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Nvidia Strong ARM’ed, Take-Two’s Tango & Peloton’s Pain

Nvidia Strong ARM’ed, Take-Two’s Tango & Peloton’s Pain

Nvidia didn't acquire cash-and-stock ARM Holding

Nvidia: Dis-ARM’ed & Dangerous

Well, Great Ones, I think we all saw the writing on the wall on this one.

Nvidia (Nasdaq: NVDA) has officially abandoned its $40 billion cash-and-stock ARM Holding takeover attempt. In a joint statement, Nvidia and ARM parent company SoftBank said:

The parties agreed to terminate the agreement because of significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties.

“Significant regulatory challenges” is putting it mildly. While investors and Wall Street alike cheered the deal when it was announced, everyone else was on pins and needles with their hackles raised.

What I'd miss keep Greatness flowing meme

Do companies even have hackles?

Asking the real questions here…

Anyway, regulators from the U.S., China and Europe, as well as a whole slew of semiconductor competitors, all opposed the Nvidia/ARM tie-up. In fact, the U.S. Federal Trade Commission (FTC) even went as far as to sue to block the acquisition back in December.

For ARM, the future holds a potential IPO, which owner SoftBank believes could be the biggest semiconductor IPO of all time.

Let’s just hope it goes better than some of SoftBank’s other IPO attempts … I’m looking at you, WeWork.

For Nvidia, very little changes.

Sure, Nvidia loses out on acquiring an innovative and powerful semiconductor company — one that could’ve led to Nvidia’s dominance in the mobile chip market. But Nvidia is headed that way already. The loss of the ARM deal just slows that goal down a bit.

Furthermore, just because Nvidia isn’t acquiring ARM doesn’t mean the two won’t be close friends going forward. In fact, Nvidia CEO Jensen Huang had this to say about ARM:

Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come. Arm is at the center of the important dynamics in computing. Though we won’t be one company, we will partner closely with Arm.
Nvidia doesn't aquire ARM

Maybe it’s not really about corporate acquisitions and product synergies. Maybe it’s all about the friends we make along the way?

I really hope you didn’t write that with a straight face, Mr. Great Stuff. Seriously…

Hey, I’ve gotta make myself laugh occasionally.

So, under the terms of the deal, Nvidia will be out the $1.25 billion it prepaid to get the ball rolling. The company said it will record a $1.36 billion charge in the first quarter of fiscal 2023 due to the deal’s termination.

Now, you might be thinking that since the ARM deal is dead that it’s time to bail on NVDA stock. But you couldn’t be further from the truth. As I’ve said numerous times, acquiring ARM would’ve just been icing on the cake for Nvidia — the company will be more than fine all on its own.

If you want a recap of all the reasons Nvidia is a blockbuster investment all by itself, check out my prior commentary here:

• “5 Stocks To Rule The Metaverse.

• “Nvidia’s Gonna Give It To Ya.

• “Nvidia’s Call To ARM.

As you can see from NVDA stock’s price action today, Wall Street agrees with me for a change. NVDA stock went from being down roughly 4% in premarket trading to closing roughly flat on the day. And yes, given that Nvidia is writing down $1.36 billion and not getting ARM … a flat day is a good day.

The bottom line here is that Great Stuff Picks will continue to hold NVDA stock … and we believe you should too. As always, you do what’s best for you and your financial situation. Your results may vary. Past performance does not guarantee future success. See the back of the cereal box for details … yada yada yada.

Hang on to those NVDA shares and … maybe … buy the dip and pick up a few more.

Editor’s Note: This Catalyst Could Send 1 Stock Blasting Higher

This stunning new technology is about to cut the cost of electric vehicle (EV) batteries IN HALF … meaning that by next year, an EV is expected to cost the same as a gas-powered car.

Mark my words: Demand is going to go through the roof. And it’s going to create what could be the investment opportunity of the century.

Click here to keep reading…

Going, Going...Gone!

