Monday's Headlines: Alibaba Faces Potential Delisting
Here were the biggest movers in the MyWallSt shortlist on Friday:
Moving Up ⬆️
Amazon (AMZN) +10.4%
Datadog (DDOG) +6.6%
Lovesac (LOVE) +5.8%
Tesla Motors (TSLA) +5.8%
Ford Motor Company (F) +4.9%
Moving Down ⬇️
Roku Inc. (ROKU) -23.1%
Eventbrite (EB) -11.8%
Baozun (BZUN) -9.1%
2U (TWOU) -5.5%
Lemonade (LMND) -5.0%
Here are the stories that you need to know ahead of market-open today, Monday the 1st of August.
Alibaba Faces Potential Delisting 😱
The ongoing dispute between the U.S. and China over accounting practices may claim its most prominent victim yet. The Security and Exchange Commission (SEC) has placed Alibaba on a list of 270 firms for potentially delisting off U.S. stock exchanges if inspectors are not allowed to audit the company’s books.
The rift originated from a law passed in 2020 to govern China-based U.S. listed companies after a number of fraudulent accounting scandals came to the fore. If Chinese regulators do not allow U.S. officials to review audits of the firms in question, they will face delisting in three years’ time. The announcement comes in the same week that Alibaba applied for a primary listing on the Hong Kong Stock Exchange, a contingency plan if the conflict between the two countries can not be resolved.
The news sent the stock plummeting 11% in what has been a rough time for Alibaba and Chinese stocks in general. However, the company has come out to say it will “strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange", indicating its willingness to work with regulators.
Investor sentiment has soured on the region as a whole as continuing COVID lockdowns, geopolitical tensions, and overarching government influence have combined to make a perfect storm. Down more than 70% in the past 18 months, Alibaba’s outlook remains clear as mud.
Intel Drops Following Disappointing Earnings 💻
Intel saw its stock slump by over 8% on Friday following an earnings report that revealed declining revenue and heavy misses on both the top and bottom lines.
The chip-maker reported adjusted earnings per share (EPS) of $0.29 on revenue of $15.32 billion — well below the expectations of Wall Street at earnings of $0.70 and revenue of $17.92 billion. Intel also reported a year-over-year decline in revenue of 22%, with its 14% underperformance against the analyst consensus its worst miss since before the turn of the millennium.
According to CEO Pat Gelsinger, “the sudden and rapid decline in economic activity was the largest driver of the shortfall but Q2 also reflected our own execution issues in areas like product design, and the ramp of AXG offerings.”
On the back of this poor performance, the company lowered its guidance for the full year but was adamant that things are going to get better. CFO David Zinsner stated that “we do think we’re on the bottom” when referencing the state of the industry currently. The finance chief added that seasonal improvements in the fourth quarter in conjunction with price increases should buoy the company through the rest of the year.
With its stock down over 31% this year so far, and Friday’s drop bringing about a symbolic shift with rival AMD now boasting a larger market cap than Intel, some significant work needs to be done to return Intel to its previous highs.
Eventbrite Plummets After Earnings 🎟
Shares of ticketing software company Eventbrite (EB) were down 12% on Friday after its most recent earnings report. While revenue came in at the high end of expectations, the company posted wider than expected losses and, most pertinently for investors, guidance that fell well below what The Street was targeting.
Revenue in the quarter came to $66 million, up 43% year-over-year thanks to a 37% increase in ticket volume from sustained demand and the return of larger events. The company’s net loss came in at $20.1 million for the second quarter of 2022 thanks to a 20% increase in operating expenses. It also felt a foreign-exchange squeeze, with the average ticket price remaining flat year-over-year thanks to the strong U.S. dollar.
For investors though, the real reason for the sell-off came down to guidance, with management giving a very cautious outlook for Q3. It expects revenue to fall between $65 and $68 million next quarter, well below analysts’ estimates.
Eventbrite is an event managing and ticketing company that empowers creators to promote and sell tickets to local events. Despite being in a competitive industry, it carved out a sizeable niche by targeting the promotion of events that many of its larger rivals deemed too small to bother with. As a result, Eventbrite has built a strong community of over 660,000 creators hosting over 5.4 million events worldwide in 2021.
The COVID-19 pandemic decimated the events industry and effectively shuttered Eventbrite’s main revenue flow, but the company was able to pivot to remote events and build some decent momentum despite suffering financially. Now, however, investors are looking for a return on investment with live events back in full swing. With its stock down almost 50% year-to-date, changes will have to be made.