Month: July 2025

Shares of Danish pharmaceutical giant Novo Nordisk have experienced a sharp sell-off this week after slashing its full-year sales and profit guidance, citing softening Wegovy demand driven by compounded GLP-1 headwinds. If losses hold through Friday, the magnitude of the drawdown will mark the largest weekly decline ever for the stock trading in Copenhagen.

A key question right now among some institutional investors: Has the correction created a compelling entry point in Novo?

Let’s start with the technicals: Shares on the week are down about 29%, the largest weekly decline ever for shares trading in Copenhagen. This followed the surprise sales and profit warning earlier this week. 

Novo shares peaked in early June 2024 and have since tumbled 69%. Much of the GLP-1 hype cycle has now unwound, with the stock trading back at January 2022 levels.

Much of the downturn in Novo shares was accompanied by Goldman analysts repeatedly telling clients how compelling the stock was at every dead-cat bounce. Now, with the stock back at 2022 levels, we ask the same question, this time, with patience … for the first time.

A new note from UBS analysts led by Matthew Weston outlines what’s next after the profit warning earlier this week. 

“Following a surprise sales and profit warning for 2025, we place our Rating and Price Target for Novo Nordisk under review,” Weston told clients. 

Here’s more from the analyst:

We were previously at the bottom end of the FY25 guidance range and had cautioned that a significant inflection in US GLP-1 growth was needed to meet guidance expectations. But the magnitude of the FY25 cuts was well ahead of UBS and market expectations. Novo now targets 8-14% CER sales growth (from 13-21%) versus UBSe 13.4%, cons c.15.8%. For EBIT, new guidance is 10-16% CER growth (from 16-24%) versus UBSe 18.9% and cons c.19.5%.

The debate between Weston and his fellow analysts centers on the issue of unapproved GLP-1 compounds on the market. He estimates that at least one million Americans are currently using these compounded versions.

Here are some of those key questions:

1. How can Novo address the threat of U.S. compounding? Novo’s market intelligence estimates 1 million U.S. patients still take unapproved compounded sema. Compounded product acts as a drain on the potential patient pool at a price point well below branded levels ($150 vs $499/month). We have been assuming compounding would wind down over 3Q25, returning to a normal branded competitive market. If widespread compounding remains, the outlook for US Wegovy would seem uncertain.

2. What is a reasonable exit rate for sales growth into 2026? 2026 will balance the impact of compounding & LLY competition vs launch opportunities from MASH & oral Wegovy 25mg obesity. What is the valuation baseline and blue/grey sky scenarios?

3. What is the long-term NPV impact of compounding threats and IRA price cuts versus the significant potential of the global obesity patient population?

What’s critical from Novo’s earnings report is this line:

“Novo Nordisk is pursuing multiple strategies, including litigation, to protect patients from knockoff ‘semaglutide’ drugs. Novo Nordisk is deeply concerned that, without aggressive intervention by federal and state regulators and law enforcement, patients will continue to be exposed to the significant risks posed by knockoff ‘semaglutide’ drugs made with illicit or inauthentic foreign active pharmaceutical ingredients.” 

A resolution to the widespread availability of compounded GLP-1 products in the U.S. marketplace could mark a potential bottom for Novo shares. This could occur through “multiple strategies,” as outlined by Novo above. Such a development would help lift the clouded outlook for Wegovy sales and potentially slow the ongoing erosion of U.S. market share to unapproved alternatives. This has yet to occur.

Authored by William Anderson via The Mises Institute,

It has been The Project That Will Not Die.

What began as a California statewide voter referendum in 2008 to approve initial funding for a high-speed rail system between San Francisco and Los Angeles has become a financial black hole with no railroad to show for it.

Despite statements from Gov. Gavin Newsom that the system is fine, the Trump administration has announced it was pulling $4 billion from the project. In typical Donald Trump fashion, the president, on Truth Social, called it a “train to nowhere,” adding: “The Railroad we were promised still does not exist, and never will. This project was Severely Overpriced, Overregulated, and NEVER DELIVERED.”

Not to be outdone, California Gov. Gavin Newsom ordered the state to sue for the money, claiming that the Trump administration was breaking a legal contract. No doubt, a friendly federal judge will order the money reinstated, but one doubts that after appeals, the California High Speed Rail Authority will win.

Despite rhetoric to the contrary, The Donald is right on this one. From the project’s 2008 start to the present time, the idea of the state building a train that could go from San Francisco to LA in 2 hours and 40 minutes has never been a possibility, thanks to California’s unforgiving geography. Furthermore, even if California authorities were able to find even $100 billion more for this project, it could not be built as planned, and certainly not as promised.

