Research Calls
- Upgrades:
- Applied Materials (AMAT) upgraded to Buy from Hold at Summit Insights
- Domino's Pizza (DPZ) upgraded to Buy from Neutral at Northcoast; tgt $460
- Pinnacle West (PNW) upgraded to Neutral from Sell at Guggenheim; tgt raised to $70
- Ross Stores (ROST) upgraded to Buy from Hold at Gordon Haskett; tgt $130
- Downgrades:
- Coinbase Global (COIN) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $50
- Chart Industries (GTLS) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $133
- Editas Medicine (EDIT) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $13
- Editas Medicine (EDIT) downgraded to Perform from Outperform at Oppenheimer; tgt lowered to $12
- HP Inc. (HPQ) downgraded to Neutral from Outperform at Credit Suisse
- RH (RH) downgraded to Neutral from Outperform at Wedbush; tgt lowered to $270
- Others:
- 4D Molecular Therapeutics (FDMT) initiated with a Buy at H.C. Wainwright; tgt $36
- AbbVie (ABBV) initiated with an Outperform at Credit Suisse; tgt $170
- Akili Inc. (AKLI) initiated with a Neutral at BofA Securities; tgt $2
- Amgen (AMGN) initiated with an Underperform at Credit Suisse; tgt $240
- Arcus Biosciences (RCUS) initiated with a Neutral at BofA Securities; tgt $33
- Bristol-Myers (BMY) initiated with a Neutral at Credit Suisse; tgt $78
- Conagra (CAG) upgraded to Buy from Neutral at UBS; tgt raised to $41
- CoStar Group (CSGP) resumed with a Buy at BofA Securities; tgt $100
- DraftKings (DKNG) initiated with an Overweight at Piper Sandler; tgt $21
- Dragonfly Energy (DFLI) initiated with a Buy at Chardan Capital Markets; tgt $15
- Eli Lilly (LLY) initiated with an Outperform at Credit Suisse; tgt $395
- Fulgent Genetics (FLGT) initiated with an Outperform at Raymond James; tgt $45
- Insmed (INSM) initiated with a Buy at BofA Securities; tgt $39
- Johnson & Johnson (JNJ) initiated with a Neutral at Credit Suisse; tgt $170
- Merck (MRK) initiated with an Outperform at Credit Suisse; tgt $120
- NeoGames (NGMS) initiated with an Underperform at BofA Securities; tgt $16
- Pfizer (PFE) initiated with an Outperform at Credit Suisse; tgt $55
- Precigen (PGEN) initiated with an Overweight at Cantor Fitzgerald; tgt $7
Philippe Laffont: from ‘repressed computer scientist’ to top tech investor
Coatue Management has grown to over $70bn in assets but now faces end of cheap money era
As a teenager, Philippe Laffont dreamt of working for Apple but, after graduating from the Massachusetts Institute of Technology, he was turned down five times by the company in which he would later become a prominent investor.
“I’m a repressed mediocre computer scientist,” the now 55-year old hedge fund manager said in a wide-ranging interview with the Financial Times from his New York headquarters overlooking Central Park. The offices are adorned with various Apple products dating back to 1976 and other once pioneering but now obsolete gadgets.
Laffont, a soft-spoken and publicity-shy Frenchman, has built one of the world’s best-known technology-focused hedge funds, and has a growing business investing in private companies. As of May filings, Laffont’s Coatue Management has grown to over $70bn in assets since it launched with $50mn in December 1999. Its flagship hedge fund has gained an average of 11 per cent a year since then, compared to 6 per cent for the Nasdaq Composite.
But growth investors like Laffont, who seek to identify the handful of companies that can make exponential gains by shaping the future, are facing a reckoning. An era of cheap money has come to an end and they are adapting to a regime change of rising interest rates and high inflation.
The technology-heavy Nasdaq Composite Index is down 30 per cent this year. Hedge fund darlings like Tesla and Meta, both of which sat in Coatue’s top-10 holdings as of mid-year, have more than halved in value. And many of Coatue’s private investments have not yet been repriced to reflect the substantial declines in public markets.
