Brace for More Trump Tariff Surprises

Given that today is July 9, Pres. Trump’s previous self-imposed trade deal deadline, we should be on guard for further tariff headlines. Already this morning, Trump posted on Truth Social that he will release 7 more tariff letters soon, with more to come this afternoon. We believe that Trump is aiming to force trade deals to come to fruition, given his now Aug. 1 deadline, lest tariffs go into effect. We also think this flurry of letters could push out trade deal announcements as folks factor in the “take it or leave it” terms being put forth.

We continue to think the renewed uncertainty will be a factor in corporate guidance coming in the next several weeks.

In fact, we’re starting to see the impact of tariffs on guidance. Last night, semiconductor test company Aehr Test Systems AEHR said that it is seeing “timing-related delays in order placements due to tariff-related uncertainty…” That led the company to maintain its cautious approach and not reinstate specific guidance beyond what has already been communicated.

We will continue to track guidance-related comments as we move deeper into the June quarter earnings season, adjusting our thinking and the Portfolio as needed.

WPP Warns on Ad Spend

This morning, U.K.-based advertising company WPP WPP revealed that it now sees its like-for-like revenue, less pass-through costs, falling 3% to 5% this year, down from its prior forecast of flat to a 2% decline. Per comments from CEO Mark Read, while WPP expected the June quarter to be similar to the March one, performance in June was worse than anticipated. While advertising is one of the first areas to get cut as companies look to tighten their belts, WPP has lost some high-profile business from Mars and Coca-Cola KO. This means we’ll be looking at results and guidance from Omnicom OMC when it reports its June quarter results. Based on past timing, that could be late next week.

In that report, we’ll be cleaving between comments about digital advertising spend vs. traditional media. Recent findings from Dentsu peg worldwide ad spend reaching $992 billion this year, up by 4.9% year over year, despite a reduced economic outlook. Digital ad spend is expected to remain a bright spot, rising nearly 8% to $678.7 billion, accounting for more than 68% of total ad spending. It’s that spending shift we aim to capture through Alphabet GOOGL, Meta META, Amazon AMZN, and, to a lesser extent, Apple AAPL shares.

Wall St. Price Target Increases on Portfolio Holdings

Here are some Wall Street price targets moving up this morning:

Oppenheimer raised its Alphabet target to $220 from $200

TD Cowen boosted its Meta target to $800 from $700

Oppenheimer upgraded Microsoft MSFT shares to Outperform with a $600 target

Barclays lifted its Eaton ETN target to $340 from $323

Keefe Bruyette boosted its Morgan Stanley MS target to $160 from $127, and lifted its Bank of America BAC target to $57 from $52. Truist also lifted its BAC target to $53 from $51 this morning.

Barrington Research increased its SuRo Capital SSSS target to $10 from $9

Morgan Stanley' M&A Win

Merk MRK will acquire Verona Pharma VRNA for $107 per American Depository Share (ADS) for a total transaction value of approximately $10 billion. In reading the published materials, we find Morgan Stanley acted as one of the financial advisers to Merck in this transaction, which tells us its investment banking business is starting the current quarter off on strong footing. We expect to hear much more about this when Morgan reports next week. Based on its investment banking backlog and investment management market share gains, we’ll revisit our current $150 target as needed. The same goes for our $55 BAC target. 

At the time of publication, TheStreet Pro Portfolio was long MS, SSSS, ETN, BAC, MSFT, GOOGL, META, AAPL, AMZN.