May 18th - The Week Ahead

The Latest on Tariffs and Former President Biden's Cancer Announcement

Author

HY Harry
May 18, 2025

The Week Ahead Of Us 🔍

Welcome back!

On Friday evening, Moody’s downgraded the U.S. from a AAA rating to AA1, pushing the dollar lower. Given our aggressive government spending, plus tariff uncertainty, you can’t blame Moody’s for doing this. S&P and Nasdaq futures are down roughly 60bps on the back of this.

Honestly though, this isn’t a big deal - this is a downgrade to the comparable rating that S&P and Fitch already have the U.S. rated at. So that’s a bit of a nothing burger from a medium-term negative catalyst standpoint; despite out-of-control government spending obviously being a massive tail risk. We think the return of reciprocal tariffs could be a bigger medium-term risk. We’ll explain more below, so let’s get into it.

Here’s a look at earnings this week.

  • Tuesday: Home Depot, Palo Alto Networks, Viking Holdings, Toll Brothers, ViaSat

  • Wednesday: TJX, Lowe’s, Snowflake, Target, Zoom

  • Thursday: Intuit, TD, Workday, Ross Stores, Decker’s, BJ’s, Webull, Advance Auto Parts

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

  • Thursday: Initial jobless claims (230k), May Services PMI (50.8), May Manufacturing PMI (49.8), April Existing Home Sales (4.12mm)

  • Friday: April New Home Sales (700k)

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Earnings Corner 📜 

Walmart (WMT): Walmart Q1 revenue of $165.61B missed slightly, but EPS beat at $0.61 vs. $0.58. US e-commerce turned profitable for the first time, with comps +4.5%. Management warned price hikes are unavoidable as tariffs hit harder and price pressure is expected to accelerate into the back-to-school season. Walmart maintained full-year guidance but withheld 2Q EPS guidance due to trade uncertainty. Shares rose 0.8% Thursday following the report.

Deere (DE): Revenue and EPS beat, despite a 16% y/y sales drop, as Deere managed through a cyclical downturn with strong cost controls. Management flagged $500M+ in expected 2025 tariff costs. Shares rose 7%+ following the mid-morning call.

Birkenstock (BIRK): The German shoe manufacturer beat revenue by 1.3%, rising 19% y/y; guidance was raised. Management said tariffs could benefit brands with pricing power. Shares rose 3% since results.

Advanced Drainage Systems (WMS): Infrastructure supplier WMS, Missed on the top and bottom line as weather and soft construction demand dragged results. Management flagged a cloudy macro outlook heading into fiscal year 2026. Shares fell nearly 12% before, eventually recouping most of the losses on Friday.

Alibaba (BABA): Chinese e-commerce giant missed on revenue and EPS as price wars and weak cross-border sales weighed. Management flagged macro weakness and uncertainty over tariffs. Shares fell more than 9%.

Cava (CAVA): Cava, the Mediterranean-style restaurant chain, beat on revenue and posted a 57% EPS surprise, but a cautious tone and tariff concerns spooked investors. Shares fell 2%.

Doximity (DOCS): Revenue stayed in line with estimates ($570.4M), while EPS beat by 10% and profits jumped 51%. Yet, concerns around slowing growth took center stage. Shares plunged 11% on Friday, recovering from an initial 23% plunge.

Today’s Headlines 🍿 

  • Biden’s Cancer Announcement: Former President Joe Biden’s spokesperson put out a statement detailing that the former President has been diagnosed with an aggressive form of prostate cancer. On Friday, he was diagnosed with prostate cancer with metastasis to the bone. The Gleason score of the cancer was a 9, which is among the more aggressive forms on a 1 to 10 scale

  • Finalized tariff rates for countries are coming over the next few weeks. It sounds like the bulk of countries that were handed reciprocal tariffs are not close to an amicable agreement with the U.S. With limited progress during this 90-day-pause, the Liberation Day reciprocal tariff rates may go into place for some nations. There may be some regional deals though, especially in Central America and Africa. This could be highly negative depending on the country, but tbh we’ve also seen this administration lower rates dramatically pretty quickly

  • Trump and Walmart beef over tariffs: After Walmart noted in their earnings remarks that they would have to raise prices on the consumer, President Trump hit back and said Walmart should eat the tariffs and not charge customers anything. Following this, Bessent noted on this morning that he spoke to Walmart’s CEO, confirming Walmart would be eating some of the tariff costs, similar to what they did during the first Trump term

  • NJ Transit strike squashed: The New Jersey Transit and Engineers’ Union agreed to a deal that ended the 3-day strike. Workers will return to their regular schedules on Monday. NJ Transit operates more than 925k weekday trips across transportation mediums

  • Qatar will invest $500B in the U.S. over the next decade, with a focus on AI, data centers, and healthcare

  • Layoffs at Microsoft: Microsoft laid off 6,000 employees, a small % of its 228k workforce, but with many of the roles cut being in engineering, the tech giant having 30% of its code written by AI may be a factor here

  • Jamie Dimon thinks there’s still a shot of a recession: The JPM CEO says recession risk shouldn’t be taken off the table, but still believes America is the best country in the world to invest in

  • 75% of restaurant traffic is now takeout orders. Per the National Restaurant Association, Gen Z and millennials are leading the push in off-premise dining.