Laffont has lived through a tech boom and bust before. After a brief stint at McKinsey in Madrid, he cut his teeth as a telecommunications research analyst in the late 1990s at renowned investor Julian Robertson’s Tiger Management in New York, before striking out on his own in the twilight of the dotcom boom.
After two months, Coatue was up double-digits. “Wow, this is going to be easy,” Laffont thought, before the Nasdaq index slumped four-fifths from peak to trough between March 2000 and October 2002.
Laffont survived with his reputation and business intact. But the experience left a lasting impression.
“The first three years when you run money on your own, it’s like a tattoo, you can’t get rid of it,” he said. “It always made me remember that trees don’t grow to the sky.”
Trying to temper Silicon Valley optimism with macroeconomic caution has informed Laffont’s approach to running money.
He wakes at 3am each night and checks the Bloomberg terminal before going back to sleep; in the back of his mind he says he’s always thinking about “what could go wrong”.
In 2020, the unexpected happened. The coronavirus pandemic swept across the world forcing governments to impose lockdown measures.
Laffont said he underestimated how quickly life would go back to normal and the fund missed out on the huge stock market rebound of 2021.
“We didn’t think that when the world would reopen that it would obviously not change, but it basically reverted almost to where it was before and that for me was a lesson”
Returns in Coatue’s main hedge fund fluctuated wildly in 2021, gaining double digits then falling close to zero before rebounding again.
“I had that vivid recollection” of similar big market swings in 2000 before the tech crash, recalled Laffont. “And I just had this ‘oh my God, this is happening again’.”
Following the market sell-off earlier this year, Laffont liquidated positions in Coatue’s hedge fund because he was nervous about the macroeconomic environment. Roughly 70-80 per cent of the hedge fund’s assets are still sitting in cash, Laffont told the Robin Hood Investors Conference last month, as he anticipates a further fall in stocks.
“I feel like not digging yourself in a big hole is really important in money management,” he said.
“Philippe has a great perception for the macro,” said Dixon Boardman, founder of investor Optima, which has been a client of Coatue since launch.
While Laffont has fared better than his peers in the technology sector — his fellow ‘Tiger cub’ Chase Coleman’s hedge fund has lost more than half its value so far this year — Coatue is still nursing losses. Its main hedge fund is down 17 per cent and its long-only fund is down 28 per cent up to November 15, according to an investor. Its private markets business, which is led by Laffont’s younger brother Thomas and accounts for two-thirds of the firm’s assets, has not yet been tested through a downturn.
Now Laffont believes that the end of cheap money has thrown up a new opportunity: providing funding to cash-strapped businesses.
Coatue is raising $2bn for a structured equity fund, the Tactical Solutions fund, which can lend money to private companies rather than raising money through the traditional means of equity financing. This allows them to avoid raising cash at a cut-price valuation through a so-called “down round”, and keep investing in their businesses and going on the offence.
“For a private company to suddenly mark things down by 75 or 80 per cent or 60 per cent, it’s a huge risk that I wouldn’t recommend the companies to necessarily do, and not necessarily do it immediately,” said Laffont.
Structured equity has debt and equity characteristics, and generally includes convertible debt, senior equity or debt plus warrants. It typically offers a higher yield and gives the lender preferred status in the pecking order of shareholders.
Providing this kind of funding “puts us at the centre of the conversation” whenever a tech company “is looking to do something,” he added.
Peter Singlehurst, head of private companies at £228bn growth investor Baillie Gifford, told an FT event last week that his firm is steering its portfolio companies away from structured funding rounds because they create a “misalignment of incentives”.
New investors are coming in with “drastically different” terms from existing ones, he said: “How that all unravels when companies come to the public markets [or] if those companies do eventually need to do a down round . . . is not well understood.”
