🎙️ From Zero to Billions

Thanks to big banks, another earnings season is starting strong.

Earnings for the S&P 500 are projected to increase sequentially every quarter this year, with Q4 2024 EPS forecasted to be 15% above Q1.

Over the next few weeks, we’ll hear more about corporate America's health, which could drive the market narrative into year-end.

🤔Also of note—unrelated to earnings—is mega-cap tech’s selloff Wednesday. The Nasdaq fell over 2% on the prospect of tighter China-focused U.S. trade curbs, the index’s worst day in two years.

By the way, we’ve had wonderful conversations with readers worldwide in recent weeks. If you’re interested in connecting, schedule a 15 or 30-minute call with us here to chat about life, investing, newsletters, and anything else.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• From zero to billions: Wiz’s rapid rise

• Wall Street wants in on America’s battery storage boom

This, and more, in just 5 minutes to read.

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In The News

📈 From Zero to Billions: Wiz’s Rapid Rise

Cybersecurity is pretty, pretty important these days, and you need to look no further than the brilliant minds at Wiz. 

What to know: Wiz, a cloud cybersecurity startup founded by four former Israeli military officers, is on the brink of a major acquisition by Google's parent company, Alphabet, for about $23 billion. If finalized, the deal would mark Alphabet's largest acquisition ever and bolster Google's cloud-computing business.

• Alphabet, a $2.25 trillion company, is the world’s second-largest tech company by revenue and one of the biggest companies worldwide. 

Background: Founded only four years ago, Wiz has risen from zero to $500 million in annual recurring revenue. Chalk up its relentless focus on providing security software for cloud computing, a sector that’s seen increased demand as more businesses migrate their data and applications to the cloud.

• The (potential) acquisition at $23 billion is nearly double Wiz's valuation of $12 billion from a funding round just two months ago. It would represent one of the largest and fastest returns for a private security company in tech history. 

Cyber wiz: Wiz's founders, including CEO Assaf Rappaport, each own about 9% of the company, potentially netting them fortunes of around $2 billion apiece should the deal go through. The founders' background in Israel's Unit 8200, a cyber intelligence division, has been a common thread among several successful cybersecurity startups. 

These folks know what they’re doing: In 2012, they launched their first cloud cybersecurity firm, Adallom, which they sold to Microsoft in 2015 for $320 million. Then they worked at Microsoft’s Azure cloud-computing division before launching and getting Wiz off the ground in the early days of the pandemic.

Why it matters:

For Wiz, the $23 billion sale is enormous, vaulting the company at 46 times its $500 million annual recurring revenue. Compare that with CrowdStrike, a richly valued cybersecurity firm with a market cap 25 times its annual recurring revenue. 

For Google, the acquisition could really enhance its position in the cloud-computing market, where it lags behind competitors like Amazon Web Services and Microsoft. By integrating Wiz's advanced security features, Google could attract more customers to its cloud services, particularly as demand surges with the growing needs of generative AI companies.

The regs: Unsurprisingly, big tech is being very closely watched by antitrust regulators in the U.S. and Europe, so the deal is likely to face intense regulatory scrutiny given the increasing focus on tech giants' acquisitions and market dominance. 

• At least one senator already wrote, “Seems like this deal would be one for the antitrust textbooks—how to enrage enforcers & elude law & logic in pursuing monopoly power. It deserves exacting scrutiny, & some skepticism.”

Bottom line: If successful, the acquisition could signal a positive shift for the tech startup sector, which has been struggling with reduced venture funding and a challenging IPO market in the face of relatively high interest rates.

Read more

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🔋 Wall Street Wants In On America’s Battery Storage Boom

Wall Street is bullish on energy storage.

A surge in demand for renewable energy and the need to stabilize power grids has driven the industry’s boom, particularly in sun-rich states like Texas and California, where large-scale battery installations are becoming more common.

Cutting edge: Entrepreneurs like Sheldon Kimber, the CEO of Intersect Power, are capitalizing on the trend by installing massive battery systems. The batteries, often the size of shipping containers, store excess solar energy during the day and sell it at higher prices during peak evening demand.

• Energy storage has come into focus recently after Hurricane Beryl made millions of Houston residents go without power, prompting many residents and business owners to install batteries to provide power during blackouts or other grid disruptions.
  

• The market for battery energy storage systems (BESS) is expected to keep humming. Projections suggest it could reach between $120 billion and $150 billion by 2030 alone. 

Growth factors include: 

• Falling battery costs, particularly in China

• Government mandates and subsidies

• The increasing adoption of renewable energy sources

• The need for grid stability and reliability

Follow the gold rush: In the U.S., battery storage capacity is expected to nearly double by the end of 2024, possibly reaching over 30 gigawatts. California and Texas are leading the expansion, with 7.3 GW and 3.2 GW of installed capacity, respectively.

• The industry is attracting big-time investment from both public and private sectors. Take Intersect Power, which recently secured $837 million in funding for three large battery storage projects in Texas. Other companies, such as Eos Energy Enterprises and rPlus Energies, have also raised huge sums of capital for their storage projects. (rPlus raised over $1 billion.)
  

• “It definitely feels like there’s a bit of a gold rush,” said a former power trader and CEO of Tierra Climate.

The sector isn’t without challenges, of course, including potential market saturation, permitting issues, and the possibility of new battery technologies rendering current lithium-ion installations obsolete. 

Why it matters:

For the most part, investors remain optimistic about the industry's potential, driven by the surge in solar energy adoption and decreasing storage costs. There’s a general consensus on Wall Street that the industry is critical as we transition to a greener economy, so there’s believed to be plenty of money to be made on energy storage investments. 

Job creation: The growth in energy storage is not only contributing to grid stability and renewable energy integration but also creating jobs. In 2022, the sector employed nearly 85,000 people in the U.S. and has far outpaced general workforce growth.

Final thoughts: As The Wall Street Journal reports, “investors are betting the surge in solar and falling costs for storage will make their bets pay off. ‘It has been the hot topic over the last 24 months,’ noted the director of the infrastructure and energy financing team at Deutsche Bank, which has invested in six storage deals over the last two years.”

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