FINANCIALS

Evercore’s Multi-Billion Dollar Advice Puts it On Par With Investment Banking Giants Like Goldman and JPMorgan

You may have never heard of Evercore ($EVR), but chances are you’ve seen their work. Over the past few years, this investment banking firm has climbed the ranks on Wall Street — advising on more than $5T worth of mergers, acquisitions, and restructuring deals. It’s now become America’s largest independent financial adviser, giving bulge-bracket investment banks a run for their money.

A big deal: Evercore had a stellar 2023, raking in over $2B in advisory fees alone. That puts them fourth behind heavyweights like Morgan Stanley ($2.2B), JPMorgan ($2.8B), and Goldman Sachs ($3.3B) — placing Evercore in the upper echelon of the advisory business. According to the Financial Times, they’ve been involved in “nearly every mega-deal in the US” recently, including significant deals like Nippon Steel’s $14.9B buyout of US Steel and Chevron’s $60B acquisition of HESS.

• Experts compare Evercore to what “Goldman was 20 years ago” — with a significant portion of its staff alums from the world’s largest investment bank (FT).

• And being compared to Goldman isn’t such a bad thing, considering $GS’ market cap is nearly 17x higher and has outperformed the S&P 500 in the past five years.

What’s good advice worth?

Unlike big banks, Evercore doesn’t accept deposits or manage extensive portfolios like a trading firm. Instead, it focuses on independent financial advising, which brings in almost all of its revenue. Yet, despite this narrow focus, $EVR is still valued at over $7.4B.

• Their stock has risen by more than 70% in the past year (and that’s not counting its generous 1.6% dividend yield), outpacing other independent advisers like Lazard ($LAZ), PJT Partners ($PJT), and Moelis ($MC).

• However, UBS research analyst Brennan Hawken believes that Evercore’s valuation “is getting less respect” because its next leg of growth will be “more challenging.”

Forward-looking: Evercore sees potential in expanding its wealth management and equity research business, especially overseas in Europe and Asia, where competitors like Moelis have been unlocking previously untapped markets. If Evercore can keep up its streak of increasing dividends like in the past 13 years, it could mean big returns for investors.

Read: Why dividends will be increasingly important for investors in the coming years

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LARGECAP RECAP

🎰 Sportsbooks team up to tackle gambling issues

US sportsbooks saw a significant 44.5% increase in revenue last year, reaching a record $10.92B. This momentum is expected to continue, with FanDuel ($FLUT) projecting a threefold increase in US profits for 2024. However, bad bettors won’t be the only factor in the company’s record revenue — rising rates of gambling addiction will also play a role. In response, industry partners are intervening.

• Seven of America’s largest gaming companies, representing 85% of the market, are forming the Responsible Online Gaming Association to track and prevent problematic gambling behavior.

• In addition, the organization will focus on education, implementing better industry practices, and promoting “conscientious advertising and marketing.”

Crackdown incoming: Recent high-profile gambling scandals have cast a shadow on the legal betting business. MLB player Shohei Ohtani’s allegations of a $4.5M gambling-related theft by his assistant and the NBA’s investigation into Jontay Porter for betting on himself have raised concerns. In response, NCAA president Charlie Baker has urged sportsbooks to ban college prop bets to prevent fraudulent outcomes.

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Markets & Economy

Yen hits a 34-year low: Last week, Japan ditched negative interest rates for the first time in eight years — and the Bank of Japan is aiming for a “slow and steady” unwinding of its easy monetary policy. Plus, the yen has been affected by the possibility that the US Fed may hold off on rate cuts. [Read]

Chime considers 2025 IPO: The SF-based fintech company surpasses Bank of America with 38M customers but grapples with profitability from its lower-income base. A shift in branding and expanded banking services could make it an attractive growth stock. [Read]

BlackRock ($BLK) CEO warns of retirement crisis: Can Social Security survive the US’ sizeable aging population — as well as weight loss drugs that could extend lifespans? Larry Fink doesn’t think so, so he’s urging more people to invest and secure financially comfortable retirements. [Read]

Business & Wealth

Will Merck’s ($MRK) $11.5B bet pay off? The pharma giant invested big in their recently approved drug, which treats pulmonary arterial hypertension. Merck needs it to be a blockbuster, as the patent for their cancer drug Keytruda — which drives 40% of their revenue — will expire in 2028. [Read]

Robinhood ($HOOD) debuts credit card: In a competitive credit space, the fintech platform hopes 3% cash back, no annual fee, no foreign transaction fees, and family plans are enough to lure customers to their gold card — and then encourage them to invest with Robinhood. [Read]

Older social media users are falling for AI-generated images: The Facebook algorithm is serving up all sorts of AI nonsense in hopes of selling products and gaining followers — and older users who are less familiar with the hallmarks of AI imagery are having trouble spotting fakes. [Read]

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DIGIT OF THE DAY

Semiconductor Stocks Powered One-Third of S&P 500’s 2024 Gains, But Face Dot-Com Valuations

Sparks are flying, innovation is in the air, and the semiconductor industry feels more chipper than ever. The sector experiences cyclical phases of chip oversupply or shortage, signaling periods of growth or decline. Currently, there’s a surge in demand for chips powering AI computing, propelling chip stocks to new highs.

• Four chip stocks, including Nvidia ($NVDA) and Broadcom ($AVGO), fueled a third of the S&P 500’s gains this year. Chipmakers now represent over 10% of the index's weight.

• The Philadelphia Stock Exchange Semiconductor Index hit a 20-year high, trading at 8x sales — more than double the S&P 500's 3x sales multiple.

Here’s the (pricey) catch: These record highs evoke memories of the dot-com bubble peak when semiconductor and tech stocks fetched risky valuations — which Miramar Capital’s Max Wasserman called “too expensive right now” and warned that it could lead to a market selloff. Investors in $NVDA, the top-performing stock in 2023, are questioning its sustainability among escalating competition and potentially tapering demand. With these rising prices, it seems like these stocks are no longer the bargain they once were.

Read: Semiconductors may be expensive, but here are some cheaper alternatives.