The Promise

In the annals of boondoggery, it is doubtful that any politician—even those that are especially venal and corrupt—ever sets out to create a boondoggle. While “boondoggle” is a word that probably is used too often (or maybe not often enough, if one really takes a hard look at government projects), it would seem that the word should have been created for the California bullet train project. The potential for financial losses is staggering, even by the high standards of financial chicanery that governments at all levels have been executing in the 21st century.

Joel Kotkin and Wendell Cox of The Spectator have written what should be the definitive article on this monstrosity, and their analysis is devastating. (You know, they state the facts of the case and the facts don’t need to be embellished in this situation.) In the beginning was the referendum:

When voters approved $9 billion for the plan in 2008, the California High-Speed Rail Authority estimated that it would cost $33 billion and start running by 2020 – and that was just for the San Joaquin Valley portion. The cost has since ballooned to $130 billion, and no stretch is operational.

That should sink in. Seventeen years ago, voters approved a plan to build something that would supposedly be done 12 years later. Today, the earliest projection of finishing a truncated line in the Central Valley—a 171 mile stretch between Bakersfield and Merced—is 2030 to 2033, and this project has not met a single deadline.

The Reality

As I noted in a previous article last spring, construction of the line has been occurring on that Central Valley stretch, but even if this part of the project is ever finished, there are still another 300-plus miles to go, and much of that will have to go through a number of California’s many mountain ranges. In the northern portion, a 1.6-mile and another 13-mile tunnel through Pacheco Pass would be required, and neither tunnel is in even preliminary planning stages.

In the southern portion, once the train goes south of Bakersfield, it hits the Tehachapi Mountains, where the current freight line goes over a pass at 4,000 feet after passing through the famous Tehachapi Loop. While a slow-moving diesel-electric train can make the climb, going over this uplift is not conducive to electrified high-speed passenger rail, which would require extensive tunneling through this mountain range that has peaks almost 8,000 feet high. Like the planned Pacheco Pass tunnels, the proposed dig through the Tehachapi exists only in the abstract.

The last leg goes through the San Gabriel Mountains, which will require extensive tunneling and grading before finally coming into Los Angeles proper. At this point, one understands the enormous task that would be ahead should the Central Valley portion ever be finished, as this portion is the easiest part of the entire project. Write Kotkin and Cox:

Worse yet, the biggest financial obstacles loom ahead. Much of what has been built has been easier-to-build flat valley land. Far more expensive tasks lie ahead, such as building 30 miles of tunnels through the San Gabriel Mountains and nearly 15 miles of rails traversing Pacheco Pass. One stretch must climb from approximately 400 feet above sea level in Bakersfield to about 4,100 feet. If the costs of the Los Angeles and San Francisco extensions replicate the experience of the much-easier Bakersfield-to-Merced segment, our analysis suggests a final cost that could be nearly double present projection: about $250 billion.

Most likely, even $250 billion might be an underestimation, and there is no way that the state can fund such a gargantuan project by itself, given that this coming year’s California state budget itself is $321 billion. Kotkin and Cox, again:

With no prospect of private investment, it’s hard to see where the money will come from. This puts Governor (and aspiring presidential candidate) Newsom in a tight spot, forcing him to choose between funding the money-mad train and balancing his budget, or addressing critical progressive priorities such as public-employee pensions and free healthcare for the state’s estimated 2.5 million undocumented immigrants.

Future Prospects for the Bullet Train

Despite the “finish it at all costs” rhetoric coming from Sacramento and the Democrats in California’s Congressional delegation, the bullet train project will never be finished in its entirety, but California’s Democrats will do everything they can to finish the present 171-mile project. If not, every Republican running for office in the state will show photos of unfinished bridges and viaducts and point out that California taxpayers will be paying for money borrowed through the bond issues into perpetuity.

If this stretch of the railroad is finished, it will probably be the least ridden high-speed line in the world and will be the subject of jokes. However, one can imagine that whoever is in the governor’s seat will declare victory, not just because the line is finished, but also because they will have spent billions of dollars in the process, enriching contractors, unions, and anyone else standing under the money spigot.

At the end of the classic 1935 movie “Little Caesar,” Rico the gangster (played by the incomparable Edward G. Robinson) is gunned down by Police Sergeant Flaherty, his last words being, “Mother O’ Mercy, is this the end of Rico?” One can only hope that Trump has played the role of Flaherty in putting the California Bullet Train out of its misery.

