Tuesday's Headlines: Pinterest Soars Pre-Market
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Roku Inc. (ROKU) +9.4%
Nautilus (NLS) +9.2%
Lemonade (LMND) +8.8%
Lovesac (LOVE) +4.8%
Shopify (SHOP) +4.6%
Moving Down ⬇️
Eventbrite (EB) -9.1%
Bumble (BMBL) -5.2%
2U (TWOU) -5.2%
Baozun (BZUN) -2.5%
Here are the stories that you need to know ahead of market-open today, Tuesday the 2nd of August.
Pinterest Soars Pre-Market 💰
Pinterest (PINS) stock is up almost 20% in pre-market trading after last night’s earnings report, in which the company posted some rather underwhelming financials. While the numbers may have disappointed, the company’s user figures outperformed expectations, providing a glimmer of hope for the social media company. An announcement from famed activist investor Elliot Management that it is now Pinterest’s largest shareholder may be the real reason for the jump in stock price, however.
Let’s start with earnings. Revenue came in at $666 million for the quarter, up 9% year-over-year, coming in slightly below expectations. Adjusted earnings per share of $0.11 were well below analysts’ estimates, and guidance of revenue growth in the mid-single digits for the third quarter of the year also falls short of what was expected from the company. Global monthly active users fell 5% to 433 million, which was actually a result for Pinterest as investors had forecast a much steeper decline in its user base.
Pinterest’s woes are similar to that of its social media compatriots, with the macro environment and a weaker consumer forcing advertisers to pull back on ad spend.
So with all this doom and gloom, why is the stock soaring?
Activist investor Elliot Management announced last night that it had become Pinterest’s largest shareholder. The hedge fund is famous for its ruthless approach to activism. With the stock down more than 75% from recent all-time-highs, investors are backing the fund to make the changes necessary to revive the business. Elliot made the following statement:
“As the market-leading platform at the intersection of social media, search and commerce, Pinterest occupies a unique position in the advertising and shopping ecosystems, and CEO Bill Ready is the right leader to oversee Pinterest’s next phase of growth.”
Activision Beats Guidance Despite Declining Revenue 🎮
Activision Blizzard (ATVI) shares have risen slightly in pre-market trading after the video game publisher posted a better-than-expected second quarter.
The maker of ‘Overwatch’ and ‘World of Warcraft’ saw revenue decline to $1.64 billion from $2.3 billion in the same quarter last year. This marks the third straight quarter of declining revenue for the company. Despite this bleak year-over-year outlook, Activision still managed to beat analysts’ forecasts which predicted $1.6 billion in revenue.
Adjusted earnings came in at 47 cents per share — an almost 50% drop from a year earlier and slightly below analysts’ estimates.
Much of this underperformance has been pinned on ‘Call of Duty Vanguard’, the latest release in the series that came to market last fall. The game received largely negative reviews and has been unable to keep up with competition from Xbox Game Studios’ ‘Halo’ and Electronic Arts’ ‘Battlefield’. The ‘Call of Duty’ series is an important tentpole for Activision, generating significant revenue from in-game purchases, subscriptions, and advertising, so a disappointing iteration can take a significant toll on earnings.
That being said, if all goes according to plan, by next summer Activision will be a part of Microsoft. The deal was announced in May to the tune of $68.7 billion and is expected to close in June 2023. However, Microsoft still needs to convince regulators that the acquisition won’t create a monopoly. U.K. regulators have already opened up an antitrust probe.
The deal would value Activision at $95 a share, an almost 20% premium from its current valuation.
UiPath Makes a Bold Acquisition 🤝
Software automation company UiPath has announced the purchase of artificial intelligence firm Re:infer Ltd. As of yet, the terms of the deal have not been disclosed, but what we do know is how Re:infer might fit into UiPath’s ecosystem of automation.
Re:infer specializes in language processing software. It can identify, analyze, and process data from a whole host of customer interactions — from emails to voice memos, and anything in between. As UiPath’s Ted Kummert explained, “once you analyze communications data, you want to automate around it.”
UiPath will now be able to work on developing a suite of automation tools centered around customer-based problems garnered from analyzing user data acquired from Re:infer’s software. Customers will be able to navigate common problems and troubleshoot issues without the need for a dedicated customer service worker.
UiPath’s software allows businesses to automate repetitive tasks through Robotic Process Automation (RPA) — think of Microsoft Excel’s macro functions but on steroids. This allows companies to cut down on administrative workloads, allowing employees to focus more on their core competencies, thus increasing productivity.
The company is currently down over 57% year-to-date but has largely suffered at the hands of the wider rotation away from tech-based growth stocks. Despite still not being profitable, the company is nevertheless growing its high-margin subscription business by 50% a year — as detailed by Rory in his recent article on the firm. This purchase is a sign that UiPath is focused on continued growth, and that its current market woes won't stop it from building toward the future.