What You Need to Know for October 23rd

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Welcome back!

Obviously, there was some volatility in the markets yesterday with the Nasdaq diving nearly 2% at the lows before ending ($QQQ ( ▲ 0.45% ) ) down a point. Trump is looking at curbing software powered exports to China, sending Tech and higher-beta AI stuff down.

Meanwhile, we got the news last night that the Trump administration is in talks to take stakes in Quantum Computing companies such as Rigetti Computing, IonQ, D-Wave Quantum, Quantum Computing (yes, that’s a company name too), and Atom Computing. This would be minimum funding awards of $10mm each.

IMO, these Quantum Computing companies are literal Aerotyne Internationals. Meanwhile, Google is actually doing impressive work in Quantum, announcing another big breakthrough yesterday! I digress.

Before we get into it, we had two new WSR Investing Club pieces go out this week

1. Our S&P 500 dispersion trade (I wrote this one up, I think this is very important given where we are in the cycle)

2. Crocs 

We also want to highlight $KINS ( ▲ 0.07% ) as one of our higher conviction ideas - you can access the report here.

To access the writeups upgrade to the WSR Investing Club. This discount will be going away within the next month, so now is the time to join the club.

Earnings Corner 📈 📉

Netflix $NFLX ( ▼ 0.19% ) Revenue of $11.51B and EPS of $5.87 missed estimates after a surprise Brazilian tax expense hit margins. The one time charge pulled operating margin down to 28% versus the 31.5% target, overshadowing what was otherwise a strong quarter of ad-tier growth and record engagement across hits. Management stressed the tax isn’t recurring and said ad revenue more than doubled y/y, marking Netflix’s best ad sales quarter ever. Q4 guidance topped forecasts with revenue of $11.96B and EPS of $5.45, keeping FY sales near the high end of its $45B range. The core growth story remains intact as the company leans on advertising and pricing power to drive 2026 momentum.

Tesla $TSLA ( ▲ 0.21% ) Revenue of $28.1B rose 12% y/y, beating estimates, but EPS of $0.50 missed as profits fell 31% amid higher R&D and weaker regulatory credits. Record deliveries and a rush of EV buyers ahead of expiring tax credits lifted sales, while energy storage hit new highs. Margins improved to 18%, the highest this year but still down from 2024, pressured by price cuts and tariffs. Musk said Tesla remains focused on autonomy, robotics, and new energy ventures, with its Texas lithium refinery on track for Q4 production

AT&T $T ( ▼ 2.18% ) Revenue of $30.7B and EPS of $0.54 missed expectations as gains in wireless and fiber were offset by weaker legacy wireline. The company added 405K postpaid and 288K fiber subscribers, fueling $4.9B in FCF and supporting $1.5B in buybacks, while a $5.5B gain from the DirecTV stake sale lifted net income. Management reaffirmed FY guidance, highlighting resilient mobility and fiber growth alongside the $23B EchoStar spectrum deal as a long-term driver for its 5G and broadband network.

Lockheed Martin $LMT ( ▼ 0.09% ) Revenue of $18.6B and EPS of $6.95 beat estimates, driven by 9% growth across aeronautics and missile programs. A record $179B backlog and $30B in new multiyear awards for PAC-3 missiles, F-35 jets, and CH-53K helicopters underscored strong defense demand amid rising geopolitical tensions. Management raised FY guidance to $74.75B in sales and $22.35 EPS, hiked the dividend 5%, and expects mid single digit growth on solid cash generation and sustained government spending.

GE Vernova $GEV ( ▲ 1.22% ) Revenue of $10.0B beat expectations while EPS of $1.64 missed on mixed segment performance. Shares fell after the company announced a $5.3B purchase of the remaining 50% of Prolec GE, expanding its grid business as power demand from data centers and AI surges. Orders jumped 55%, and management reaffirmed guidance for $36–37 B in 2025 sales with 8–9% margins.

3M $MMM ( ▼ 1.32% ) Revenue of $6.32B and EPS of $2.19 beat estimates as organic sales rose 3.2% and margins expanded on cost cuts and higher margin products. Strength in Safety & Industrial, lower SG&A, and new product launches drove the fourth straight quarter of organic growth. Management raised FY EPS guidance to $7.95–$8.05 and lifted its margin outlook.

