Verizon and T-Mobile Sink on SpaceX, Humana's Star Ratings, Delta, Palantir

Good evening. This is Trade and Ticker. Friday, October ninth, twenty twenty-six. Your evening company deep dive after the close.

Four stories tonight, and three of them are about one simple question: who gets paid next year, and how much. First, Verizon, A-T-and-T, and T-Mobile, the three big wireless carriers, which got hammered after SpaceX agreed to buy a nationwide block of low-band airwaves and said out loud that it wants to become a major U.S. mobile carrier. Verizon had its worst day since two thousand two. Second, Humana, the Medicare insurer that went from one of the worst report cards in the industry to one of the best in a single year, and jumped about eleven and a half percent. Third, Delta Air Lines, which posted record revenue, missed on earnings, cut its full-year forecast because of fuel, and somehow finished the day flat. And fourth, Palantir, which closed at a record high after two big Wall Street firms got more bullish, on a day when the A-I software trade bounced back hard. Let's get into it.

A quick look at the board first. Stocks finished higher to close out the week. The Dow gained about eight-tenths of a percent, or roughly four hundred twenty points. The S-and-P rose about six-tenths of a percent, and it finished within a whisker of the record it set on Tuesday. The Nasdaq also gained about six-tenths of a percent, a solid bounce after Thursday's drop of more than one percent. For the week, the S-and-P was up a bit more than one percent, the Dow was up close to one percent, and the Nasdaq was up about six-tenths of a percent. Small caps were the exception. The Russell two thousand rose today but finished the week lower.

Under the hood, health care led, up about one-and-a-half percent, and Humana had a lot to do with that. Communication services was the weakest group, down about one-and-a-half percent, and that was almost entirely the phone companies. The ten-year Treasury yield ended near five-point-two-four percent after swinging around all day. Brent crude ticked higher and stayed near one hundred four dollars a barrel, as Hurricane Isaias moved toward the northern Gulf Coast with most offshore Gulf production shut in. Diesel futures went the other way, falling more than four percent, after President Trump said Russia would supply large amounts of diesel to the U.S. and global markets. Keep that diesel move in mind when we get to Delta.

That's the setup. Now let's start with the biggest story of the day, and the one that could reshape an industry most people think of as boring.

Verizon, A-T-and-T, and T-Mobile.

Late Thursday afternoon, a private investment firm called Grain Management announced a definitive agreement to sell its entire nationwide eight-hundred megahertz spectrum portfolio to SpaceX. Spectrum is the set of radio airwaves that carriers need to send signals to your phone. This particular package is up to fourteen megahertz of paired spectrum in the eight-hundred megahertz band. The companies did not disclose a price. The Wall Street Journal and Reuters both reported a value of about eight billion dollars, citing people familiar with the deal. The transaction still needs approval from the Federal Communications Commission.

Why does this specific slice of airwaves matter so much? Because it is low-band. Lower-frequency signals travel farther, and they push through walls and buildings with less signal loss than higher-frequency bands. That has been one of the big gaps in the SpaceX phone story. Satellites can reach you in the middle of a field. They have a much harder time reaching you in your kitchen, in an office tower, or in a basement parking garage. SpaceX already agreed earlier to buy higher-band two-gigahertz spectrum from EchoStar, which is about capacity. This new eight-hundred megahertz block is about coverage, especially indoors. And SpaceX says most existing phones already support this band.

Elon Musk called it the last critical piece of the spectrum puzzle needed for SpaceX to provide complete phone coverage in America. But the line that really spooked investors was in SpaceX's own statement. It said that once it gets F-C-C approval, Starlink Mobile will deploy a flexible architecture that combines its satellites in space with an advanced terrestrial deployment, meaning equipment on the ground. In plain English, SpaceX is no longer only talking about filling in dead zones for the big carriers. It is talking about competing with them for your monthly phone bill. On the same day, the F-C-C approved Starlink Mobile's plan to launch fifteen thousand new satellites built for direct-to-phone service.