Going: Pfizer Pflounders

Pfizer shares fall after Big Pharma earnings projection

Pfizer (NYSE: PFE) shares fell today after the Big Pharma drugmaker reported fourth-quarter earnings that outpaced projections, but revenue that missed Wall Street’s mark.

I should say, though, that even when Pfizer “fails,” it still does better than a lot of other companies.

I mean, Pfizer’s adjusted earnings over the past three months topped $1.08 per share — a 157% increase from the year-ago period and well ahead of the Street’s $0.87 consensus.

But revenue is where things really started to go off the rails. For the quarter, Pfizer brought in $23.84 billion versus the $24.12 billion that analysts anticipated.

For context, that’s still double the amount of money that Pfizer made in the fourth quarter of 2020, backed by strong demand for the company’s COVID vaccine. But you try telling that to a bunch of forward-looking Wall Street lackeys.

It’s all “more, more, more” from the Street’s infamous talking heads — and Pfizer’s latest revenue rendezvous simply won’t do. As such, PFE stock is down almost 4% on the day.

Spoiler alert: It won’t last. There’s too much untapped revenue coming from Pfizer’s COVID-19 shot and its antiviral pill, Paxlovid, to keep this company down for long.

While we wait for Pfizer’s shares to rebound, check this out:

One small company has a patent on a new “bio-chip” that could drive mankind into a new era. Elon Musk calls this tech “amazing,” while a former Apple CEO says “[it will] have a far bigger impact on humanity than the internet.”

Click here for the full story.

Going: Hey Now, You Were A Rockstar

TakeTwo Interactive reports lower earnings

Take-Two Interactive (Nasdaq: TTWO) investors did everything but “get their game on, go play” this morning after learning that the videogame maker, and parent of popular Rockstar Games, reported fiscal third-quarter net bookings — a form of adjusted revenue — that fell short of Wall Street’s expectations.

Analysts wanted net bookings in the ballpark of $867.8 million, but what they got was $866 million in adjusted revenue instead. As a result, the Street rewarded Take-Two with a tame 2% drop in the company’s share price.

I have to say, in light of today’s lackluster revenue romp, the timing of Take-Two’s other headline hype hasn’t gone unnoticed.

Just last week, the company teased that a new game in the Grand Theft Auto (GTA) series is finally in development after years of speculation:

With the unprecedented longevity of GTAV, we know many of you have been asking us about a new entry in the Grand Theft Auto series. With every new project we embark on, our goal is always to significantly move beyond what we have previously delivered — and we are pleased to confirm that active development for the next entry in the Grand Theft Auto series is well underway.

“Unprecedented longevity?” That’s a funny way to say: “We haven’t bothered to make a new GTA game because we’re still banking off of microtransactions from GTAV.” But I digress…

TTWO shares shot up more than 7% following Friday’s announcement, which admittedly took some of the edge off today’s topsy-turvy stock decline. It’s almost like Take-Two knew investors would be bummed about its net bookings and decided to throw them an early bone as a distraction.

Coincidence? I’ll leave that up to you to decide…

Gone: Grubhub’s Delisting Snub

Grubhub parent company delist Nasdaq

Now for a stay-at-home favorite: Just Eat Takeaway (Nasdaq: GRUB), the parent company of popular food delivery service Grubhub … aka, where most of your money went during lockdowns. (Don’t lie, we’ve all placed the consecutive breakfast, lunch and dinner delivery orders before.)

In a rare move, Just Eat Takeaway has decided to delist from the Nasdaq in favor of the Amsterdam and London stock exchanges, saying that “low trading volumes and the low proportion of the company’s total share capital held on the Nasdaq” is the main reason it’s leaving the New York exchange.

Translation: The fees that Just Eat Takeaway had to pay to remain on the Nasdaq and file with the SEC every year just weren’t cutting it compared to the company’s … well, takeaway.

To be fair — ♫ To be faaaair… —  this is still better than selling Grubhub outright, which Just Eat Takeaway has felt recent pressure to do even though it just bought the delivery service for $7.3 billion back in June 2021 … you know, right when coronavirus restrictions began to ease, and people started eating out again. Sometimes, you just can’t win for losing.