California politicians have shown themselves capable of mind-bending foolishness, but nothing in the history of foolishness in this state comes close to this railroad. If nothing else, however, perhaps the steel and concrete that makes up the “bullet train” can stand as a warning to future governors and presidents that economic laws exist for a reason, and that those that bend or break them will have to deal with the consequences.

Ahead of Apple’s earnings report this afternoon, which concludes the results from big 4 group of the Mag 7 (including MSFT, META and AMZN) Goldman notes the tech giant is a very clear outlier from a sentiment, flow, and positioning perspective relative to its Mega-Cap Tech peers. As the largest Mutual Fund Underweight in the market and a popular HF relative short, AAPL has represented a significant source of “performance Alpha” for most this year (stock -17% vs. NDX +9%) and Goldman has it as a 4 on 1-10 positioning scale.

As a reminder, Apple declined to give any form of guidance for services revenue in the June quarter, citing uncertainty. The services segment is under fire from regulators globally, who are upending App Store policies in a way that could dramatically reduce revenue from apps and subscriptions.

While a beat was expected in the quarter (and most were ‘respectful’ of that dynamic), but long term uncertainties around AAPL’s competitive positioning feel like they remain as high as ever heading into tonight’s results.

Just 30 minutes after AMZN disappointed with lackluster AWS growth and a soft operating income outlook, AAPL flipped the script with a big top- and bottom-line beat:

• *APPLE 3Q REV. $94.04B, EST. $89.3B

• *APPLE 3Q EPS $1.57, EST. $1.43

The best YoY revenue growth since Q4 2021:

Under the hood, it was mixed with products beating expectations led by iPhone and Mac revenue, while iPad and Wearables disappointed…

• *APPLE 3Q PRODUCTS REV. BEAT $66.61B, EST. $62.36B

  • *APPLE 3Q IPHONE REVENUE BEAT $44.58B, EST. $40.06B, +13%

  • *APPLE 3Q MAC REVENUE BEAT $8.05B, EST. $7.3B, +15%

  • *APPLE 3Q IPAD REVENUE MISS $6.58B, EST. $7.07B, -8%

  • *APPLE 3Q WEARABLES, HOME & ACCESSORIES MISS $7.40B, EST. $7.78B, -8.6%

Bloomberg points out that the iPad’s decline of 8% can probably be explained by the mediocre updates this year. There was no new iPad Pro, and the iPad Air and low-end iPad refreshes were both minor. 

China revenue is back to growth, up 4.35%…

• *APPLE 3Q GREATER CHINA REV. $15.37B, EST. $15.19B

Apple Services revenue hit a new record high ($27.4 Billion)…

CEO Tim Cook on the quarter: 

“Today Apple is proud to report a June quarter revenue record with double-digit growth in iPhone, Mac and Services and growth around the world, in every geographic segment.”

AAPL rallied back to unchanged on the day ahead of earnings and extended gains modestly after the results…

CEO Tim Cook has been reluctant to offer guidance in recent calls, but we note that the iPhone (and China) beat was likely driven by shoppers flooding Apple stores earlier in the quarter when they feared immediate price hikes.

That pull-forward could cause trouble for the next quarter.

With MSFT and META blowing away expectations yesterday and sending the Nasdaq to a new record high, if only to see all those gains disappear during the day, today attention turns to the other two Mag7 giants, AAPL and AMZN, with the latter reporting right after the close, and the former waiting the usual 30 minutes. As we reported in our preview, positioning both companies has been relatively weaker, with Goldman having AMZN at 7 out of 10 (AAPL is even worse at 4 out of 10), so expectations were more modest compared to yesterday’s two juggernauts heading into earnings where the buyside bogeys are as follows: i) AWS growth of ~17% Q2 and ~18% Q3, with perhaps some upside risk to the Q3 number with GOOGL highlighting AI capacity coming online faster (note, management don’t guide that number); ii) Q2 net sales and EBIT high end of respective guides ($159-164B and $13-17.5B); iii) Q3 guidance of net sales $176B & EBIT ~$20B (both high-ends; iv) Post GOOGL, some expectation that AMZN tweak up the 2025 capex outlook from current ~$105BN.

With that in mind, and considering the stock is now trading red after kneejerking green, it appears that the skeptics may have been right. 