The market reaction was brutal. Verizon closed down about eight-and-three-quarters percent, its worst day since July of two thousand two. A-T-and-T fell nearly ten percent. T-Mobile fell a bit more than thirteen percent. All three were among the biggest decliners in the S-and-P five hundred. By N-B-C News's count, the three carriers lost more than fifty billion dollars in combined market value before lunch. Cable companies that sell wireless service on top of Verizon's network, Comcast and Charter, fell too. And the selling went global. In Europe, Deutsche Telekom, which controls T-Mobile, fell close to eight percent, and Europe's telecom group dropped about three percent to its lowest level since January.

There's a little irony in the T-Mobile part. Grain bought this exact spectrum from T-Mobile back in August, paying with cash and its own six-hundred megahertz licenses. Now it is flipping it to the company that worries T-Mobile's investors the most. New Street Research analyst David Barden noted that the reported eight-billion-dollar price works out well above what Grain had been rumored to want, which tells you SpaceX was willing to pay up to get it.

So why did tower stocks rally on the same news? Crown Castle closed up about fifteen-and-a-half percent. American Tower rose about nine percent. S-B-A Communications gained more than seven percent. The thinking is simple. If SpaceX really builds an on-the-ground network, it needs somewhere to put the equipment: towers, rooftops, and small cells. Morgan Stanley called the deal incrementally constructive for tower owners. A new customer with very deep pockets is good news if you rent out steel and real estate in the sky.

Now, the pushback, and there was plenty of it. The carriers say spectrum is not a network. Verizon put it bluntly in a statement to N-B-C News: a company can have billions of dollars of spectrum, but if it does not have the network to use it, it's just empty airwaves. John Saw, T-Mobile's president of technology, wrote that you can acquire spectrum in a single transaction, but you cannot acquire a nationwide, high-performing wireless network overnight. JPMorgan analysts said the deal makes Starlink Mobile's long-term opportunity more credible, but they still see limited near-term risk to the incumbents, given the time, infrastructure, and money it takes to build a real terrestrial network. T-D Cowen estimated a ground network could take years and cost upwards of eighty billion dollars.

That cost estimate points to the scenario a lot of analysts think is more likely. Instead of building everything, SpaceX could use this spectrum as leverage to cut a wholesale deal with one of the big three, renting space on an existing network the way many smaller brands already do. All three C-E-Os have said they don't want that kind of deal with SpaceX, and just last week they formalized a joint venture to pool resources for satellite coverage. The analysts at LightShed Partners called that a pretty weak response to a competitor spending billions on real spectrum, and they made a sharp point: the first carrier to sign with SpaceX gets the wholesale revenue and some say in how SpaceX enters the market. The other two get a new competitor with no partner to slow it down. T-D Cowen added another wrinkle. With a big government spectrum auction coming next April, the carriers now have a new bidder with deep pockets at the table.

And Washington doesn't look like it's in the way. F-C-C Chair Brendan Carr told CNBC that more competition in the spectrum market is really good news for American consumers. He said the agency will probably bring more than one hundred billion dollars of spectrum to market over the next two years, and that it's not the government's job to pick winners and losers.

So what does it all mean? The phone companies have been owned for years as steady dividend stocks, with three big players and pricing that mostly holds. What changed today is not next quarter's earnings. It's the long-term picture. Investors are asking whether a fourth national competitor, backed by the richest man in the world and a satellite network nobody else has, could force price cuts or raise the cost of keeping customers. Into next week, watch three things. First, whether any of the carriers blinks and starts talking to SpaceX about a partnership. Second, what the F-C-C does on the approval and how fast. And third, earnings season, when Verizon, A-T-and-T, and T-Mobile will all get the same question on their calls: what's your plan for SpaceX? That's the first deep dive.

From a company whose stock just lost its sense of safety, to one that just got its swagger back. Humana.

Humana.

If you are not on Medicare, here's the short version of why this stock jumped. Every year, the federal government grades Medicare Advantage plans, the private health plans that cover tens of millions of older Americans, on a scale of one to five stars. The grades look at things like preventive care, drug management, how often patients end up back in the hospital, and customer service. And they come with real money attached. Plans rated four stars or higher can qualify for government bonus payments. The ratings the government released Thursday night are the twenty twenty-seven ratings, and they set those bonus payments for twenty twenty-eight.

