SpaceX Hits the Carriers, Medicare Stars Lift Humana

Dear readers,

The S&P 500 closed its third straight weekly gain on Friday, just below Tuesday’s record. The more telling moves came in individual stocks. The three big wireless carriers lost 10 percent or more in a single session, tower operators jumped, and a health insurer hit a 52-week high. The market is sorting quickly between those who profit from a shift and those who pay for it.

SpaceX Goes After the Carriers

SpaceX wants to acquire Grain Management’s nationwide 800-megahertz spectrum, up to 14 megahertz of low-band frequencies. Reuters and the Wall Street Journal put the price at about $8 billion, though it is unconfirmed. FCC approval is still pending.

The reaction on Friday was swift. T-Mobile US fell about 13 percent, Verizon roughly 10 percent and AT&T almost 10 percent. Tower operators moved the other way: Crown Castle rose about 16 percent and American Tower a good 9 percent.

One infrastructure analyst estimates that SpaceX as a new tenant could lift the towers’ recurring revenue by 10 to 15 percent. In credit, the spread on a Verizon bond maturing in 2058 widened to a record 220 basis points.

T-Mobile is pushing back. Its chief technology officer argues that 800 megahertz barely solves Starlink’s indoor problem, because satellite signals suffer about 50 decibels more path loss than a tower one kilometer away. More than 70 percent of US mobile traffic happens indoors.

That makes the selloff a bet on a threat, not on a finished product. There is no launch date and no pricing yet. The move can reverse if the FCC hesitates or the technology disappoints. Investors tempted to act should watch the approval process and any launch announcements.

Humana: Stars Turn Into Cash

Humana jumped about 12 percent on Friday to roughly $434, a new 52-week high. The trigger was the CMS quality ratings for 2027 Medicare Advantage plans.

According to analysts, the share of Humana members in plans rated four stars or higher rose above 90 percent for 2027. Those plans earn bonus payments, which total about $13 billion a year across all insurers.

Analysts moved quickly. Barclays raised its price target from $515 to $582 and stays at Overweight. Baird upgraded the stock and lifted its target from $390 to $596, and Cantor Fitzgerald went from $300 to $460.

Alignment Healthcare shows the other side. The share of its members in four-star plans collapsed from 100 percent to 25 percent, and the stock fell 13.4 percent to $7.54. Bank of America cut its rating from Buy to Neutral and its price target from $25 to $9. Alignment has announced legal action. UnitedHealthcare (67 percent, down from 78) and CVS Aetna (69 percent, down from 81) also slipped.

Humana is up about 76 percent since the start of the year, so much of the good news is already in the price. The next test is open enrollment, which starts October 15. Roughly 600,000 Humana members hold terminated plans and must choose again.

Software Shakes Off the OpenAI Scare

Security and software names rebounded on Friday after Thursday’s drop. Palo Alto Networks gained a good 5 percent, CrowdStrike just under 5 percent, Palantir about 5 percent and Oracle almost 5 percent. Palo Alto sits just below Tuesday’s high and is up a good 130 percent year to date.

Should investors sell immediately? Or is it worth buying Humana?

The setback began with a report on OpenAI that sent the semiconductor index down as much as 3.4 percent. OpenAI then clarified the numbers. Its annualized revenue stood at $50 billion at the end of September, and the $68 billion figure that had circulated included partners’ gross revenue.

By year-end, OpenAI expects at least $70 billion. So the question we asked in the last days, who pays for the buildout, is still open, but the revenue gap looks less dramatic than it did on Thursday.

Demand for AI hardware remains strong. Nvidia expects $108 billion in revenue for the October quarter, up 89 percent. Even so, Nvidia and AMD slipped slightly on Friday as investors rotated into software.

Apollo chief economist Torsten Slok warns of a kind of “Dutch disease.” In his view, AI investment is growing by about 0.85 percentage points of US economic output per year, drawing capital, power and labor away from construction and autos. For investors, the implication is plain: software earnings depend on an investment boom that cannot keep expanding indefinitely.

Banks Open Earnings Season on Tuesday

On Tuesday, October 13, JPMorgan, Citigroup, Goldman Sachs and Wells Fargo report. According to LSEG, analysts expect S&P 500 earnings growth of 30.6 percent for the third quarter, led by energy (up 123 percent) and technology (up 66.5 percent). Deutsche Bank forecasts 34 percent, while the consensus stands at 26.7 percent.

Goldman Sachs beat earnings expectations by an average of 20 percent over the past four quarters. For the third quarter, analysts expect revenue of $16.87 billion, up 11.1 percent from a year earlier. Equities trading should be strong, while bond trading and merger advisory are expected to be weak. The stock trades around $895 and has lost about 10 percent over 30 days. The record second quarter sets a high bar.

Evernorth: An XRP Treasury Heads to the Nasdaq

Evernorth completed its merger with the shell company Armada Acquisition Corp. II on Friday. Trading under the ticker XRPN is scheduled to begin Monday, October 12. The company holds about 473 million XRP and roughly $300 million in cash before costs.

Only about 84 million of those XRP were bought, at an average of roughly $2.54 for $214 million. At a price near $1.40, that is a paper loss of a good 45 percent. Much of the holdings came as contributions in kind, including from Ripple. Armada shareholders redeemed more than 80 percent of their shares for cash.

A listed XRP vehicle remains a sentiment product. XRP is down about 41 percent over twelve months. Bitcoin has stabilized around $82,700 after a low near $80,000 on Wednesday.

The Week Ahead

Next week shows whether the rotation holds. Tuesday’s bank results and the first reactions to the SpaceX deal will reveal whether investors keep separating winners from losers so cleanly. Rates remain the frame around all of it. The economy added only 29,000 jobs in September, and unemployment rose to 4.2 percent.

I hope you enjoy the rest of your weekend.

Best regards,
The StocksToday.com Editorial