Here is what Amazon reported moments ago:

• EPS $1.68 vs. $1.59 q/q, beating estimate $1.33
   
• Net sales $167.70 billion, +13% y/y, beating estimates of $162.15 billion, and above the upper end of the company’s guidance range of $159-$164BN
• Online stores net sales $61.49 billion, +11% y/y, beating estimates $59.13 billion
• Physical Stores net sales $5.60 billion, +7.5% y/y, beating estimates $5.49 billion
• Third-Party Seller Services net sales $40.35 billion, +11% y/y, beating estimate $38.97 billion
• Third-party seller services net sales excluding F/X +10% vs. +13% y/y, estimate +7.49%
• Subscription Services net sales $12.21 billion, beating estimate $11.92 billion
• Subscription services net sales excluding F/X +11%, beating estimate +9.68%

Geographically, the results were strong all around:

• North America net sales $100.07 billion, +11% y/y, beating estimate $97.36 billion
• International net sales $36.76 billion, +16% y/y, beating estimate $34.21 billion

So far so good, with every line time beating. But what the market was especially focused on was the high margin AWS data, and here numbers also beat solidly: 

• AWS net sales $30.87 billion, +17% y/y, beating estimate $30.77 billion
• Amazon Web Services net sales excluding F/X +17% vs. +19% y/y, beating estimate +17%

Turning to operating profits, here the results were also uniformly solid:

• Operating income $19.17 billion, +31% y/y, beating estimates $17 billion, and above the upper end of the company’s guided range of $13Bn – $17.5BN
• Operating margin 11.4% vs. 9.9% y/y, beating estimate 10.4%
• North America operating margin +7.5% vs. +5.6% y/y, beating estimate +5.78%
• International operating margin 4.1% vs. 0.9% y/y, beating estimate 1.87%

As for fulfillment expenses, these came in slightly above estimates, while the seller unit mix was slightly worse than expected. These may continue to deteriorate as tariffs rise: 

• Fulfillment expense $25.98 billion, +10% y/y, estimate $25.74 billion
• Seller unit mix 62% vs. 61% y/y, estimate 61.5%

Of the above, the most notable highlight – as per our preview – was AWS which grew revenue by 17% to $30.9BN, just above the sellside estimate of $30.77BN. The problem: the growth rate is clearly slowing.

And if revenue growth for AWS just barely beat, what Wall Street may have been growing on is the continued decline in AWS operating margins, which at 32.9% was the lowest since 2023 and a drop both MoM and YoY. Elsewhere, North American profit rose to $7.517 billion, resulting in a profit of 7.51%, beating estimates of 5.6%, while international margins rose to 4.06%, up from 0.9% and also beating estimates of 1.87%

As a result of the drop in AWS profits, Amazon’s consolidated operating margin posted a sequential drop and in Q2 declined from a record high of 11.8% to 11.4%.

However, while the above data was mixed if generally solid, it was the company’s guidance that led to an after hours drop in the stock; that’s because the company projected profit and revenue in the current quarter both of which were seen as coming in soft vs Wall Street expectations:

• Sees net sales $174.0 billion to $179.5 billion, above the estimate of $173.2 billion
• Sees operating income $15.5 billion to $2.05 billion, with the midpoint coming below the estimate of $19.42 billion, vs $14.7 billion in Q2 2024.

This means that revenue growth in Q2 is expected to print 13.1% YoY, or roughly where Q1 came.

In response to the soft guidance and the disappointing AWS profit, the stock initially pumped but then promptly dumped as it now appears that the stellar results from yesterday are unlikely to be repeated…

… as attention now turns to AAPL.

Authored by Matt Taibbi via Racket News,

I arrived in Washington for an event last night, trying to finish the story about former CIA official Susan Miller’s disputed biography on my phone, when new information dropped from Director of National Intelligence Tulsi Gabbard’s office. Before heading home today (with a pause to record America This Week from a hotel), I wanted to catch readers up on new developments, and explain some of what we’ll will be publishing in the next week or so, as a wall of nonsense enters crumble mode.

Tulsi’s new document is a whistleblower statement, from a former “Deputy National Intelligence Officer (DNIO) at the National Intelligence Council (NIC).” The former official’s story mostly surrounds his suppressed objections to the use of unverifiable evidence in the Russiagate assessment, and subsequent odyssey through the whistleblower bureaucracy. A tale I’d never heard before, that the dossier material was inserted during a car ride involving James Comey, James Clapper, and John Brennan, makes a cameo. The jokes write themselves:

An additional interesting angle has to do with the investigation of Special Counsel John Durham and the whistleblower’s apparent inability across years to connect with him, despite appearing to have evidence relevant to his probe. If you want to know why few people in federal service blow the whistle, this excerpt might offer insight:

The IC IG staff stated to me — for the first time — that the IC IG lacked a mechanism or authority to convey potentially relevant whistleblower information, regarding potential criminal activity, to the Department of Justice (DOJ) Special Counsel. IC IG staff acknowledged the possibility that I had witnessed malfeasance and events of possible relevance to ongoing criminal investigations being conducted by Special Counsel Durham, but the IC IG staff stated no procedure existed to pass information to DOJ investigators, save my taking action in personal capacity.