Humana's results were a dramatic turnaround. The company said ninety-five percent of its Medicare Advantage members will be in plans rated four stars or higher for twenty twenty-seven. Reuters reported that this year, that number was just twenty percent. J.P. Morgan had been expecting something like sixty to seventy percent. On top of that, about forty-two percent of Humana's members will be in plans rated four-and-a-half stars. Humana now has eighteen Medicare Advantage contracts rated four stars or better, eleven more than a year ago, and its standalone prescription drug plan earned four-and-a-half stars too.

To understand why the stock reacted so strongly, you need the backstory. Two years ago, Humana's ratings fell sharply, which put billions of dollars of bonus payments at risk. Humana sued the government over how those ratings were calculated, and it lost that case last October. Then in February, it gave a profit forecast for this year that came in below what Wall Street expected. For a long stretch, the star ratings were the single biggest cloud over the stock. Today that cloud cleared, and then some.

The shares jumped as much as fifteen percent in early trading and finished up about eleven-and-a-half percent, to around four hundred thirty-two dollars. That was one of the best moves in the S-and-P five hundred today. Evercore I-S-I analyst Elizabeth Anderson pointed to better scores on drug-plan quality, health-plan quality, and hospital readmissions, and estimated Humana could collect about four-point-eight billion dollars in bonus payments in twenty twenty-eight as a result.

Humana also filed an update with regulators this morning that's worth a close listen. The company said it beat its own goal of top-quartile results, which it defines as star-related revenue per member at least ten percent above the median of a peer group that includes UnitedHealth, C-V-S, Elevance, and Centene. Then it added an important bit of caution. Humana said it will keep designing its plans as if its performance is roughly at that top-quartile level, and that some of this outperformance will be one-time in nature. It expects a benefit in twenty twenty-eight that it plans to use for one-time investments and returns to shareholders, and it said it will share more about the size once it has more data. In other words, management is telling investors not to annualize this windfall forever, which is a sensible thing to say after the last two years.

What about the rest of the group? J.P. Morgan estimates the share of UnitedHealth's members in four-star-or-better plans will fall to about sixty-seven percent from eighty-one percent, and C-V-S Health's to about seventy percent from eighty-four percent. C-V-S finished down nearly two percent. UnitedHealth actually rose about two-and-a-quarter percent, and Elevance gained almost three percent, as the whole health care group had a good day. Smaller Medicare-focused Alignment Healthcare fell about thirteen percent. Across all of Medicare Advantage, the government said about seventy-one percent of enrollees in plans with drug coverage will be in contracts rated four stars or higher next year.

There's one more reason the timing matters. Medicare open enrollment starts next Thursday, October fifteenth, and runs through December seventh. The new ratings show up on Medicare's plan finder, so for the next eight weeks, Humana gets to sell with a much better report card. As C-E-O Jim Rechtin put it, the ratings are a direct reflection of the hard work thousands of Humana employees put in every day.

The open question is how much of that bonus money actually reaches the bottom line. Analysts at Baird said the profit boost will depend on how much Humana reinvests in richer member benefits and in its arrangements with doctors and hospitals. Into the coming months, watch three things. First, what kind of enrollment Humana pulls in during open enrollment with these new ratings. Second, how medical costs are running, because higher stars don't help much if members are using a lot more care. And third, UnitedHealth's earnings next week, which will give investors a read on the whole Medicare Advantage business. That's the second deep dive.

Now from health care to the airline that kicked off earnings season this morning. Delta Air Lines.

Delta Air Lines.

Delta is the first major airline to report every quarter, so investors use it as an early read on travel demand and on how the industry is handling costs. And this quarter, the cost that matters is fuel. Jet fuel prices have surged since the Iran war started in February, and fuel is an airline's second-biggest expense after labor.