Texas Instruments $TXN ( ▼ 3.98% ) Revenue of $4.74B beat slightly, but EPS of $1.48 missed and weak Q4 guidance signaled slowing orders amid trade tensions. Management flagged soft auto demand and factory underutilization pressuring margins as the analog recovery remains gradual.

Cleveland Cliffs $CLF ( 0.0% ) Cliffs posted a slight revenue miss of $4.7B and an EPS loss of $0.45, roughly in line with expectations. Shares spiked early in the week after the company announced a push into rare earth mining, part of a broader U.S. effort to cut reliance on China, but those gains faded as investors took profits. Management called the shift a long-term growth play, highlighting steady auto-steel demand and lower 2025 capex of $525M.

IBM $IBM ( ▼ 1.4% ) Revenue of $16.3B and EPS of $2.65 both beat expectations, up 9% y/y on broad-based growth and strong AI demand. The company’s AI book topped $9.5B, driving higher FCF and margins, though shares slipped after-hours following a strong pre-earnings run.

O'Reilly $ORLY ( ▼ 1.85% ) Revenue of $4.71B and EPS of $0.85 both beat expectations, up 8% y/y with comps rising 5.6%. Solid DIY and professional demand drove growth, while management lifted FY25 comp sales guidance to 4–5% and reaffirmed strong FCF.

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The Main Story: OpenAI’s latest big moves 🔍

OpenAI trains AI to take over junior bankers’ grunt work: Sam Altman has hired over 100 former Wall Street analysts at $150/hr to help train its AI to build financial models under a secret project called Mercury. The initiative aims to automate tasks like Excel modeling and presentation edits

OpenAI demo day: OpenAI launched Atlas, their answer to Chrome. Atlas combines the chat experience with a traditional web browser, adding more personalization and increasing memory to make the browser more helpful for users. The AI-powered search engine has standard browser tabs, but incorporates a split-screen view with ChatGPT. The goal is for the chatbot to always be there as an AI-companion to assist users while on the web. The browser - available today on MacOS - is free, and will incorporate “agent mode” at a paid tier. News of the release initially sent shares of Google down 4%, but $GOOG ( ▲ 2.51% ) quickly recovered

Today’s Headlines 🍿 

• Trump announces sanctions on Russia, sending oil shooting higher by about 5%. The sanctions will target Russia’s two largest oil companies, Lukoil and Rosneft, which account for almost half of the country’s oil production. The move is a direct attempt to end the war in Ukraine

• Warner Bros. considers sale amid interest from Paramount, Netflix, and Comcast: WBD is reviewing strategic options and preparing to give potential buyers some financial information. WBD is evaluating a breakup, full sale, or partial asset sales. Netflix and Comcast are evaluating bids for the streaming and studio parts of the company, while Paramount Skydance has already had several $19-$24 bids (mix of cash & equity) rejected. Apple and Amazon may also be involved

• Beyond Meat soars 146% after meme ETF addition and Walmart deal: The artificial burger maker skyrocketed after joining Roundhill’s revived Meme Stock ETF and announcing an expanded Walmart partnership. The surge triggered a short squeeze, with 63% of shares sold short, marking a dramatic rebound for the longtime struggling stock

• Anthropic CEO rebuts Trump AI czar’s ‘woke’ criticism: Dario Amodei rejected David Sacks’ claims that the startup pushes “woke” AI policies, saying the company aligns with the Trump administration on key goals for safe and competitive AI development. Amodei said Anthropic supports a unified federal approach over state-level regulations

• Replit is projecting $1B in 2026E revenue: The vibe coding startup recently hit $150mm in ARR but is reportedly close to $250mm in ARR - a massive jump from just $2.8mm in revenue last year. Replit has focused on non-technical users and now boasts a user base of 40 million, including over 150k paying customers