Laffont believes that the moment of reckoning in private markets will come “at some point in the first half of next year” when companies run out of cash. There’ll be a shakeout of the market as they weigh up equity down rounds, other financing options, sales or mergers. There will be some companies that won’t make it to the other end and that process is healthy,” he said.
Historically part of Coatue’s success has come from investing in China. It was an early backer of TikTok owner ByteDance, food delivery app Meituan and Tencent. Now some once bullish foreign investors, including Baillie Gifford, are cutting exposure to China amid a challenging regulatory environment.
At the Robin Hood conference, Laffont said there were some “green shoots” of opportunity in China. He is watching the geopolitical situation closely and has not meaningfully reduced his exposure there.
Coatue believes that the best defence against a tough macro environment is to identify the tectonic shifts that come each decade. “You don’t need a thousand big ideas to do well in our business, you just need the one or two key ideas that then all the dominoes start falling from,” said Laffont. In 2007 Apple opened investors to the world of mobile internet, while the launch of Amazon Web Services in 2006 heralded the rise of cloud computing.
Laffont thinks that it’s a fool’s errand to try to call the bottom of equity markets, but is starting to turn less bearish. Back in May he felt that “the glass is half empty”; now the focus is on trying to build a portfolio for the next decade “that can do well irrelevant of these headwinds” — the war in Ukraine, geopolitical tensions between the US and China, deglobalisation and supply chain sovereignty, and a prolonged period of high interest rates.
“There’s plenty of great ideas but the winners in the next 10 years are not going to be the FAANG stocks,” he added, referring to Facebook, Amazon, Apple, Netflix and Google.
Three of Coatue’s top themes for the next decade are electric vehicles, artificial intelligence and climate technology. The firm envisions a world where electric vehicles are powered by solar panels, AI enables hyper-individualised content, and homes become individual power plants sending electricity back to the grid. Coatue has built a large position in US chipmaker Nvidia — whose shares are down over 45 per cent this year — because demand for semiconductors lies at the intersection of all of these technological innovations.
Right now Laffont’s hedge fund is sitting on more cash than at any moment since Coatue has been in business. Once again its founder’s inherent caution is jostling with his belief in technological innovation.
“I am anxious to deploy capital and at the right price we’re going to do it,” Laffont said on the investor call last month. “But there’s still value in being patient and responsible and the downside could be significant . . .The better we manage risk on the downside, the more aggressive we can be on the recovery.”
Gapping down
In reaction to earnings/guidance:
- WSM -7.6%, FTCH -6.9%, DLB -5.7%, SPB -2.4%
Other news:
- SCLX -32% (entered into a Standby Equity Purchase Agreement)
- GTHX -21.1% (prices offering of 7.7 mln shares of common stock at $6.50 per share)
- VERX -9.8% (prices offering of 1.5 mln shares of common stock at $15.15 per share)
- RAPT -8.6% (prices offering of 4054055 shares of common stock at $18.50 per share)
- IOVA -7% (provides update on biologics license application submission for lifileucel in advanced melanoma)
- PRVB -5.9% (receives FDA approval for TZIELD)
- MIR -4.6% (files $1.0 bln mixed shelf)
- QFIN -2.1% (launces global offering)
- LAUR -2% (prices underwritten public offering of 32842183 shares at $9.75/share)
- INO -1.7% (provides update on Lassa Fever and MERS programs)
Gapping up
In reaction to earnings/guidance:
- STNE +19.9%, ROST +16.3%, CLFD +15%, FL +14.4%, PANW +9.8%, GPS +8.5%, TWST +8.5%, ATKR +5.5%, KEYS +5%, JD +4.7%, AMAT +4.1%, BKE +2.1%, GLOB +1.9%, POST +1.6%, UGI +1%
