Forgotten Profits Trade Setup Archive

Strategy Narrows, Novo Nordisk Cuts Guidance, as Governance Turbulence Persists

New CEO Mike Doustdar said Novo will focus tightly on obesity, diabetes, and related cardiometabolic conditions, exiting “non-core” assets. The declaration follows an unusually tumultuous stretch for the historically steady company, marked by a CEO ouster, a full refresh of the independent directors, and a planned workforce reduction of ~11%.

Metsera Bidding War Raises the Stakes

Novo thrust itself into a bidding fight with Pfizer for obesity biotech Metsera, floating an offer that could reach approximately $ 10 billion. CFO Karsten Munk Knudsen defended the price and pre-approval structure—paying most of the consideration upfront—calling it a function of negotiations and consistent with the sharpened focus on obesity. Pfizer has sued on antitrust grounds; Novo says the deal is lawful.

What’s Slowing—and What Isn’t

After years of “hyper growth,” management stated that GLP-1 expansion is decelerating into Q4, with Wegovy missing its target and Ozempic slightly exceeding estimates. Investors, already unnerved by summer volatility and guidance resets, remain focused on near-term U.S. pricing, capacity, and competitive dynamics versus Lilly.

Policy Watch: Pricing and Coverage

Reports indicate Novo and Lilly are in discussions with the White House over lower prices for small doses and potential Medicare coverage for weight-loss use cases. Knudsen declined specifics, signaling only that “there will be a deal to be announced at some point.” Any framework that expands payer access while preserving margins would be a key catalyst for the GLP-1 class.

Investor Take

• Near term: Guidance trim, restructuring costs, and Wegovy miss = pressure on shares.
• Medium term: Metsera bid could deepen the pipeline, but adds execution, legal, and integration risk.
• Key swing factors: U.S. pricing/coverage outcomes, manufacturing throughput, and Lilly’s launch cadence.

Note: All figures are as reported by the company and industry sources cited in the original coverage; DKK = Danish krone; CER = constant exchange rates.

Bank of America (BAC) shares fell on Wednesday even as the bank’s leadership raised profitability and growth targets during its first investor day in 14 years. The event, held in Boston’s Back Bay, was intended to reassure Wall Street that CEO Brian Moynihan can close the performance gap with rivals such as JPMorgan Chase and Wells Fargo.

The second-largest U.S. bank now targets a return on tangible common equity (ROTCE) between 16% and 18% over the next three to five years, up from 15.4% in the third quarter. The new range met analyst expectations but didn’t ignite enthusiasm—shares were down 1.7% in midday trading even as the S&P 500 rose 0.7%.

Performance Goals and Investor Reaction

Moynihan’s message was clear: responsible growth remains the bank’s north star, but profitability and efficiency will improve. Analysts, however, questioned the time horizon for results. UBS’s Erika Najarian said the longer timeline “raised early rumblings from investors.”

By comparison, JPMorgan Chase reported a 20% ROTCE in the third quarter—highlighting Bank of America’s continued lag behind its peers. Wells Fargo analyst Mike Mayo called the event a potential “sell-the-news” moment, noting the stock had rallied ahead of the meeting. Still, he expects higher earnings and returns to drive future gains.

Efficiency, Credit Quality, and Income Growth

Bank of America said it plans to lower its efficiency ratio—a key measure of profitability—to 55–59%, down from 62% in the third quarter. It also expects its net charge-off rate to hold steady between 0.5% and 0.55% “through the cycle,” indicating stable credit quality.

Meanwhile, net interest income—a primary driver of profitability—is projected to grow at a compound annual rate of 5% to 7% over the next five years, driven by asset repricing and organic expansion.

Repricing Legacy Assets

The bank acknowledged that its low-yielding securities portfolio—a byproduct of pandemic-era investments in U.S. agency mortgages—has constrained performance. Bank of America invested around $500 billion in securities yielding about 2% when the Federal Reserve slashed rates in 2020.

Those assets will finally roll off over the next decade. Between 2026 and 2031, the bank expects $450 billion to $490 billion of those holdings to be reinvested at higher yields. Analysts at Deutsche Bank described this repricing as “a built-in earnings lift” that should fuel better per-share growth starting in 2027.

Rebuilding Investor Confidence

Bank of America’s management team emphasized consistency, long-term profitability, and operational discipline—attributes they argue will drive shareholder value. Yet, many investors remain cautious, comparing its slower growth to faster-moving peers. “In the long run, the stock should follow earnings and returns,” Mayo noted. “Both seem to be heading higher, but it’s a question of patience.”

Tech Stocks Lead the Selloff

The downturn began when Palantir Technologies failed to impress investors despite topping analyst expectations. Shares tumbled after Monday’s record close, sparking a broader retreat in speculative and high-growth assets. A wave of cautious remarks from top Wall Street executives, including Ted Pick of Morgan Stanley and David Solomon of Goldman Sachs, added to the risk-off sentiment.

“After seven consecutive months of gains—the longest stretch in eight years—a pullback may simply reflect natural market rotation or profit-taking,” wrote Mizuho’s Daniel O’Regan. He added that the market’s sudden decline likely signals a “broader de-risking trend” affecting speculative assets, from crypto to AI-linked stocks.

Broader Risk-Off Move

Markets were further weighed down by declines in cryptocurrencies, meme stocks, and other speculative names, suggesting a widespread reduction in risk appetite. The 2-year Treasury yield fell to 3.58%, while the 10-year yield eased to 4.09%, as investors sought safety in government bonds.

Tom Essaye of Sevens Report Research said that until Wednesday, AI stocks had been “masking broader market struggles this earnings season.” He warned that Wall Street’s expectations have become overly optimistic: “The market is priced for perfection—and I mean perfection—and there’s a little bit of a disjointed existence there.”

Market Rotation and Next Steps

Despite the selloff, analysts view the pullback as part of a regular market rotation rather than the start of a deeper correction. “Investors are finally recalibrating expectations after months of exuberance in AI-related sectors,” said one trader. “Valuations had simply gone too far ahead of fundamentals.”

While the S&P 500 and Nasdaq remain near multi-year highs, continued weakness in speculative assets could test market sentiment as investors await upcoming economic data and the Federal Reserve’s commentary.