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📈 Reddit's Hidden Asset
Musk offers to buy OpenAI for $97B and Altman says No, Hyatt to acquire Playa Hotels for $2.6B, Merck to acquire Springworks, Groq secures $1.5B from Saudi Arabia, Reddit to show revenue gain
Evelio Silvera
February 11, 2025
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Good morning.
⚡ The Fast Five → Musk offers to buy OpenAI for $97B and Altman says No, Hyatt to acquire Playa Hotels for $2.6B, Merck to acquire Springworks, Groq secures $1.5B from Saudi Arabia, Reddit to show revenue gain
🔎 Market Trends → Wall Street ends higher on AI strength; steelmakers climb on Trump tariff threat; US Futures Decline as Trump Implements New Tariffs
And now…
⏱️ Your 5-minute briefing for Tuesday, February 11, 2025:
MARKET BRIEF
Before the Open
As of market close 02/10/2025.
Pre-Market
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Fear & Greed
Markets in Review
Markets Climb as Investors Weigh Tariff Moves, Inflation on Deck
The Nasdaq rose 1% to 19,714.3, while the S&P 500 gained 0.7% to 6,066.4. The Dow added 0.4% to 44,470.4, with energy leading sector gains as financials and health care lagged.
The Big Picture:
Markets took tariff news in stride as investors turned their focus to upcoming inflation data. President Donald Trump reaffirmed plans for 25% tariffs on metal imports, sending aluminum and steel stocks soaring. Meanwhile, his administration paused tariffs on Mexico and Canada, leaving room for negotiation.
Inflation remains the wildcard. Consumer prices for January drop Wednesday, followed by producer prices Thursday. The Fed will be watching, with Chair Jerome Powell set to testify before Congress this week. Bond markets remained steady, with the 10-year Treasury yield rising 1.4 basis points to 4.50%.
Oil saw a boost as West Texas Intermediate crude gained 2.1% to $72.47 per barrel, reflecting ongoing supply concerns amid tariff discussions.
Market Movers:
Rockwell Automation (ROK) surged 12.6%, a top gainer on the S&P 500, after posting a strong Q1 and reaffirming full-year guidance.
McDonald’s (MCD) jumped 4.8%, the best performer on the Dow, after surprising the Street with higher-than-expected same-store sales growth.
ON Semiconductor (ON) dropped 8.2%, the biggest loser on the S&P 500, following a weaker-than-expected Q4 and a downbeat outlook.
Moderna (MRNA) slid 2.2%, with investors cautious ahead of its upcoming earnings report this week.
What They’re Saying:
"Despite ongoing tariff battles, markets remain resilient, focusing on solid corporate earnings and steady consumer demand," Oppenheimer Asset Management noted.
WHAT WE’RE WATCHING
Events
Today: Federal Reserve - Fed Chair Powell Testifies - 10:00am
Why You Should Care: As head of the central bank, which controls short term interest rates, he has more influence over the nation's currency value than any other person. Traders scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy.
Earnings Reports
Today: Coca-Cola, DoorDash, Marriott International, Humana, Zillow, S&P Global, Shopify, American International Group
Tomorrow: CVS Health, Robinhood, Reddit, The Kraft Heinz Company, Cisco, CME Group, Barrick
MARKET BRIEF
Leading News
Reddit's AI Ambitions Could Make Its Rich Valuation Look Cheap
Why it matters:
As Reddit (RDDT) prepares to report Q4 earnings, its astronomical valuation might actually be justified by its unique position at the intersection of social media, AI data licensing, and digital advertising.
Zoom Out:
The "front page of the internet" has morphed into Wall Street's newest darling, with shares up an eye-popping 329.9% in six months. While that might trigger painful memories of dot-com era exuberance, Reddit's evolution tells a different story.
Unlike the vaporous promises of Web 1.0, Reddit sits on a goldmine of human-generated data that's becoming increasingly valuable in the AI age. Its partnership with Google (GOOGL) for AI training data and the rollout of "Reddit Answers" suggest the company is monetizing its greatest asset: 15+ years of authentic human conversations.
Key Insights:
The AI Advantage: Reddit's vast dataset of human interactions is catnip for AI training. While trading at 21.65x forward sales might induce vertigo, consider that Meta (META) trades at similar multiples with arguably less unique data.
Ad Market Recovery: The consensus estimate of $408M in Q4 revenue suggests Reddit is successfully courting advertisers despite broader market jitters. Its focus on mid-market and SMB customers could provide resilience against macro headwinds.
International Expansion: Machine translation initiatives in France, India, and the Philippines point to significant untapped growth potential beyond English-speaking markets.
Market Pulse:
"The market is starting to price in Reddit's potential as an AI data powerhouse, not just a social media platform," says Deutsche Bank's latest note, raising their target to $235.
Bull’s Take:
For investors willing to stomach the volatility, Reddit offers unique exposure to both the AI revolution and digital advertising recovery. Think of it as buying early Facebook (META) with a generative AI kicker thrown in for free.
Headlines
Hyatt to acquire Playa Hotels for $2.6 billion to expand in Caribbean, Mexico (link)
Germany's Merck in advanced talks to acquire US biotech firm Springworks (link)
AI chip startup Groq secures $1.5 billion commitment from Saudi Arabia (link)
SoftBank Explores Debt-Heavy Financing for $500 Billion AI Push (link)
Canada's TD Bank to exit Charles Schwab stake worth $15.4 billion (link)
Elon Musk-led group proposes buying OpenAI for $97.4 billion. OpenAI CEO says 'no thank you' (link)
CRYPTO
Fear & Greed
Headlines
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On the Socials
*Hat-tip to wallstmemes
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