Other news:
- ISEE +23.7% (FDA grants breakthrough therapy designation)
- APLS +20.2% (FDA has accepted Apellis' unsolicited major amendment to the New Drug Application for intravitreal pegcetacoplan for the treatment of geographic atrophy secondary to age-related macular degeneration)
- MGNX +8.1% (earns $60 mln milestone payment with FDA approval of Teplizumab)
- LPRO +6.9% (authorizes $75 mln repurchase program)
- EVH +6.4% (to acquire NIA from Centene)
- DOCN +4.2% (appoints new CFO)
- GOOS +3.3% (launches share repurchase program)
- ACMR +3.1% (enters the track market with new tool)
- ROG +3% (current CEO to retire appoints new CEO)
- AMD +2.5% (resolves patent litigations with ADI)
- RBT +2.4% (committed to a reduction in force plan to reduce spending and preserve cash)
- DDS +2.3% (declares special dividend)
- CSIQ +1.2% (Japan flagship mega-project reaches commercial operation)
- ORMP +1.1% (signs contract with MEDICOX to distribute oral insulin in South Korea)
Analyst comments:
- ABBV +0.6% (initiated with an Outperform at Credit Suisse)
Early premarket gappers
- Gapping up:
- ISEE +20.4%, STNE +19.7%, ROST +17.9%, CLFD +13.9%, PANW +8.6%, MGNX +7.5%, GPS +7.2%, EVH +6.4%, PRVB +5.1%, ORMP +4.6%, AMAT +4.6%, LPRO +4.5%, ACMR +3.2%, ROG +3%, KEYS +2.8%, POST +2.7%, JD +2.6%, ATKR +2.3%, GLOB +1.9%, DDS +1.8%, ZTO +1.8%, AMD +1.6%, DOCN +1.3%, CSIQ +1.1%, UGI +1%
- Gapping down:
- SCLX -30.3%, GTHX -21.8%, FTCH -10.8%, RAPT -9.9%, VERX -8.9%, WSM -5.7%, DLB -5.7%, MIR -4.6%, QFIN -3.3%, INO -2.1%, AMED -0.8%, TRQ -0.8%
Explosives Found in Vicinity of Nord Stream Blasts, Sweden Says
Authorities have called explosions along the natural gas lines sabotage, but haven’t been able to determine a culprit
Swedish authorities investigating a series of blasts that damaged undersea natural-gas pipelines in the Baltic Sea said they had found traces of explosives on several foreign objects nearby, a potential break in an international probe into who was responsible for what authorities have called sabotage.
Sweden, Denmark and Germany are investigating the blasts in September that sent gas bubbling to the surface for days and caused severe damage to the the Nord Stream pipelines. Investigators have previously said they believe the blasts were an intentional act.
Sweden, in a statement Friday, said it found traces of explosives on several of the foreign objects. It didn’t elaborate but said it was continuing the “very complex and extensive” probe aimed at finding a culprit.
The discovery of explosives could help investigators learn the origins of the material. A press officer at the prosecutor’s office said it wasn’t clear if the material they had found was traceable.
The pipelines ran from Russia to Germany. Gas flows along the Nord Stream line had already been halted by Russia, a move European officials said was taken in retaliation for Western sanctions imposed on Moscow after it invaded Ukraine. Nord Stream 2 had just been completed before the invasion began, but Germany froze the project in February, days before Russian troops entered Ukraine. Before the war, Nord Stream was a major source of natural gas to Europe from Russia.
Sam Bankman-Fried ex Caroline Ellison made ‘foray’ into ‘Chinese harem’ polyamory
Disgraced Alameda Research CEO Caroline Ellison penned graphic blog posts about polyamory and masochism before the implosion of her FTX-linked cryptocurrency hedge fund.
Ellison — who dated FTX founder Sam Bankman-Fried — wrote candidly about her “‘foray into poly” on her now-deleted Tumblr account back in February 2020, according to the Daily Mail.
The post — along with a series of other sexualized entries — was unearthed by the tabloid just days after CoinDesk claimed Ellison, 28, and Bankman-Fried, 30, were part of a 10-person “cabal of roommates” that managed operations for FTX and Alameda from a luxury penthouse in the Bahamas. CoinDesk claimed the group “are, or used to be, in romantic relationships with each other.”
