Friday's Headlines: Elliott Takes Stake in Pinterest
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Costco (COST) 4.0%
Evolent Health (EVH) 3.6%
Apple (AAPL) 2.1%
Moving Down ⬇️
2U (TWOU) -10.2%
Ericsson (ERIC) -9.2%
StoneCo (STNE) -7.6%
Wix (WIX) -6.7%
The Trade Desk (TTD) -6.7%
Here are the stories that you need to know ahead of market-open today, Friday, the 15th of July.
Elliott Takes Stake in Pinterest ⬆️
Shares of Pinterest (PINS) are currently up 15% in pre-market trading after reports that Elliott Management has taken an interest in the company.
According to a report in the Wall Street Journal, the activist investor has built a 9% stake in the social-media company over recent months, and has had active discussions with Pinterest’s management.
Pinterest’s share price exploded during the COVID-19 pandemic, as millions turned to the platform to plan home improvements amid lockdown restrictions. In February, the company posted its first profits on sales of over $2 billion. However, in the most recent quarter, the company saw monthly active users drop over 9% as restrictions ended and online spending declined. Changes to Apple’s tracking rules have also impacted the business.
In June, co-founder Ben Silbermann stepped down from his role as CEO and was replaced by Bill Ready, who had been working as president for commerce at Google. Silbermann holds 37% of the voting rights in the company, according to the most recent proxy statement.
Elliott Management is one of the most prominent activist investors on Wall Street. They have regularly fought for board seats and pushed out managers they felt were underperforming. Jack Dorsey’s resignation as CEO of Twitter last year was largely due to pressure from Elliott.
However, Pinterest’s co-founders, Silbermann, Evan Sharp, and Paul Sciara, control nearly 76% of the voting rights through their B-class shares. This may dampen Elliott’s ability to affect change at the business. Pinterst shares are down 77% from their 52-week high.
Taiwan Semiconductor Beats Earnings Estimates in Q2 💵
Taiwan Semiconductor, the largest chip manufacturer globally, announced its second-quarter results yesterday and reported revenue of 534.14 billion Taiwanese dollars or $18.16 billion, an increase of 43.5% year-over-year. Its adjusted earnings stood at 237.03 billion Taiwanese dollars ($7.91 billion) or $1.55 per share.
Analysts forecast TSMC to report revenue of $18.25 billion and adjusted earnings of $1.47 per share in Q2. While the company missed top-line forecasts, earnings surpassed consensus estimates, surprising investors given rising inflation rates and slowing demand.
TSMC expects revenue between $19.8 billion and $20.6 billion in Q3, compared to sales of $14.8 billion in the year-ago period. Comparatively, Wall Street expects sales of $20.1 billion in the quarter ending in September.
TSMC stated chip demand in Q2 was driven by verticals such as high-performance computing, automotive, and the internet of things.
Despite its stellar results, TSMC emphasized it would delay certain capital expenditures due to supply chain related challenges which are extending delivery times for chip making equipment.
TSMC maintained a cautious outlook due to a challenging macro-environment which might impact near-term demand and result in an oversupply of chips.
Shares of several semiconductor chip manufacturers have plunged lower in 2022 due to rising material prices, the ongoing war between Russia and Ukraine, and supply chain disruptions.
Sales and Costs on the Rise for Ericsson ⬇️
Swedish telecommunications giant Ericsson (ERIC) announced sales and profit rose in its second quarter but warned costs are climbing due to geopolitical conditions and general inflation.
Ericsson is one of the world’s largest makers of 5G equipment and has had a very good few years on the back of the rapidly expanding technology.
For Q2 2022, sales increased by 14% reaching $5.9 billion while profit rose by 19% to $444 million. Despite this, the company missed earnings estimates for the quarter, bringing in just $689 million compared to analysts’ forecasts of $756 million. Ericsson’s stock is down 10% on the news.
Management painted a mixed picture for the future, citing long-term tailwinds but also short-term headwinds. While demand for the company’s tech remains incredibly high, it needs to put in the work to de-risk its supply chain which will mean a temporary increase in spending. This prompted a drop in the company’s gross margin in its latest quarter. Most importantly, Ericsson wants to remove resources from China in light of geopolitical tensions between the country and the West.
Interestingly, these same tensions are also working in Ericsson’s favor, pushing American and European wireless carriers away from competitor Huawei over cybersecurity concerns.
Ericsson is also battling the fallout of a bribery scandal in Iraq that prompted an investigation from the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
In its earnings call, management stated they are fully engaged with the DOJ and SEC and the outcome of matters is yet to be determined.
Clearly, despite its highly relevant tech, it's not all smooth sailing for Ericsson.