Friday's Headlines: Meta Cuts Hiring Plans in Ominous Memo
There will be no Market Headlines on Monday, the 4th of July as the markets are closed for Independence day.
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Chegg (CHGG) 2.7%
Lemonade (LMND) 2.6%
ShotSpotter (SSTI) 2.2%
Costco (COST) 2.0%
Moving Down ⬇️
RH (RH) -10.5%
Lovesac (LOVE) -10.1%
Pinterest (PINS) -9.0%
Stitch Fix (SFIX) -8.2%
iRobot (IRBT) -6.9%
Here are the stories that you need to know ahead of market-open today, Friday the 1st of July.
Meta Cuts Hiring Plans in Ominous Memo 😕
Meta employees have been warned of continued challenges over the coming months for the Facebook owner, as a flagging economy threatens to wreak havoc on the business.
This week, an internal memo circulated that detailed plans on how the company plans to weather the storm. Among these was confirmation that plans to hire new engineers have been cut by 30%-40% from an initial figure of 10,000. Wider hiring pauses were also announced last month, but this marks the first real specific information we’ve received on the matter from Meta.
In further worrying news for employees, CEO Mark Zuckerberg exclaimed that “realistically, there are probably a bunch of people at the company who shouldn’t be here.” Zuckerberg plans to “raise expectations” and develop “more aggressive goals,” which will likely see some workers leave the company of their own volition — something Zuckerberg seems to be hoping for based on his comments.
Chief Product Officer Chris Cox reiterated these ideas by outlining the need for “leaner, meaner, better-executing teams” within the company. All of this points toward further workforce strife for the Big Tech firm as it contends with a steadily weakening economy and continued challenges in its advertising business.
Zuckerberg went on to state, “if I had to bet, I'd say that this might be one of the worst downturns that we've seen in recent history." With Meta currently down over 52% year-to-date, it’s likely that employees and shareholders alike are concerned about these recent developments.
Walgreens Prepares for Recession 📆
Shares of Walgreens fell almost 7.5% yesterday after the drug store chain warned that it was preparing for a recession in its future guidance.
Reporting on its third fiscal quarter yesterday, America’s second-largest drug store chain by store count posted adjusted earnings of $0.96 per share on revenue of $32.6 billion. Although this came in higher than many analysts had expected, this did not reflect the $683 million charge that Walgreens had to pay relating to its opioid settlement with the state of Florida. Factoring that in, net income for the company fell to $289 million, or 33 cents per share — a sharp decline from $1.2 billion, or $1.38 per share, a year earlier.
There were a couple of other pieces of news for investors to digest. Firstly, Walgreens management flagged that they expect to see reduced business as demand for COVID-19 vaccinations and test kits wanes. To highlight this, the company administered 4.7 million vaccines in its last quarter, which is a significant decline from the 15.6 million and the 11.8 million administered in the quarters previous.
Of course, the eternal boogeyman of inflation also made an appearance, with CEO Roz Brewer noting that “there’s a shift in calculus due to food and fuel inflation” with the average consumer, but also that “health and wellness will always be a priority”.
Constellation Brands Tries to Shine 🍺
Constellation Brands was trading down on Friday despite a solid earnings report. The owner of Corona Extra, Modelo, Mi Campo tequila, and other spirits saw revenue and profitability grow year-over-year, but the stock stumbled after management lowered its financial forecasts for the full fiscal year.
Sales were up 17% to $2.36 billion in the quarter while earnings per share (EPS) came in at $2.90. This easily beat analyst expectations, which anticipated EPS of around $2.52 a share.
Interestingly, Constellation also announced its intention to eliminate its higher-vote Class B shares. These shares, which are principally owned by its founders the Sands Family, carry 10-1 voting rights over the Class A shares. This has allowed the Sands family to maintain control over the board and executive decision-making.
If the plan is accepted by shareholders, the Sands Family will receive Class A shares and cash in exchange for a dilution of their voting power. Going forward, the family will only control about 20% of the company, allowing Executive Chairman Rob Sands and Executive Vice Chairman Richard Sands to take a step back from operations.
Constellation is the third-largest beer supplier in the United States with a healthy 7.4% market share. However, in recent years its stock has struggled due to a disastrous investment in Canadian cannabis business Canopy Growth.
Throughout 2019, Constellation gradually acquired 36% of Canopy, and also maintains millions of stock warrants. Unfortunately, Canopy has struggled financially and its stock now trades more than 65% below what Constellation paid for it.
Time will tell if Constellation will cut its losses and focus on what it knows or if it wants to play the long, cannabis game.