“When I first started my foray into poly, I thought of it as a radical break from my trad past,” Ellison allegedly wrote in the Tumblr entry. “But tbh I’ve come to decide the only acceptable style of poly is best characterized as something like ‘imperial Chinese harem.’ “
The Stanford grad continued, “None of this non-hierarchical bulls–t; everyone should have a ranking of their partners, people should know where they fall on the ranking, and there should be vicious power struggles for the higher ranks.”
It’s unclear whether Ellison was in a polyamorous relationship with Bankman-Fried. The crypto bro recently confirmed that they had broken up after an unspecified period of dating.
The Post has attempted to contact Bankman-Fried for comment. Attempts to reach Ellison have proven unsuccessful.
Meanwhile, on her Tumblr, Ellison also purportedly penned several other entries about her sexual desires.
“I’m less hedonistic and more masochistic. I get a lot of pleasure from doing things that are hard, unpleasant, physically taxing, or emotionally painful,” the kinky CEO allegedly wrote in one post.
In a separate entry, she is said to have declared that growing up in the 21st century was not a good time for sex, quipping: “Born too late to have ten kids, born too soon to have four-dimensional upload orgies.”
And in another post, enumerating things she thinks are “cute” for men to do, she listed “sufficient strength to overpower you” and “controlling most major world governments.”
The Tumblr account also allegedly featured entries where Ellison opined on financial matters.
“I didn’t get into this as a crypto true believer. It’s mostly scams and memes when you get down to it,” the Daily Mail quotes her as saying in one post.
Of the 2008 financial collapse, she purportedly stated: “I can’t think of anyone involved who makes me go ‘yes what that person did should be illegal and result in going to prison for a long period of time.'”
She added: “I think people’s first instinct is to react to these things with ‘a bunch of bad stuff happened, we should make all of it illegal so it can’t happen again’ when like, the problem is really a complicated mess of slightly misaligned incentives and human error rather than evil people doing clearly bad things.”
The blog entries take on a new level of meaning in the wake of FTX’s and Alameda Research’s recent collapse.
Bankman-Fried — who is believed to be hiding out in the Bahamas — appears to be shifting blame onto Ellison for the crypto catastrophe.
The disgraced crypto bro is under intense pressure to address his decision to funnel $10 billion in FTX client funds to prop up Alameda. Of that money, at least $1 billion in customer funds is still missing.
In an interview with Vox reporter Kelsey Piper published Wednesday, Bankman-Fried said he believed Alameda — and, by default, CEO Ellison — “had enough collateral” to cover client investments.
Ellison has not spoken publicly since FTX and Alameda filed for Chapter 11 bankruptcy last week.
Meanwhile, she has also hit headlines for talking about “regular amphetamine use” in an April 2021 Twitter thread.
NYP : FTX founder Sam Bankman-Fried to appear alongside Ukraine’s Volodymyr Zelensky at exclusive NYT event
Disgraced FTX founder Sam Bankman-Fried is scheduled to speak at an exclusive conference hosted by the New York Times alongside Ukrainian President Volodymyr Zelensky and US Treasury Secretary Janet Yellen.
The DealBook Summit, sponsored by Accenture, will be held at Jazz at Lincoln Center in Manhattan on Nov. 30 and features speeches from supposed luminaries such as Mark Zuckerberg, Mayor Eric Adams, former Israeli Prime Minister Benjamin Netanyahu, and former Vice President Mike Pence.
The fee to attend the conference is a whopping $2,499, according to DealBook Summit’s website. A ticket includes mainstage conversations, VIP Networking Sessions, Breakfast and Lunch and a cocktail reception.
The goal of the conference is to hold conversations to reveal “hidden complexities, unexpected relationships and the wide-ranging ripple effects of change,” according to the event website.