That’s Catch-22 in life. Intelligence personnel who witness malfeasance are trained to go to the IC Inspector General, but when this whistleblower went to that office, he was essentially handed back the line made famous by Maine humorist Marshall Dodge: “You can’t get there from here.”

Rumors continue to circulate about the possible incipient publication of a classified annex to Durham’s investigation. A lot of people are waiting for that document. Meanwhile, Greg Collard published a Racket Library page containing an archive of the recently declassified materials. Greg does a great job detailing the chronology of this story, showing dates of document releases and statements along with clips of coverage to show the progress of media reactions. We’ll be adding as we go to this timeline, which readers will know by another memorable illustration by Daniel Medina:

The image of Brennan in “Take my wife, please” mode fits the moment, as Walter and I will discuss on tomorrow’s America This Week. There is a definite rats-fleeing-a-sinking-ship vibe around the original protagonists in this story. Brennan and Clapper pointed fingers at Comey in a remarkably poisonous “It wasn’t us!” editorial in the New York Times; former National Security Adviser Susan Rice wore out the all-caps function in one of a series of nervy tweets on this topic; and John Kerry “protected” his social media record. This is all in addition to once-ubiquitous CIA spokesperson Susan Miller’s “Yeah, that’s the ticket” act about having authored or directed the Intelligence Community Assessment team blowing up yesterday in bizarre fashion.

Racket will have a feature coming soon by UndeadFOIA, explaining little-known documents relevant to this case obtained by his public records requests across years. These shed a lot of new light on how we got where we are. We’re pushing this now because there’s a strong sense one of the major deceptions of our era is about to fall, and we all want it documented cleanly. Please hang in there with us.

Shares of USA Rare Earth are rocketing higher this afternoon after it was reported that the Trump administration is moving to extend price support mechanisms for U.S. rare earth projects to other companies, broadening a policy that previously focused on MP Materials to include other mining, refining, and magnet production firms.

USA Rare Earth is the obvious #2 name in the U.S. that such an expansion may have an impact on. scale, government stake, and strategic timing. Shares quickly popped 15% on the news:

This expansion will provide guaranteed price floors for key rare earth elements, reducing the investment risk that has historically deterred private capital. The approach mirrors the strategy used to back MP Materials earlier this year, where government involvement transformed market confidence and secured long-term domestic supply.

Top White House officials have told rare earth companies that they are pursuing a pandemic-style strategy to strengthen U.S. critical minerals production and counter China’s market dominance by setting a guaranteed minimum price for their products, according to five sources familiar with the plan, per Reuters.

The previously unreported July 24 meeting, led by President Donald Trump’s trade advisor Peter Navarro and National Security Council supply chain official David Copley, included ten rare earth firms alongside major tech companies like Apple, Microsoft, and Corning—all of which depend on reliable supplies of critical minerals for electronics manufacturing.

The precedent for this move was set in July when the Pentagon made an unprecedented $400 million equity investment in MP Materials, the operator of the Mountain Pass rare earth mine in California. As part of that deal, the Department of Defense became MP’s largest shareholder and locked in a 10-year price floor for neodymium-praseodymium oxide at roughly $110 per kilogram—nearly double prevailing Chinese spot prices.

Alongside the equity, the Pentagon committed to purchasing MP’s entire magnet output for a decade, while private lenders like JPMorgan and Goldman Sachs provided over a billion dollars in commercial financing to scale production.

MP Materials’ stock reaction was swift and dramatic. On the day the Pentagon’s investment was announced, MP shares surged more than 50% as investors priced in the guaranteed revenue and government backing. In the days that followed, the stock rallied further after Apple revealed a $500 million supply deal with MP, ultimately pushing the company’s year-to-date gains to well over 200–250% by mid-July.

The market capitalization climbed toward $9.5 billion, marking one of the most significant single-year jumps for a U.S. resource company in recent memory.

Navarro and Copley emphasized that the price floor arrangement granted to MP Materials earlier this month as part of a multibillion-dollar Pentagon investment was “not a one-off” and that similar agreements were being developed for other companies. For years, U.S. critical minerals producers have argued that China’s market dominance deters investment in domestic mining projects, and they have pushed for federally backed price guarantees to reduce risk.

Rare earths—17 metals essential for manufacturing magnets that convert power into motion—are widely used in electronics, including smartphones and military hardware.