• Amazon rallies after the AWS down-day: The effects of Monday’s AWS outage were massive, with sites like Snapchat, Lyft, Canvas, and Venmo being down for most of the day - but Amazon’s stock has actually risen. The breach, likely caused by a technical issue from a key data center, is somewhat inconsequential; investors are more focused on how the company may be utilizing AI to replace half a million jobs with robots

• Apollo calls out the energy gap: Apollo says the amount of energy required to power data centers is massive and that "the gap between what AI is demanding and what we have everywhere in the world on the grid in terms of generation and transmission is huge and will not be closed in our lifetime." The firm says renewables alone won’t be enough to power the AI age and has already invested billions into energy transition projects

• Meta launches fifth AI reorg this year: Meta is slashing 600 researchers as it reshapes AI teams after Llama 4 stumbles, while Zuckerberg’s new “superintelligence” group, run by Alexandr Wang and stocked with big-name hires, remains untouched, intensifying tensions with Yann LeCun’s FAIR as Meta chases rivals without a clear breakthrough yet

• Ineos bond slumps amid mounting chemical industry pressures: Ineos Group’s €800M bond, issued in September, has dropped nearly 10% to 91 cents as rising energy costs and competition weigh on the sector. The company plans plant closures in Germany and job cuts in the UK, while JPMorgan downgraded its debt to underweight, citing high leverage and earnings risks

• Subprime lender PrimaLend files for bankruptcy after default: PrimaLend Capital Partners filed for Chapter 11 in Texas after missing interest payments, marking another collapse among subprime auto lenders. The firm, which funds “buy here, pay here” dealerships, plans to sell its business and continue servicing loans with new financing from existing lenders

• Pimco nets $2B paper gain on Meta data center debt: The lender is crushing it after leading the $27B Meta data center financing. The debt’s price surged above 110 cents on the dollar after pricing at par last week. The firm has already sold over $1 billion of the investment, while Citadel Securities and BlackRock funds are also involved in the deal

• Western Alliance says loan fraud is an isolated issue: After going through its $2B note finance portfolio, the bank’s CEO is confident that asset quality is strong and that the potential fraud from Cantor Group is just a one-off

• Oaktree taps private credit for Perpetual wealth unit buyout: Oaktree is using loans from Ares and Barings to finance its purchase of Perpetual WM arm through its portfolio firm AZ Next Generation Advisory

• ‘Tron: Ares’ busts: Disney’s new film starring Jerod Leto debuted with $33.5M domestically and $60M worldwide, falling short of Tron: Legacy’s $44M 2010 opening. The film earned mixed reviews with a 55% on Rotten Tomatoes from critics and 86% from audiences

• Travis Kelce joins Six Flags revival bid: The NFL star has teamed up with activist investor Jana Partners in a group holding a 9% stake in Six Flags. The partnership aims to boost shareholder value and improve park experiences, sending $FUN ( ▼ 8.59% ) shares up over 15% Tuesday

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M&A Transactions💭 

ZimVie, focused on the dental and spine markets, was acquired for $762.89M by ARCHIMED. EV/EBIDTA was 22.28x and EV/Revenue was 1.72x. Centerview Partners advised on the sale.

Xella International, manufacturer of building materials and insulation products, has reached a definitive agreement to be acquired for EUR 1.85B by Holcim (SWX: HOLN). EV/Revenue was 1.96x.

Veritex Community Bank (NAS: VBTX), engaged in the provision of commercial banking products, was acquired for $1.9B by Huntington National Bank (NAS: HBAN). EV/Net Income was 16.4x and EV/Revenue was 4.33x. Stifel Financial and Keefe, Bruyette & Woods advised on the sale.

U-blox (SWX: UBXN), a manufacturer of wireless semiconductors, was acquired for CHF 1.0B by Advent International. EV/Revenue was 3.72x. Globalscope Partners, IFBC, and Morgan Stanley advised on the sale.

Taylor Adhesives, manufacturer of floor covering adhesives, was acquired for $390.0M by Avery Dennison. Moelis & Company and Piper Sandler advised on the sale.

153,000 Hectares of Land in Estonia and Latvia of Sodra was acquired by Ingka Investment for EUR 720.0M.