  • 13-F Takeaways: It’s 13-F season - and here’s what some of the most well-known managers were up to in 1Q25:

    • Burry went full Bear: Michael Burry now has one long position, Estee Lauder. The rest of his portfolio is full of Put options, including a very large put on Nvidia

    • Ackman punts out of Nike (although he had some calls) and beefed up his position in Uber

    • Berkshire maintains its Apple stake and adds some new names: Buffett added small exposure to Constellation Brands, Dominos Pizza, HEICO, and Pool Corp

  • First-Time CLO Managers are on the rise: CLO warehouses are on the rise, with first-time managers Macquarie and Arini among the latest priced deals

  • Podcast of the day: Scott Greenberg, the Global Chair of Restructuring and Reorganization at Gibson Dunn, spoke to Bloomberg on how co-ops work. Scott highlighted how lenders have more opportunities to participate than they did historically, how large lender groups initiate co-ops, and why existing lenders should worry about a rise in “deal away” transactions

  • Flutter’s High Yield Launch: Bank of America and Goldman are set to launch 2.5B of high-yield bonds to finance Flutter Entertainment’s acquisition of Playtech’s Italian gambling business.

  • Autopilot Latest: Last week, High Yield Harry bought the dip on UnitedHealth in the Corporate Dividends Fund. This is one of Harry’s four strategies and has over $400k of “AUM”. You can explore Harry’s strategies here. See disclaimers at the end of the newsletter

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M&A Transactions💭 

Charter is acquiring Cox Communications for $34.5B. Cox will gain a 23% stake in the merged entity, with Charter assuming $12B in debt.

Khosla Ventures founder Vinod Khosla is among the investor group acquiring a 6% stake in the San Francisco 49ers at a $8.5B valuation

Inozyme Pharma (NAS: INZY), a clinical stage bio-pharma company, has reached a definitive agreement to be acquired for $383.087M by BioMarin Pharmaceutical (NAS: BMRN). EV/Cash Flow was 73.22x. Centerview Partners advised on the sale.

Svitzer, sustainable marine services, was acquired for DKK 9B by A.P. Moller Holding. EV/EBITDA was 9.79x and EV/Revenue was 2.8x. Citigroup advised on the sale.

365.Invest, operator of an online investment platform, has reached a definitive agreement to be acquired for EUR 761.0M by KBC Group (BRU: KBC).

Decolar, an online travel company, was acquired for $1.7B by Prosus (AMS: PRX). EV/EBITDA was 21.53x and EV/Revenue was 2.2x. Goldman Sachs advised on the sale.

Deribit, developer of a cryptocurrency derivatives exchange platform, was acquired for $2.9B by Coinbase Global (NAS: COIN). Financial Technology Partners advised on the sale.

JET Tankstellen Deutschland, operator of fuel stations and convenience stores and a subsidiary of Phillips 66, entered into a definitive agreement to be acquired for $1.84B by Stonepeak Partners and Energy Equation Partners.

A 2,600 Megawatt Modern Natural Gas Generation Asset of Lotus Infrastructure has entered into a definitive agreement to be acquired for $1.9B by Vistra Energy. Lazard advised on the sale.

NSX Enterprise, operator of an online sports betting and iGaming company, was acquired for $350.0M by Flutter Entertainment (NYS: FLUT). EV/EBITDA was 18.38x and EV/Revenue was 2.44x.

NV5 Global (NAS: NVEE), provider of technology, has reached a definitive agreement to be acquired for $1.7B by Acuren (ASE: TIC). EV/EBITDA was 14.76x and EV/Revenue was 1.76x. ROTH Capital Partners advised on the sale.

Our Home, operator of a food company, was acquired for KRW 869.5B by Hanwha Group. EV/Net Income 20.2x and EV/Revenue was 0.64x.

The Insurance Division of RAC WA was acquired for $1.35B by Insurance Australia Group (ASX: IAG).

Electra Del Maestrazgo, provider of electricity distribution, has reached a definitive agreement to be acquired for EUR 100.0M by Iberdrola (MAD: IBE).

Private Placement Transactions💭 

Pathos, developer of a drug discovery platform, raised $365.0M through a combination of Series D, Series D-1 venture funding from undisclosed investors at a pre-money valuation of $1.24B.

MoviePass, provider of a movie-theater subscription service, raised $100.0M of venture funding in the form of options from Global Emerging Markets.

IKF Finance, provider of asset financial services, raised INR 14.65B of venture funding in a deal led by Norwest Venture Partners.

Stord, developer of a digital warehousing and distribution network, raised $200.0M of Series E venture funding through a combination of debt and equity at a pre-money valuation of $1.42B. The equity portion of $80.0M was led by Strike Capital. The transaction was supported by $120.0M of debt financing.

Odds of the Day 🍒 

Recession odds keep nosediving. Kalshi traders are pricing in a 37% chance of a recession this year.

*New Traders on Kalshi receive a $20 bonus of trading credit when depositing $100+ with the code “HYH”.

Noteworthy Chart 🧭

Meme Cleanser 😆 

Until next time!

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Investment advice provided by Autopilot Advisers, LLC (“Autopilot”), an SEC-registered investment adviser. Past performance does not guarantee future results. Investing carries risks, including loss of principal. As always be smart out there.