Here is what Delta reported. On the revenue side, things looked great. Adjusted revenue hit a record for a September quarter at about seventeen-point-six billion dollars, up sixteen percent from a year ago, on flat capacity. In other words, Delta flew about the same number of seats and charged a lot more for them. Main cabin unit revenue rose seventeen percent. Premium revenue, the more expensive seats up front, rose eighteen percent. Loyalty revenue rose eighteen percent, and Delta said its American Express partnership is on pace to pay it more than nine billion dollars this year. Corporate travel sales grew by double digits in every sector.

But then there's fuel. Delta's adjusted fuel bill for the quarter was about four-point-one billion dollars, up sixty-two percent from a year ago. It paid an average of three dollars and sixty-one cents a gallon, up sixty percent. That was more than five hundred million dollars above what Delta had planned for when it gave guidance back in July. When reporters asked what drove the forecast cut, chief financial officer Erik Snell answered in three words: all of it's fuel.

So the bottom line came in slightly short. Adjusted earnings were one dollar and seventy-two cents a share, about even with last year, but a few cents below what analysts expected. CNBC noted it was Delta's first earnings miss in two years. And the full-year outlook came down a lot. Delta now expects adjusted earnings of five dollars and ten cents to five dollars and sixty cents a share, down from six-fifty to seven-fifty back in July. It cut its free cash flow outlook to about two-and-a-half billion dollars, from as much as four billion. For the fourth quarter, Delta guided to earnings of one dollar and fifteen cents to one dollar and sixty-five cents a share, with fuel at about four dollars and twenty-five cents a gallon. That price already includes about forty cents a gallon of help from the oil refinery Delta owns outside Philadelphia. Overall, Delta says it now expects to absorb about six billion dollars of extra fuel cost this year and still earn about four-and-a-half billion dollars before taxes.

Here's the part that shapes how you think about the airline industry right now. C-E-O Ed Bastian says customers are not pulling back, even as fares rise. He told CNBC the consumer response continues to be quite strong, across all channels, all cabins, all geographies, business and leisure. And the government's latest inflation report showed airfares up more than twenty-three percent from a year ago. Delta expects fourth-quarter revenue to grow about twenty percent, and it is keeping a tight lid on supply. Seats are growing less than two percent, with fewer seats in the main cabin. That's the formula: fly about the same amount, push premium and loyalty, and pass as much of the fuel bill along to passengers as they will tolerate.

Now, the stock. Delta fell about two-and-a-half percent in early trading, which is about what you'd expect from a miss and a big guidance cut. But it climbed back through the day and finished essentially flat. United also finished flat, and American Airlines slipped about three-tenths of a percent. A few things may have helped. The new full-year range wasn't far below where analysts had already moved their numbers, the fourth-quarter revenue outlook was strong, and Delta said earnings at the top of its fourth-quarter range would match last year. And remember that diesel move from the top of the show. Jet fuel and diesel are close cousins, so a drop in diesel futures on a day when you just told everyone your problem is fuel doesn't hurt.

Into the coming weeks, watch three things. First, the fuel price, especially with Hurricane Isaias threatening Gulf Coast refineries this weekend. Second, United and American when they report, to see if the strong demand Delta describes is showing up across the industry or mostly at the premium end. And third, whether fares keep rising without denting bookings. Bastian is betting they can. If travelers start to balk, the math changes quickly. That's the third deep dive.

And finally, the stock that ended the week at a record. Palantir.

Palantir.

Palantir makes data and A-I software that governments and big companies use to pull together huge amounts of information and actually act on it, from military logistics to factory operations. It's one of the most loved and most debated stocks in the market, because the growth is huge and so is the valuation. Today the bulls won. Palantir closed up about five percent, at about two hundred nine dollars a share, a new record close.

Two Wall Street calls drove the move. On Thursday, Goldman Sachs analyst Gabriela Borges upgraded Palantir to buy from neutral, with a price target of two hundred thirty dollars. Her team wrote that the stock is setting up for another phase of outperformance into twenty twenty-seven. Goldman framed the debate around two questions. First, has the best part of Palantir's A-I opportunity already played out? Goldman's answer is no. It thinks Palantir's market may be about to get much deeper, because of three trends: governments wanting their own A-I systems under their own control, companies wanting custom-built applications, and Palantir building products for specific industries. Goldman puts Palantir's revenue run rate around eight billion dollars, growing roughly one hundred percent.

