Market Movers: A Tale of Two Economies

Market Movers: A Tale of Two Economies

FYI: There will be no Market Movers next week due to public holidays next Thursday and Friday here in Ireland.

Happy Saturday folks!

Looking at this week's big winners, it seems that dating could be back, but travel is taking a big hit. However, we might want to dive in a bit further to understand what’s going on with the market this week. 

Let’s get to it. 

Here were the biggest movers in the MyWallSt shortlist this week:

Moving Up ⬆️

Bumble (BMBL) +28.5%

Tripadvisor (TRIP) +11.3%

Pure Storage (PSTG) +10.2%

2U (TWOU) +10.2%

Evolent Health (EVH) +8.3%

Moving Down ⬇️

Huazhu Hotels Group (HTHT) -19.2%

Baozun (BZUN) -18.2%

The Trade Desk (TTD) -16.7% Group (TCOM) -15.1%

DraftKings (DKNG) -15.0%

The Winners

Let’s start with the winners!

Bumble (BMBL) +28.5%

The dating-app specialist had its best-ever single day of trading on Wednesday following a record-breaking Q4. The company posted revenue of $208.2 million for the fourth quarter, representing a 25.7% year-over-year (YoY) increase. 

Fears had been mounting that the current war between Russia and Ukraine would affect the stock significantly, with the company’s ‘Badoo’ app relatively popular in Eastern Europe. Despite Bumble making the decision to discontinue operations in Russia, investors were kept happy by the fact that its flagship app had grown its revenue by 42.2% to $150.5 million — more than making up for the forced loss of users.

Despite Bumble experiencing its strongest trading day ever, investors should be reminded that prior to that, the stock had hit all-time lows. The return of in-person dating following the pandemic, a general rotation away from growth stocks, and current geopolitical issues could all conspire to hinder the company’s forecasted growth, despite CFO Anu Subramanian’s bullish assertions that international growth and innovation will result in strong growth during 2022. 

Tripadvisor (TRIP) +11.3%

It’s been a tough couple of years for the travel industry (obviously) and the recent escalation of tensions between Russia and Ukraine into a full-blown invasion hasn’t exactly made investors feel more comfortable about the prospects for the immediate future.

But Tripadvisor and its shareholders didn’t appear to get the geopolitical memo this week as shares jumped on renewed confidence in the travel companion business. The catalyst to this spark of confidence came from company Director, Gregory B. Maffei, buying 50,000 additional shares in the business for a total transaction of approximately $1.12 million. This insider buying implies confidence in a business that is largely unaffected by conflict in Eastern Europe, where only a fraction of its income is derived. 

After all, the U.S. alone is responsible for almost 60% of its 2021 income and is unimpacted geographically. 

With travel restrictions all but lifted across the U.S. and Europe, Tripadvisor continues to benefit from years of pent-up wanderlust, and may see significant year-over-year revenue growth in 2022. 

The Losers

And now for the losers…

Chinese travel stocks (Huazhu Hotels Group (HTHT) & Group (TCOM) -15.1%)

Things may be peachy for the travel industry stateside, but the world’s second-largest economy is having some problems in the east.

Aside from conflict in Eastern Europe, continued curbs against COVID-19, and the very real threat of domestic regulatory sanctions in China, travel stocks in the country must also contend with scrutiny against their listings on U.S. markets. 

This week, the Securities and Exchange Commission (SEC) identified five U.S.-listed American depositary receipts of Chinese companies (Yum China, BeiGene, Zai Lab, ACM Research, and HUTCHMED) for failing to adhere to the Holding Foreign Companies Accountable Act (HFCAA).

The act, which was passed in 2020, permits the SEC to ban companies from trading and delist them from U.S. exchanges if American regulators are not able to review company audits for three consecutive years. These are the first such sanctioned businesses.

Of course, it is unlikely that this will impact Huazhu or, as they have not been identified as problem stocks, but it has spooked investors against all Chinese-based stocks. Expect near-term volatility as investigations continue against Chinese stocks. 

Speaking of Chinese businesses listed on U.S. exchanges…

Baozun (BZUN) -18.2%

It’s been a bad week for Baozun. While most companies are still climbing their way out of pandemic-driven lulls, Baozun is running into a headwind. 

The Chinese e-commerce leader generated $497.9 million in sales for its final quarter of fiscal 2021, down 5.2% on a year-over-year basis. CEO Vincent Qiu explained during the quarterly earnings call that "a weak consumption sentiment and constrictive government policies persist for China's e-commerce" in the wake of COVID-19.

This latest weakness simply adds to the more than 80% drubbing that Baozun has received over the past year, with shares falling 16% yesterday alone. 

While 14% growth in gross merchandise volume (GMV) offered some optimism for Baozun, there is still a lot of risk surrounding this business at the moment as it contends with a changing market and increasing tech regulations.