Tuesday's Headlines: Walmart Guidance Update Shocks the Market

Tuesday's Headlines: Walmart Guidance Update Shocks the Market

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Silicon Valley Bank (SIVB) +8.2%

Boston Beer Co. (SAM) +5.5%

Teladoc (TDOC) +2.2%

Tripadvisor (TRIP) +1.9%

Evolent Health (EVH) +1.5%

Moving Down ⬇️

2U (TWOU) -11.6%

Upstart Holdings (UPST) -5.5%

Nautilus (NLS) -5.2%

Align Technology (ALGN) -5.2%

Wix (WIX) -4.9%

 

Here are the stories that you need to know ahead of market-open today, Tuesday the 26th of July.

 

Walmart Guidance Update Shocks the Market 😱

A late Monday announcement that retail giant Walmart was cutting its quarterly and full-year profit outlook sent shockwaves across the market.

Walmart is currently down close to 9% in pre-market trading following the news. Adjusted earnings per share (EPS) is now expected to decline by between 8% and 9% for the quarter, while annual EPS is predicted to slide by up to 13%. This is a stark contrast to the close to flat numbers previously expected.

The main reason for this unexpected dip is rising inflation, as shoppers are forced to focus on buying necessities instead of discretionary items which carry a higher profit margin. Taking this into account, Walmart actually expects same-store sales to rise by 6% for the quarter, but according to CEO Doug McMillon, “the increasing levels of food and fuel inflation are affecting how customers spend.”

Walmart is often seen as a bellwether for the wider economy, and as such, this announcement has had wide-reaching ramifications. Amazon (AMZN) is down over 3% pre-market ahead of its second-quarter earnings report this Thursday, and stock futures fell across the board as investors anticipate Walmart’s update may be the first in a string of guidance downgrades.

With the market particularly volatile right now, expect any major guidance changes announced during this earnings season to have significant effects on companies' stock prices, as investors continue to be exceedingly reactionary.

 

Alibaba Stock Pops on News of Dual Listing 💥

Alibaba is up about 5% in pre-market trading after the company announced it would pursue a dual primary listing on the Hong Kong stock market. Alibaba is already on both the New York and Hong Kong exchanges, however, its Hong Kong listing is a secondary one.

The announcement comes soon after the Hong Kong exchange adjusted its regulations to make it easier for companies to have dual primary listings. Alibaba is the first large company to take advantage of this, and likely not the last as companies will look to keep Chinese regulators onside as they exert more control over its big tech names. The listing is set to go through in late 2022.

The move has been lauded as a savvy one by many analysts, as the primary listing in Hong Kong allows Alibaba’s stock to be added to the Shenzhen-Hong Kong Stock Connect, which gives investors in mainland China access to the stock. This will follow in the footsteps of EV makers Xpeng and Li Auto in providing more liquidity.

It is also a failsafe if the current dispute between U.S. and Chinese regulators over accounting practices goes South. There has been a dark shadow cast on U.S.-listed Chinese companies of late as the dispute concerning the Holding Foreign Companies Accountable Act rages on. The act would allow the SEC to delist Chinese companies from U.S. exchanges if American regulators cannot review company audits for three years. With a primary listing elsewhere, if worse did come to worst, Alibaba could at least take refuge on the Hong Kong exchange.

 

Price Hikes Save Unilever 😅

Unilever Plc (NYSE: UL) raised its full-year revenue guidance on Tuesday after it beat analysts’ expectations for the first-half of the year thanks to its price hikes. This has pushed the stock up 2.9% so far today pre-market.

Unilever is one of the world’s largest companies, controlling some of the most famous and beloved brands around. Knorr, Dove, Lipton, Ben & Jerry's, Domestos, and Vaseline can all be found within the company’s portfolio. Unilever first emerged in 1929 after a merger between a Dutch margarine company and a British soap manufacturer. After the Second World War, Unilever expanded rapidly, picking up brands across the world in a variety of sectors.

In the wake of the pandemic and supply chain constraints, Unilever has struggled to contain soaring costs. This has been made worse by the war in Ukraine, which has increased the expense of necessary raw materials such as wheat, sunflower oil, and packaging pulp. The company’s first-half operating profit margin fell to 17% from 18.8% last year. That’s pretty shocking when you remember the company raised prices by 9.8%.

Despite this, Unilever’s quarterly sales grew by 8.1% year-over-year, beating analyst expectations of 7.2%. This puts the company on track to beat its full-year guidance, it now expects sales growth between 4.5% and 6.5%.

However, it will be interesting to see if changing consumer spending habits catch up with Unilever in the wake of Walmart’s underperformance and slashed forecasts.

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