The second question is about Palantir's unusual business model. Palantir sends its own engineers to work on-site with customers and build software alongside them. Critics say that's expensive and hard to scale. Goldman says Palantir has perfected the feedback loop between those field engineers and its product team, and that it has a head start using A-I agents to make that model more efficient. Goldman also pointed out that other companies, including Microsoft, Salesforce, and Snowflake, are now hiring field teams of their own, which is a kind of compliment. Then on Friday, Barclays started covering Palantir with an overweight rating and a price target of two hundred sixty-five dollars, saying Palantir has deep competitive moats that support unusual levels of growth and margins. Barclays started SpaceX at overweight the same morning.

Palantir didn't rise alone. The whole A-I software and cloud group bounced back after Thursday's selloff, which was the Nasdaq's worst day since mid-August. Amazon rose more than three percent. Microsoft gained more than two percent. Oracle climbed more than four-and-a-half percent. Cybersecurity names were strong too, with Palo Alto Networks up about five percent and CrowdStrike up more than four-and-a-half percent. Part of the relief came from OpenAI. Bloomberg reported that OpenAI's annualized revenue was about fifty billion dollars at the end of September and that it expects to reach seventy billion dollars or more by year-end, mostly from businesses. That matters, because so many of these companies are spending heavily on the idea that A-I customers will be able to pay their bills.

The chip side was more mixed. Nvidia slipped about half a percent, A-M-D fell about two percent, and the semiconductor index finished slightly lower. Apple fell about one percent after a report that it cut iPhone orders. But one chip-adjacent name had a great day. Lumentum, which makes optical parts that move data inside A-I data centers, rose about five percent after C-E-O Michael Hurlston told Bloomberg the company is sold out through twenty twenty-nine, and that it can't meet about seventy percent of demand for some products through next year. Six months ago he said sold out through twenty twenty-eight. When a supplier pushes its sold-out date out by about a year, that's a sign the A-I build-out is still running hot.

So what does Palantir's record tell us? Investors are willing to pay up again for the software companies they think will actually turn A-I spending into revenue, not just for the companies selling the chips. The risk is the same one it's always been with Palantir: expectations. A stock priced for near-perfection needs near-perfect results. Into its next earnings report, watch three things. First, whether U.S. commercial revenue keeps growing at the pace that got investors excited. Second, any sign of new government contracts or sovereign A-I deals, since that's the heart of Goldman's call. And third, how the broader A-I trade handles a ten-year yield above five percent, because high yields have a way of pressuring the most expensive growth stocks. That's the fourth deep dive.

So let's bring it all together. Stocks finished higher, and the S-and-P ended the week just shy of a record, even with long yields above five percent and oil near one hundred four dollars. SpaceX's spectrum deal knocked the three big phone companies to their worst days in decades while tower owners rallied, because investors suddenly see a real fourth competitor on the horizon. Humana jumped as its star ratings went from a major weakness to a major strength, with a big bonus payday possible in twenty twenty-eight. Delta showed that demand for travel is strong enough to pass through most of a six-billion-dollar fuel bill, but not all of it. And Palantir hit a record as Wall Street got more bullish on the software side of the A-I story.

Here's what to watch into next week. Monday is Columbus Day. The stock market is open, but the bond market is closed. Monday is also the four-year anniversary of this bull market, and the S-and-P has more than doubled since its late twenty twenty-two low. Tuesday morning, earnings season gets serious, with JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup, along with UnitedHealth. Wednesday brings the September consumer price index, plus Bank of America and Morgan Stanley. And over the weekend, keep an eye on Hurricane Isaias and the Gulf Coast, because that could move oil and fuel prices before Monday's open. We'll have the futures board and all of that for you on Monday morning's show, before the opening bell.

That's your evening company deep dive. Enjoy the weekend. Thanks for listening. I'm Trade and Ticker.