Going forward, diehard Grubhub fans can still get their grubby little hands on Just Eat Takeaway stock shares listed in London and Amsterdam … they just have to jump through a few more hoops to do so. But at that point, you’ve gotta wonder whether it’s really worth it.

In my humble opinion? Probably not.

Quote of the week

Foley has proven he is not suited to lead Peloton, whether as CEO or Executive Chair, and he should not be hand-picking directors, as he appears to have done today.

Blackwells Capital Chief Investment Officer Jason Aintabi

Oh, how the not-so-mighty have fallen. Like a 60-bike pileup, Peloton’s (Nasdaq: PTON) pandemic plight went from horrible to gut-wrenching to, well, wherever PTON investors find themselves now.

And with today’s news of a C-suite shakeup, Peloton’s never-ending charade as an actual fitness company … cycles ever onward.

Normally, a CEO’s departure would be a time of great uncertainty — even unrest — among stockholders. But in Peloton CEO John Foley’s case, this is the day PTON investors and Wall Street alike have been waiting for. (Sorry, John.)

Foley is out. New CEO Barry McCarthy is in. PTON stock soared 30% … and there was much rejoicing!

Well, except from the 2,800 employees who are also leaving Peloton with John Foley due to the company’s cost-cutting and budget-slimming initiatives. And new CEO Barry McCarthy? Oh boy.

Ol’ Barry spent eight years as Netflix’s (Nasdaq: NFLX) CFO, taking the company public before he jumped ship for another lil’ fledgling streaming platform called Spotify (NYSE: SPOT). Oh no…

Peloton fires CEO Foley

Now, after Spotify’s … umm … let’s be nice and say “glowing success,” McCarthy wants to lead Peloton into a bold, new future. Supposedly.

Great Ones, I know some of you OG readers have joined us in following the Peloton saga from the very beginning.

From those early days of “why is everyone freaking out over a bike with a tablet” to the Christmas commercial catastrophe to the … well, every other catastrophe that followed…

The hole that Peloton dug for itself shouldn’t surprise any of you. What should surprise you is if McCarthy actually leads Peloton out of its malaise — and doesn’t simply sell the sucker for whatever it’s worth.

Dan Ives, Wedbush analyst and longtime Quote of the Week talking head, is betting that firing Foley and cutting up the workforce won’t be enough to quell PTON investors’ ire:

While Foley has supermajority B shares and ultimately controls the fate of Peloton, we believe shareholder pressure will build to solicit bids and sell Peloton to a strategic player with potential bidders Apple, Amazon, and Nike likely in the fold. — Dan Ives

I’ve said it a dozen times before in Great Stuff, and I’ll keep saying it: The Peloton brand, while a bit too cult-y for my tastes, is just the right amount of cult-y for many folks. And when people overpay for your brand for the clout, you can make a mint off the masses — just ask Apple.

Peloton might not have much value as a stationary bike manufacturer … but as far as its captive audience goes? Why, that’s all that Peloton has going for it!

Departing CEO Foley admits as much since there’s not much else he can brag up on his way out the door:

Since founding Peloton a decade ago, we’ve grown this brand to engage and motivate a loyal community of more than 6.6 million members. — John Foley

It’s this “loyal community” that Peloton will need to leverage going forward … ideally in the form of a sale. That’s 6.6 million people that Amazon or Apple could further loop into their respective ecosystems.

Can you say “service and subscription revenue?” Course you can. And think of all the personal health data you could resell!

Whoa there, calm down, Satan.

Great Ones, do you think anyone will bite on Peloton and snatch up the wannabe fitness pro? Or will Barry McCarthy turn Peloton around and help it … you know … actually function?

Drop us a line at GreatStuffToday@BanyanHill.com with your thoughts. Your email might even be featured in this week’s edition of Reader Feedback!

We’d love to hear from you! In the meantime, here’s where else you can find us:

Until next time, stay Great!

Regards,
Joseph Hargett. Editor of Great Stuff

Joseph Hargett
Editor, Great Stuff

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