Mpox Scare Causes Biotech Stocks to Skyrocket

Good morning. It’s August 19th, and today we’ll look at Estée Lauder’s weak results, a major acquisition that could heat up the AI hardware race, and how the mpox scare has one biotech stock soaring by 177%.

Previous Close 📈

Stocks again ended yesterday in the green, with the S&P 500 up by 0.2%, the Nasdaq up by 0.21%, and the Dow Jones Industrial Average up by 0.24%.

Futures

Futures are dipping slightly today after a week of positive gains as investors await word on rate cuts from Federal Reserve Chair Jerome Powell during the Jackson Hole Economic Symposium to be held later this week.

What to Watch

Watch out for Palo Alto Networks’ quarterly report before the opening bell.

At 9:15 a.m., keep a close watch on Fed Governor Christopher Waller’s speech.

The U.S. Leading Economic Indicators for July will be out by 10:00 a.m. After the market closes, Fabrinet, Agora, and Flexsteel Industries will also disclose their earnings.

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Beauty

Estée Lauder Faces Sluggish Sales Forecast; CEO Freda to Step Down

Estée Lauder is forecasting disappointing profit and sales results for 2025, citing ongoing challenges in the global beauty market, particularly in China, where spending remains subdued.

The company projects fiscal 2025 sales to either decline by 1% or see a modest rise of 2%, significantly below the analyst estimate of a 6.43% increase.

Additionally, it expects annual adjusted profit per share to range between $2.75 and $2.95, falling short of the anticipated $3.96.

The bleak outlook is sending Estée Lauder’s shares down by 5% in premarket trading. The announcement comes alongside news that long-time CEO Fabrizio Freda, who has led the company since 2008, will be retiring.

This leadership change follows the recent departure of Chief Financial Officer Tracey Travis, whom Akhil Shrivastava succeeded.

Estée Lauder’s board is considering internal and external candidates to replace Freda as part of its succession planning.

The company’s quarterly results showed a slight increase in net sales to $3.87 billion, surpassing analyst expectations of $3.81 billion. However, the overall outlook remains challenging as the global beauty market faces slower-than-expected growth.

Beverages

Functional Beverages Gain Popularity as Health-Conscious Alternatives to Alcohol

As more Americans seek alternatives to alcohol, the market for nonalcoholic beverages that promote health benefits is rapidly expanding. In 2024, over 40% of Americans reported trying to cut back on alcohol, up from 34% the previous year, with the trend particularly strong among Generation Z.

This shift has fueled the growth of functional beverages—drinks that offer more than just hydration by incorporating ingredients like adaptogens and THC, which are marketed for their health and mood-enhancing properties.

Functional beverages have surged in popularity, with U.S. retail sales reaching over $9 billion in the past year. These drinks cater to a growing demand for products that offer both social enjoyment and health benefits without the drawbacks of alcohol.

Industry leaders like Hop Wtr and Cann are capitalizing on this trend, targeting consumers who seek the "buzz" of alcohol without the negative effects while also tapping into the cannabis market with THC-infused options.

However, the rise of functional beverages comes with challenges, including legal scrutiny over health claims and the need for regulatory clarity as the industry evolves. As the market grows, the involvement of major beverage manufacturers and the progression of cannabis legalization will be crucial in determining the long-term impact of this trend.

AI Hardware

AMD Announces $4.9B Acquisition of ZT Systems to Strengthen AI and Server Offerings

AMD announced plans to acquire server maker ZT Systems for $4.9 billion in a strategic move to enhance its portfolio of artificial intelligence (AI) chips and hardware, aiming to compete more effectively with industry leader NVIDIA.

The deal will be financed with 75% cash and 25% stock, utilizing AMD's substantial $5.34 billion in cash and short-term investments as of the second quarter.

As AI computing demands increase, requiring clusters of thousands of chips to achieve the necessary data processing power, the composition of entire server systems has become critical.

This acquisition will allow AMD to accelerate the development and deployment of its AI graphics processing units (GPUs) at the scale required by cloud computing giants like Microsoft.

Once the deal closes, possibly in the first half of 2025, AMD is planning to divest its server manufacturing business.

The acquisition is expected to positively impact AMD’s financial performance by the end of 2025. This move positions AMD to further challenge NVIDIA, which is anticipated to generate $105.9 billion in revenue from its data center segment this year.

AMD, meanwhile, projects $4.5 billion in AI chip revenue for the year, with major clients including Microsoft and Meta Platforms.

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Xperi Inc. [XPER] - Last Close: $7.55

Xperi's stock is up by nearly 20% so far in premarket trade.

The stock is rallying after news broke out that Amazon has agreed to acquire Perceive Corporation, an AI company in which Xperi holds a 76% stake, for $80 million in cash.

This deal is seen as a positive development for Xperi, as it provides a significant cash infusion and validates the value of its investment in Perceive.

ALT5 Sigma Corporation [ALTS] - Last Close: $2.27

ALT5 Sigma is rallying by 31% in premarket trading today.

The company's platforms, ALT5 Pay and ALT5 Prime, facilitate cryptocurrency payments and trading.

On Tuesday, it reported a significant 114% year-over-year increase in transaction volume for July 2024, reaching over $179 million compared to $84 million last year.

The growth reflects the company's successful expansion in the fintech sector, particularly in blockchain-powered technologies for digital assets.

Year-to-date, ALT5 has processed $1.05 billion in transactions, a 101% increase from the previous year.

Applied DNA Sciences, Inc. [APDN] - Last Close: $0.78

Applied DNA Sciences is surging in premarket trade by 177%.

Mpox stocks are experiencing significant movement due to the global spread of the virus, which prompted the World Health Organization (WHO) to declare a global public health emergency last week.

This declaration has fueled investor interest in companies involved in vaccine production, treatments, and testing related to mpox.

Apart from Applied DNA Sciences, Danish biotech firm Bavarian Nordic, Emergent Biosciences, Geovax Labs, Virax Biolabs, and Tonix Pharmaceuticals are also seeing significant gains.

Investors Brace for Potential 117X Returns as FDA Patent Pends for New Drug Delivery Device

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>> See the 117X-Potential Biotech Before This Reaches Wall Street

Everything Else

• U.S.-China financial cooperation deepens with their new stability agreement.

• Couche-Tard has bid for Seven & I in what could be Japan's largest-ever foreign buyout.

• The White House warns of an “inflation bomb” with a Trump tax cut extension.

• Tesla is testing the limits of corporate law by appealing to shareholders in the Elon Musk pay dispute.

• A boardroom battle is escalating as Elliott pushes for a leadership overhaul at Southwest Airlines.

• European defense stocks have dropped as Germany plans to limit new Ukraine aid spending.

• Goldman Sachs cut U.S. recession probability to 20% amid strong economic indicators.

• Thailand's economy is expanding, but stimulus concerns still loom.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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