Market Movers: Trouble for Under Armour as CEO Resigns

Market Movers: Trouble for Under Armour as CEO Resigns

Happy Saturday folks.

Another busy week on Wall Street, and while we did see some very small green shoots of recovery, bad earnings calls from retail giants like Target and Walmart sent the industry into a tailspin, dragging down the likes of Costco, which hasn’t even reported yet!

Inflation was the buzzword in both Target and Walmart’s earnings calls — and it’s no wonder, with US inflation currently at a nearly four-decade high. This is sending costs skyward for many retailers, who also have had to lower their margins in an attempt to keep customers spending money in their stores.

It’s not all doom-and-gloom, however, as we do have a couple of good news stories for you this week too.

Shall we?

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

Moving Up ⬆️

Upstart Holdings (UPST) +35.3%

Baozun (BZUN) +13.1%

BlackLine (BL) +12.7%

2U (TWOU) +12.5%

DraftKings (DKNG) +12.2%

Moving Down ⬇️

Lovesac (LOVE) -18.8%

Under Armour (UAA) -15.9%

Costco (COST) -14.9%

Etsy (ETSY) -13.9%

Cloudflare (NET) -12.6%

The Winners:

Upstart Holdings (UPST) +35.3%

For the third week in a row, Upstart has made the weekly movers list. First, it was a winner, then last week it had a catastrophic fall from grace after investors were less than impressed by management reducing revenue forecasts for the rest of the year.

This week, the stock is up a very respectable 35%, which is all the more impressive when you consider that the market is maintaining its downward pressure on growth stocks.

So what gives?

Well, in addition to the lowered revenue forecast, investors had been worried by the news that the company would temporarily place roughly $100 - $150 million of loans on its balance sheet, which increased risk for the company and raised questions about its business model. However, an update from CFO Sanjay Datta this week revealed that the company now plans to limit its balance sheet exposure to R&D loans only, even if it means limiting lending volume.

This clarification appears to have comforted investors somewhat, prompting the upward tick in share price.

Baozun (BZUN) +13.1%

It’s been a rough year for Baozun, with its stock price down over 75% since last May. However, the company got a slight boost this week thanks to the Chinese government.

On Tuesday, China's Vice Premier Liu He — the country's top economic advisor — said that Beijing would support companies that are central to the digital economy in China. Little detail on these supports was provided, but the fact that the comments are coming in the wake of a year-long crackdown on some of the country's most well-known technology companies is as a positive sign for investors.

At the end of 2020, the Chinese government introduced new regulations to curb the growing power of tech giants in the region, covering a wide range of related issues from antitrust to data protection. These measures impacted heavily upon some of the most well-known names in the region, including Tencent and Alibaba, as well as smaller players like Baozun.

2U (TWOU) +12.5%

Both 2U and Chegg (CHGG) stock were up this week on reports that the Indian online education startup Byju was weighing both companies for a potential acquisition.

As reported in Bloomberg, Byju has recently held talks with both companies with a view of acquiring one of them as part of its plans for international scaling over the next few years, giving it access to millions of new students. With a valuation of $22 billion, Byju is India’s most valuable start-up and has a history of snapping up international companies in the US, Singapore, and Austria in recent years.

2U was initially a success story when it came to market back in 2018, but has endured a difficult couple of years since and now finds itself with a market cap of around $850 million — a far sign off its $5.5 billion valuation four years ago.

DraftKings (DKNG) +12.2%

With all the fears over inflation in recent weeks, any company that’s managing to navigate these tricky economic waters well is in for a boost for investors.

That’s exactly what happened to DraftKings this week, whose stock jumped after CEO Jason Robins told Yahoo Finance that the company is “seeing absolutely zero impact to our customer cohorts due to any sort of inflationary pressures or otherwise, any other macroeconomic factors.”

Reporting earnings last week, the company beat on revenue expectations but posted an unexpectedly large loss, driving the stock down. However, Robins appears quite bullish on DraftKings prospects as we head into higher inflation, stating: “Gaming has generally been very well-performing during economic downturns, recessions, inflationary periods, and the like, so this is not a new thing. This is something that's been well-known about the industry for quite some time. And we're certainly seeing the same thing materialize in our numbers.”

The Losers

Under Armour (UAA) -15.9%

Worrying news coming from Under Armour this week as CEO Patrik Frisk announced that he would be stepping down from the start of next month.

Although no official reason was given for Frisk’s impending departure, the news will surely be a hammer blow to Under Armour’s turnaround plans that Frisk was spearheading. Joining the company in 2017 and stepping into the CEO and President role at the start of 2020, Frisk was instrumental in leading a revival of the Under Armour brand that had shed more than 80% of its value in just four years.

Focusing on limiting the amount of discounting that Under Armour did with third-party retailers, while also trying to make the brand appear more premium next to industry peers like Nike and Lululemon, the share price had doubled from its 2020 lows before the news of Frisk’s departure broke.

COO Colin Browne will step in and serve as interim president and CEO as the search for a replacement begins.

JamesJames

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