Also slated to speak are TikTok CEO Shou Chew, Amazon CEO and President Andy Jassy, Netflix Founder and Co-CEO Reed Hastings, CNN Host Van Jones and NYT President and CEO Meredith Kopt Levien among others.
Bankman-Fried, a once celebrated crypto mogul with a $16 billion personal fortune, is reportedly hiding in the Bahamas after his company FTX Group collapsed.
The crypto evangelist’s cryptocurrency empire plunged to about $1 billion after being valued at $32 billion as recently as January. Last week the company filed for bankruptcy and Bankman Fried resigned as CEO after it was revealed the company was short billions of dollars and may have been hacked.
Between $1 billion and $2 billion of customer funds have vanished from FTX, Reuters reported.
In a wide-ranging interview on Wednesday, Bankman-Fried appeared to shift the blame for the collapse of his company to the trading firm Alameda Research run by his ex-girlfriend, Caroline Ellison.
The sudden fall of FTX has spawned baseless theories that US aid to Ukraine was laundered back to the Democratic Party through FTX.
Meanwhile, Zelensky remains entrenched in his war against Russia, having recently celebrated the retreat of Russian troops from the city of Kherson last week.
Farfetch Q3 Hit by Russia Exit, China Lockdowns
CEO José Neves said the company has been adjusting its cost base and is prepared to return to “solid growth” and adjusted EBITDA next year.
Farfetch is everywhere in luxury, not just serving as the digital platform for boutiques, but also signing deals with Compagnie Financière Richemont to eventually gain control of Yoox Net-a-porter and with Neiman Marcus and Ferragamo to help power their digital businesses.
While that has the company fortifying its position in one of the last areas of strength in a weak and chaotic consumer market, the platform is still waiting for those high-end dollars to flow to its bottom line.
Now the company is trimming costs as it seeks to deliver on a promise to deliver adjusted earnings before interest, taxes, depreciation and amortization next year.
Farfetch’s third-quarter revenues rose 1.9 percent to $593.4 million, an increase of 14.1 percent in constant currencies. The value of the goods sold through its platform, or the gross merchandise volume, slipped 4.9 percent to $967.4 million, which would have been an increase of 4.2 percent in constant currencies.
The quarter had some tough year-over-year comparisons, given that Farfetch stopped its operations in Russia following the invasion of Ukraine and has also been hit by COVID-19 restrictions in China. Russia and China were two of the platform’s three largest marketplace markets last year.
Farfetch’s active customer count for the quarter grew by 8.6 percent to 3.9 million from a year earlier. And gross profit margins increased 160 basis points to 44.9 percent and adjusted losses before interest, taxes, depreciation and amortization tallied 4.1 million.
The company’s net losses for the quarter ended Sept. 30 totaled $274.9 million and compared with earnings of $769.1 million a year ago, when a gain of $901 million in the fair value of investments boosted results dramatically.
Investors were feeling antsy and sent shares of the company down 9.7 percent to $8.25 in after-market trading on Thursday.
But José Neves, founder, chairman and chief executive officer, told analysts: “Luxury is an incredible industry, which has demonstrated its resiliency over the decades and is expected to grow from circa $350 billion in 2022 to over $500 billion by 2030. Farfetch has built a platform for this industry in pursuit of a unique mission that sees us more galvanized than ever as we continue to navigate the challenging macro environment.”
Neves said the company has been using the opportunity of a difficult market to do some streamlining.
“In this year of macro headwinds, our focus has been on furthering the rationalization of our cost base,” Neves said. “In this vein, we’ve taken the opportunity to redesign the entire Farfetch organization in order to seize the sizable enterprise milestones ahead with a sharpened focus on efficiency and profitability.
“And while this is ongoing, I’m pleased with the initial results and the performance of our energized leadership team under this new framework,” he said. “This reorganization is enabling us to fundamentally restructure our headcount allocation and cost base.”
Neves added, “In 2023, we expect to return to solid growth while also delivering adjusted EBITDA profitability and positive free cash flow.”