News of the Week (March 31 - April 4, 2025)

Author

Brad Freeman
April 05, 2025

Table of Contents

Aside from the extremely noisy week in macro-land, it was a quiet week for stock-specific news. I’ve already sent out the two macro and portfolio-specific articles, which can be found here and here. There were no earnings reports or notable investor events as companies gear up to report Q1 earnings over the next several weeks. Profit estimates are also volatile following this week’s tariff announcements, so I wanted to give that time to settle before I do my planned free cash flow comp sheets.

1. Amazon (AMZN) – Various News

This also includes data relevant to all of digital advertising.

Sell-Side Notes:

From the research that I’ve seen, Amazon’s blended tariff will be close to 18%. I actually thought it would be a bit over 20%, so this is modestly good news. Goldman Sachs sees a $7.5 billion, or roughly 9%, hit to 2025 EBIT estimates from new tariffs. For context, Amazon’s stock had already begun pricing in tariffs and fell another 14% after the harsher-than-expected levels were announced this week. We never know if anything is fully priced in, but in this specific case, I’m rather confident that stock declines are coinciding with true forward multiple contraction here. Furthermore, Goldman rightfully called out several potential offsets that Amazon has to combat this $7.5 billion. They can negotiate with manufacturers to make them absorb some of the burden… and there’s nobody else in commerce with more bargaining power than Amazon to do so. Evercore ISI came out with a separate note this week calling that their expectation. They can raise prices, shift to a domestic focus on some SKUs and also shift to countries with lower tariffs (as places like Vietnam also seem poised to eliminate theirs). With that said, even though the 9% hit to EBIT is modest vs. the stock’s current decline, it will likely be smaller than 9%. For context, 2018-2019 EBIT margins for Amazon were stable despite trade war 1.0. These tariffs are much wider-ranging, but the true impact should be smaller than feared today, just like it was 7 years ago.

Mizuho published a note on AWS. They see sales cycle elongation and rising discounting playing out in channel checks. While that’s not ideal, both trends were called very modest compared to 2022 elongation and discounting, which is good to hear. 

Ad Channel Checks:

UBS came out with advertising channel checks on Meta, Amazon and Google. The majority of the 6 businesses surveyed are cutting 2025 spend plans due to heightened uncertainty. Budgets are consolidating on larger platforms and shifting towards performance marketing over brand marketing, which is harder to tangibly calculate the impact of.

More Amazon News:

  • Project Kuiper will launch its first production satellites next week. It will take a long time for revenue here to scale, but as that happens, the margin drag will peak and continue to dissipate. Amazon has front-loaded an immense amount of expense for this specific bet. Now, it is time to begin enjoying watching those costs finally translate into revenue. That should join continued optimization of inbound and outbound fulfillment, inventory algorithms and robotics use cases as more margin tailwinds for this business.

  • It made a bid for TikTok’s U.S. business but that acquisition is not seen as likely to happen.

  • While tariffs may hurt Amazon’s business, the 54% tariff placed on China would have a much sharper impact on Temu’s and Shein’s U.S. businesses. Both are strong Amazon competitors. 

  • Finally, Amazon debuted a new agentic AI model called Nova Act this week. It automates web tasks.

2. Hims (HIMS) – Weight Loss Drugs

Hims made news this week when it announced that it would offer Eli Lilly’s Zepbound. Re-selling these branded drugs at a marked-up price comes at much lower margin than selling compounded, non-personalized GLP-1s, which it was able to do during shortages. Still, this was briefly still seen as a piece of positive news for reducing risk of litigation from various markers of these GLP-1 drugs. Many thought this news meant Hims and Eli Lilly were beginning a new partnership, but LLY refuted that idea. Companies are welcome to resell branded versions of their drugs on any marketplace or app they want to. This is just Hims doing that.

Companies like Eli Lilly and Novo Nordisk spend gigantic sums of money to develop these drugs and are promised exclusivity periods to protect those investments, ensure good returns, and motivate more biotech research. Hims is claiming that personalizing these drugs, through subtle tweaks to dosing or the inclusion of vitamins or something else, provides a loophole to bypass this exclusivity. While I am in no way an expert here, I do not see how that could be allowed without greatly deterring all biotechs from investing in future drug discovery. If a company is allowed to just change a single part of the drug but offer essentially an identical product, there’s no appeal to making these hefty investments because there’s no chance firms will recoup them. As someone who isn’t a legal or healthcare expert, I could easily be wrong… but that’s just how I see things today.

I will say that I have developed a skepticism towards direct-to-consumer healthcare as I’ve made some of my worst stock picks in that space (GoodRx & Teladoc). Hims has executed far better than either of those companies to date, which deserves a lot of praise. I simply think the status quo must remain for Hims to be a great investment and, due to regulation and competition, I do not think it can.

