across portfolio companies, potentially accelerating cost cuts and adding pressure to SaaS names.

• Disney+ is rolling out Verts, a short-form video feed that lets users scroll through clips of movies and TV shows.

• Triton Partners raised €5.5B for its sixth flagship PE fund, about 10% larger than Triton V and a successful raise following allegations of inappropriate behavior from some executives.

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M&A Transactions💭 

Allianz (ETR: ALV), a transport and accident insurance company, has reached a definitive agreement to be acquired for AED 2.605B by Sanlam Maroc (CAS: SAH). EV/EBITDA was 0.04x and EV/Net Income was 0.06x.

ProofX, operator of a generative AI platform, has reached a definitive agreement to be acquired for $337.0M by Fuva Brain (TKS: 3927).

Alexander & Baldwin, a Hawaii commercial real estate company, was acquired for $2.033B by Aiea Business Group, Blackstone Real Estate Income Trust, and DivcoWest. EV/EBITDA was 16.15x and EV/Revenue was 9.84x. Bank of America advised on the sale.

The Thermal Management Solutions Business of Boyd was acquired for $9.5B by Eaton (NYS: ETN). Goldman Sachs and J.P. Morgan advised on the sale.

Cemex Colombia, manufacturer and supplier of cement, has reached a definitive agreement to be acquired for $555.0M Holcim (SWX: HOLN).

Eastdil Secured, operator of a real estate investment bank, has reached a definitive agreement to be acquired for $1.125B by Savills (LON: SVS). EV/EBITDA was 9.96x and EV/Revenue was 1.78x.

Korean Air Catering & Duty Free Services was acquired for KRW 750.0B by Korean Air Lines Company (KRX: 003490).

MNC Solutions (KRX: 484870), engaged in the development of domestically produced electric drive devices, has reached a definitive agreement to be acquired for KRW 945.0B by Korea Search Investment Partners. The transaction values the company at KRW 1.0T. UBS Group advised on the sale.

Signature Bank, operator of a commercial bank, has reached a definitive agreement to be acquired for $348.4M by Esquire Bank (NAS: ESQ). Raymond James advised on the sale.

Urban Campus, operator of coliving and coworking campuses, was acquired for EUR 600.0M by Goldman Sachs Asset Management.

CNL Healthcare Properties, operator of a real estate investment trust, was acquired for $1.831B by Sonida Senior Living (NYS: SNDA). EV/EBITDA was 21.4x and EV/Revenue was 4.66x. KeyBanc Capital Markets advised on the sale.

Wiz, developer of a cloud security platform, was officially acquired for $32.0B by Alphabet (NAS: GOOGL). EV/Revenue was 32.0x. Barclays, Bank of America, Morgan Stanley, and Goldman Sachs advised on the sale.

Private Placement Transactions💭 

Zero One Automotive, manufacturer of intelligent heavy-duty transport, raised CNY 1.2B of venture funding from Beijing Momenta Technology Company, CATL Capital, and NIO Capital.

Wonderful, developer of AI-based software platform, raised $150.0M of Series B venture funding led by Insight Partners at a pre-money valuation of $1.85B.

Tropic, developer of gene editing technology, raised $105.0M of Series C venture funding led by Corteva and Forbion.

Sunday, operator of an AI agent platform, raised $165.0M of Series B venture funding led by Coatue Management at a pre-money valuation of $1.34B.

ORO Labs, developer of a procurement orchestration company, raised $100.0M of Series C venture funding led by Goldman Sachs Growth Equity and Brighton Park Capital.

MainFunc, developer of a search engine platform, raised $385.0M of Series B venture funding led by LG Technology Ventures, SBI Investment, and Emergence Equity Management at a pre-money valuation of $1.22B.

Grafana Labs, developer of a performance monitoring platform, raised $250.0M of Series E venture funding from undisclosed investors at a pre-money valuation of $8.75B.

Alsphere Technology, developer of general visual multi-modal large models, raised $300.0M of Series C venture funding led by CDH Investment.

WayCool, developer of an omnichannel fresh produce distribution platform, raised $2.1B of venture funding from Lightrock.

Qualified Health, developer of generative AI infrastructure, raised $100.0M of Series A venture funding from SignalFire and New Enterprise Associates.

Perpetual Next, developer of a climate technology designed to reuse waste streams, raised EUR 200.0M of Series B venture funding from Martijn van Rheenen and Momentum Global Ventures.

Calterah, manufacturer of millimeter-wave radar semiconductor chips, raised over CNY 1.0B of Series E venture funding from several national-level industrial funds.

Axiom, developer of a quantitively superintelligence technology, raised $200.0M of Series A venture funding led by Menlo Ventures at a pre-money valuation of $1.4B.

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Obviously, none of this constitutes financial or investment advice. *Today’s Sponsors are UpSlide, LongView Tax, and Polymarket