Sandstorm Gold Royalties, provides financing to companies engaged in gold mining, was acquired for $3.969B by Royal Gold (NAS: RGLD). EV/EBITDA was 25.43x and EV/Revenue was 19.09x. BMO Capital Markets, CIBC Capital Markets, and National Bank Financial Markets advised on the sale.

Horizon Copper, a copper company, was acquired for $196.0M by Royal Gold (NAS: RGLD). EV/Revenue was 16.54x. Fort Capital Partners and Cormark Securities advised on the sale.

Echo.xyz, operator of an on-chain platform, was acquired for $375.0M by Coinbase Global (NAS: COIN).

CNB Bank & Trust, a United States company engaged in the provision of a full range of banking services to individuals and corporate customers, has reached a definitive agreement to be acquired for $170.2M by HBT Financial (NAS: HBT). Performance Trust Capital Partners and D.A. Davidson Companies advised on the sale.

Aekyung Industrial (KRX: 018250), manufactures, exports, and sells beauty, home care, and healthcare products, has reached a definitive agreement to be acquired for KRW 470.0B by Taekwang Industrial, T2 Private Equity, and Yuanta Investment. EV/EBITDA was 14.25x and EV/Revenue was 1.12x.

Vectren Energy Delivery of Ohio, distributor of natural gas in Ohio and a subsidiary of CenterPoint Energy (NYS: CNP), has reached a definitive agreement to be acquired for $2.62B by National Fuel Gas (NYS: NFG). Guggenheim Securities and Goldman Sachs advised on the sale.

The Browser Company, developer of a web browser, was acquired for $610.0M by Atlassian (NAS: TEAM).

Securiti, developer of privacy management software, has reached a definitive agreement to be acquired for $1.725B by Veeam. Morgan Stanley advised on the sale.

Prolec GE, manufacturer of transformers, has reached a definitive agreement to be acquired for $5.275B by GE Vernova (NYS: GEV). EV/Revenue was 1.76x. Morgan Stanley advised on the sale.

Performant Healthcare, provides solutions to payers, was acquired for $670.0M by Machinify. EV/EBITDA was 102.18x and EV/Revenue was 4.88x. Truist Securities advised on the sale.

Hologic (NAS: HOLX), manufacturer of proprietary product, has entered into a definitive agreement to be acquired for $18.3B by Blackstone, TPG, Abu Dhabi Investment Authority, and GIC Private. EV/EBITDA was 18.17x and EV/Revenue was 4.53x. Goldman Sachs advised on the sale.

Coca-Cola Beverages Africa, provider of bottling services catering to Africa, has reached a definitive agreement to be acquired for $3.4B by Coca-Cola HBC (LON: CCH). Rothschild & Co advised on the sale.

Avadel Pharmaceuticals (NAS: AVDL), a specialty pharmaceutical company, has reached a definitive agreement to be acquired for $1.9B by Alkermes (NAS: ALKS). EV/EBITDA was 246.47x and EV/Revenue was 8.77x.

DraftKings (NAS: DKNG) acquired predictions platform Railbird Exchange.

Private Placement Transactions💭 

LangChain, developer of a language model framework, raised $125.0M of Series B venture funding led by IVP at a pre-money valuation of $1.13B.

CoMind, developer of a neuro-sensing technology, raised $102.5M of venture funding led by Plural VC.

Revolut, developer of a foreign exchange, is in the process of raising $3.0B of venture funding led by undisclosed investors at a pre-money valuation of $72.0B.

Sesame AI, developer of an AI based voiced assistant platform, raised $264.0M of Series B venture funding from Spark Capital, Sequoia Capital, and other undisclosed investors at a pre-money valuation of $598.0M.

Moniepoint, developer of a financial ecosystem, raised $220.0M of Series C venture funding led by Development Partners International.

Fal, developer of a generative media platform, raised $250.0M of venture funding from Kleiner Perkins and Sequoia Capital at a pre-money valuation of $3.75B.

Uniphore, developer of an AI powered conversational automation platform, raised $251.0M through a combination of Series F and Series F1 venture funding led by New Enterprise Associates at a pre-money valuation of $2.86B.

Odds of the Day 🍒 

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Meme Cleanser 😆 

Until next time!

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