3. DraftKings (DKNG) & Sports Betting

Outcomes:

Déjà Vu. Just like horrendous luck during the NFL football season led to lower hold (take) rates for sportsbooks and guidance misses, the second weekend of March Madness was not kind to these companies. Books thrive when upsets happen… and the four top-seeded teams all made it to the final weekend. As I said last year, bad luck is not a bear case and doesn’t do anything to change things in my mind. Handle (or bet volume) with the weekly data we have in New York for DraftKings rose at a great 30% clip during conference tournaments and March Madness so far. To me, that’s what matters for the long term thesis, even though it matters less for whether or not companies meet quarterly targets. I want to see more volume, strong customer acquisition and great retention. That’s what’s important for DraftKings and all other books profitably growing for a long time. The bad luck will normalize and statistics will revert to the mean.

For those focused on numbers for this quarter, I do not think this one bad week means DKNG or other companies will miss Q1 numbers. DraftKings had been trending well ahead of schedule through the first several weeks of the quarter, and did not bake that into its forecast to provide a larger cushion. 

Prediction Markets:

Illinois and Ohio joined New Jersey and Nevada as states that have issued cease and desist letters to Kalshi and Robinhood to halt offering sports betting. In the other states where this is still allowed, we’ll have to see how federal regulators rule. In the meantime, I expect more of these letters to come.

For the sportsbooks (remember DKNG has already filed for an events contract license), I continue to think this is a large net positive. If federal regulators say non-licensed companies offering sports betting through the events contract loophole are allowed (I think doubtful), DraftKings, FanDuel and all others can enter 50 states immediately and avoid paying higher special tax rates imposed by states. And if companies like Robinhood are instead blocked from offering sports betting through event contracts, the sportsbooks can potentially still enter Kalshi’s other prediction markets through licenses.

4. Meta (META) – Smart Glasses

According to Bloomberg, Meta will debut an upgraded version of its Ray-Ban smart glasses this year. It will feature hand controls and a screen. Meta continues to see glasses as the next ubiquitous form factor in consumer hardware. I tend to agree with them and, between this launch and its Orion full AR glasses, I also think it is convincingly leading this race in the USA. To reach massive scale, these devices will need to resemble a slick pair of glasses, while emulating the power and battery life of the clunky, hot Quest headsets. Meta, Apple and everyone else are many, many iterations away from making that happen, but still there’s a clear leader and it’s Zuck and company. 

Why does this matter so much to me? Well, smartphones are a gigantic industry and this could be Meta taking its piece of what eventually replaces use cases for those phones. But it goes deeper than that. If you’ll recall in 2022, Apple’s decision to restrict cross-app data sharing threw a giant wrench in Meta’s business. The company struggled with targeting and advertising growth as it scrambled to plug the signaling gap through investments in AI. While Apple (I think), did this to hurt Meta and gain a leg-up on that company, I think that was a strategic blunder. This was a wake-up call for Zuckerberg to slash reliance on any other mega-cap and take its future into its own hands. Not only did Meta do just that… but it also turbocharged consumer hardware efforts to aim to supplant Apple in the decades to come. It took the existential threat… resolved it… and then levied a new existential threat on Apple. Zuck is good at this… I guess.

5. Headlines

Tesla deliveries fell by 13% Y/Y and missed estimates by 14%. This also missed the whisper number by about 8%. The company is working through a Model Y transition, a softer global macro environment and perhaps some other political demonstration headwinds at this time. At the same time, their relative skew towards U.S.-based production vs. all other automakers should serve them very well if tariffs stick.

PayPal Ads launched in the UK.

Uber and OpenTable launched a new integration and partnership. It will launch autonomous vehicles on its app in Dubai through a WeRide partnership. It added Serve Robotics as an autonomous delivery partner in Dallas while adding Coco Robotics as a delivery robot partner in Miami.

Oppenheimer thinks same-store sales trends for Starbucks will improve. It wants to gain more confidence on this ramp before turning bullish. They’re neutral.

Cantor Fitzgerald upgraded Zscaler to a buy due to better execution and resilient demand.

Apple is considering shifting some iPhone production to Brazil to avoid tariffs.

6. Macro

Explaining the Madness:

There was something I saw Friday morning that I think was very important. Up until now, we’ve had dozens of broad-ranging opinions on why the administration is embarking on an aggressive trade war with the whole world. What are they potentially trying to accomplish aside from lowering trade barriers with partners? 

The most compelling explanation I’ve seen is that the administration wants yields to fall so they can refinance about $9 trillion in debt maturing this year at lower interest rates. And that actually makes some sense. Refinancing at 3.5% instead of 4.5% would mean saving $90 billion a year in interest. And how do you crush yields? By stoking chaos, uncertainty and an urgent flight to safety from investors. Or? You pull out a poster with sky-high tariff rates during a press conference. It’s hard to pinpoint the exact schedule of federal debt maturity in 2025, but most of it comes due in June. After that is when the incentive to aggressively push down yields would diminish.

