Tuesday's Headlines: Rivian May Be Looking At Significant Layoffs
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
ShotSpotter (SSTI) 1.3%
American Tower (AMT) 1.2%
Axos Financial (AX) 0.8%
Casey's (CASY) 0.8%
Markel Corp (MKL) 0.7%
Moving Down ⬇️
Duolingo (DUOL) -14.3%
Peloton Interactive (PTON) -12.6%
Twitter (TWTR) -11.3%
Redfin (RDFN) -10.7%
DraftKings (DKNG) -10.3%
Here are the stories that you need to know ahead of market-open today, Tuesday, the 12th of July.
Rivian May Be Looking At Significant Layoffs ✂️
Up-and-coming electric vehicle (EV) manufacturer Rivian is reportedly looking to cut its workforce by approximately 5% in the coming weeks. This will represent close to 700 of its roughly 14,000-strong workforce.
Shares in Rivian dropped by close to 7% yesterday following the news breaking and it’s continuing on a downward trajectory in premarket trading today — currently down a further 2%. The company allegedly grew too rapidly to maintain its expanding workforce, and now with a much more dire economic situation at hand, the firm is forced to make a difficult decision. Rivian’s workforce has effectively doubled in the past year in order to facilitate an increased production push following its immensely publicized November IPO.
EV companies have been suffering across the board, with supply chain issues and a severe shortage of semiconductors wreaking havoc on the industry at large. Industry leader Tesla has also previously announced that it intends to cut close to 10% of its salaried workforce in an attempt to quell costs.
In general, however, larger companies such as Ford and Tesla have much more of a capacity to absorb these economic hits. For newer businesses like Rivian, they can be hammer blows to any attempted growth.
Rivian is currently down over 70% year-to-date and 77% from all-time highs seen following its market debut last year. The company has declined to comment on the impending layoffs as of yet, but it’s clear that decisive action will be needed to guide the company through this tumultuous period.
Netflix Searches for an Ad Exec 💼
Netflix (NFLX) appears to be ramping up its move towards ads as the company searches for an executive to lead its ad-supported content, according to a report from The Wall Street Journal.
At the company’s first-quarter earnings call back in April, management said that an ad-supported tier of the streaming service was something they were exploring in the face of falling subscriber numbers and tightening revenue growth. Now, it appears that Netflix is looking for the right expertise to lead this, with executives from Comcast and Snap Inc said to be in the interview process.
This comes off the back of recent comments from co-chief executive Ted Sarandos, who said that the company was exploring partnerships with the likes of Alphabet (GOOG) and Comcast in order to facilitate an “easy entry to the market”.
Investors and consumers alike appear split on the prospect of Netflix introducing ad-supported content to its site. On one-hand, consumers have become particularly sensitive to digital advertising in recent years, especially within content they are already paying a subscription for.
However, market saturation in the U.S. and — according to the company — password sharing across multiple households has put pressure on Netflix to maintain its explosive growth, with the service expected to lose another 2 million subscribers in the current quarter. Ad-supported streaming has worked well for other media companies like Hulu, HBO Max, and Spotify, and could be a key route into more price-sensitive international markets for the brand.
Netflix is reporting its second-quarter earnings after market-close next Tuesday, July 19th, so we can expect to find out more then.
Casino Shares Fall Amid Macau COVID Restrictions ⬇️
Casino companies with operations in the gambling enclave of Macau are under pressure after city officials ordered a week-long shut down of all non-essential businesses. The region, which relies heavily on the gambling industry, has seen hundreds of new cases of coronavirus in recent weeks. Unlike Europe and the United States, China has implemented a strict zero-COVID strategy, putting entire regions on lockdown as cases emerge.
Shares of Wynn Resorts, Las Vegas Sands Corp, and MGM Resorts, all fell on Monday, highlighting the degree to which US-based companies rely on Macau and its high rollers.
Wynn Resorts was founded in 2002 by Steve Wynn after he was ousted from his previous company, Mirage Resorts. The business has two properties in Las Vegas, but derives the majority of its revenue from its Macau subsidiary, where it now has three casinos.
Macau is seen as a huge opportunity for gaming companies like Wynn. The small enclave has a massive addressable market with China’s 1.4 billion residents and growing middle class. Licenses to operate in the region are strictly controlled, and land is limited, hindering competition.
However, in the past, the Chinese government has imposed restrictions that have caused volatility in companies that operate there. An anti-corruption crackdown under Chinese President Xi Jinping resulted in a steep slowdown in gaming revenue between 2014 and 2016, and in 2021 they announced plans for increased scrutiny of casino operations.
COVID lockdowns have previously been a disaster for the company. Wynn’s Macau revenue declined nearly 80% in 2020, while total industry revenue was just 30% of pre-pandemic levels last year.