Things are probably going to stay ugly for the next several weeks. Some tariff negotiations will be loud, with countries beating their chests to ensure they can tell their voters that they’re “winning.” But? As I talked through during the week. I continue to see that noise as an opportunity to be slowly taken advantage of. There is every rational reason in the world to think deals will be stuck and tariffs will come down. Not to sound like a patriotic egomaniac, but the U.S. consumer powers a great deal of global economic activity. It cannot be replaced. We spend like drunken sailors and we have a lot of bargaining chips because of that.

We’ve already seen movement out of Vietnam and Cambodia, which is fantastic news for Lululemon, Nike, On Running and countless apparel/footwear vendors. For context, 40% of Lulu’s goods were vulnerable to 46% cost hikes while 80% of On Running’s total EBIT was in jeopardy from tariffs according to some sell-side notes I saw. Many of these firms moved supply chains to Vietnam during trade war 1.0 to avoid tariffs. That’s very expensive to do. It’s even more expensive to do twice in a decade. I expect every other country to follow Vietnam’s lead. France and Germany will probably be stragglers and China will likely take the longest to settle. That’s my feeling.

As we move into the 2nd half of the year with more trade clarity, less fiscal incentive to crush yields and an economy at full employment with healthy wage growth… I still expect things to look much better in stock market land. As a long-term investor, I am not interested in timing the day or even week that the bottom comes. Instead, I plan to keep accumulating as (or if) deals get better, with cautious optimism about abating headwinds towards the end of Q2. Some of my favorite assets are on sale… so I’ve slowly, carefully and methodically gone shopping. 

Next time you hear someone say… “this ain’t nothing yet…” feel free to respond with this:

The VIX is over 40, S&P short positions are at record highs, hedge funds are liquidating at record pace, retail sold at its fastest pace in history on Friday morning, the fear/greed index is at 4 and mega-caps are all off 25%+. That is real fear. This is when we generate our multi-year alpha.

Powell Friday Comments:

Powell spoke on Friday. His comments were unsurprising. Tariffs are larger than he expected, the Fed is in a good spot to be patient and it will take time to understand the effects of this trade policy. While this doesn’t have any impact on monetary supply, it still will likely lead to higher consumer prices. Powell needs to see how things shake out to get a better feel for how stubborn this inflation will be. As a reminder, during his last statement, he said he expected the price impact to be short-lived.

Other Notes:

Tariffs led to:

  • Goldman cutting its GDP outlook to 2.3% from 2.6% for 2025.

  • Wells Fargo cutting its GDP outlook to 1% from 2.5% for 2025.

  • JP Morgan making a 2025 recession their new base case.

Output Data:

  • The Chicago Purchasing Managers Index (PMI) for March came in at 47.6 vs. 45.5 expected and 45.5 last month.

  • The Manufacturing PMI for March came in at 50.2 vs. 49.8 expected and 52.7 last month.

  • The Institute for Supply Management manufacturing PMI for March came in at 49 vs. 49.5 expected and 50.3 last month.

  • Factory Orders rose 0.6% M/M for February vs. 0.5% expected and 1.8% last month.

  • The Service PMI for March came in at 54.4 vs. 54.3 expected and 51.0 last month.

  • The ISM Non-Manufacturing PMI for March was 50.8 vs. 53 expected and 53.5 last month.

Consumer & Employment Data:

  • JOLTs Job Openings for February came in at 7.568M vs. 7.690M expected and 7.762M last month.

  • ADP Nonfarm Employment Change for March came in at 155,000 vs. 118,000 expected and 84,000 last month.

  • Nonfarm Payrolls for March were 228,000 vs. 137,000 expected and 117,000 last month.

  • The Unemployment Rate for March was 4.2% vs. 4.1% expected and 4.1% last month.

  • Private Nonfarm Payrolls for March were 209,000 vs. 127,000 expected and 116,000 last month.

  • Labor Force Participation rate rose from 62.4% to 62.5% M/M for March.

  • Initial Jobless Claims were 219,000 vs. 225,000 expected and 225,000 last report.

Inflation Data:

  • The ISM Manufacturing Prices Index for March came in at 69.4 vs. 64.6 expected and 62.4 last month.

  • The ISM Non-Manufacturing Prices Index for March was 60.9 vs. 63.1 expected and 62.6 last month.

  • Average Hourly Earnings rose 3.8% Y/Y vs. 3.9% expected and 4.0% last month.

  • Average Hourly Earnings Rose 0.3% M/M vs. 0.3% expected and 0.2% last month.

Reply

or to participate.