Wednesday's Headlines: Investors Swipe Left on Match Group
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Pinterest (PINS) +11.6%
Peloton Interactive (PTON) +10.6%
DraftKings (DKNG) +8.9%
Stitch Fix (SFIX) +7.3%
Upstart Holdings (UPST) +6.3%
Moving Down ⬇️
THOR Industries (THO) -4.7%
Eventbrite (EB) -4.2%
Nike (NKE) -2.2%
Boston Beer Co. (SAM) -2.1%
Netflix (NFLX) -2.1%
Here are the stories that you need to know ahead of market-open today, Wednesday the 3rd of August.
Investors Swipe Left on Match Group 💔
Shares in Match Group (MTCH) have plummeted by almost 22% today in pre-market trading following the company’s second-quarter earnings report after the bell yesterday. Underperforming revenue and weak guidance seem to be the main culprits behind the sudden drop.
Match — the parent company of dating apps such as Tinder and Hinge — reported earnings per share (EPS) of $0.52 on revenue of $795 million. Despite this revenue figure being up 12% on the year-ago quarter, it still came in quite a bit below Wall Street’s estimate of $804 million. The company also issued guidance for the upcoming quarter of revenue between $790 million and $800 million — effectively displaying no real growth.
The company bemoaned a general lack of activity on its apps following a surge in the latter half of 2021 as the world began to socialize once again following the COVID-19 pandemic. The firm is also facing headwinds in the notable strengthening of the U.S. dollar against many major global currencies. According to CEO Bernard Kim, “this has caused a $74 million year-over-year revenue headwind year-to-date, and we expect it will be a significant headwind in 2H 2022 as well.”
Match is also seeing challenges specific in the Japanese market, where a rise in COVID cases has hindered engagement with its live streaming business.
Moving forward, Match faces a number of difficulties, perhaps most notably the departure of Tinder CEO Renate Nyborg. Announced yesterday, Nyborg’s exit from the company has necessitated an interim management team be put in place. Considering Match’s heavy reliance on Tinder to drive the bulk of its revenue, a suitable replacement will need to be found immediately to try and steady the ship. With the company already down over 42% year-to-date, time is certainly of the essence.
PayPal Soars as Elliott Management Discloses Stake 💸
PayPal (PYPL) stock is trading 10% higher pre-market as the company announced Q2 results after market close yesterday. The fintech giant reported revenue of $6.81 billion and adjusted earnings of $0.93 per share in Q2. Comparatively, analysts forecast revenue of $6.79 and adjusted earnings of $0.86 per share in the June quarter.
While sales rose 9% year-over-year, its total payment volume surged 13% to $339.8 billion. PayPal ended Q2 with 429 million active accounts, an increase of 6% compared to the year-ago period. Analysts expected customer accounts to rise to 432.8 million.
PayPal estimates Q3 sales at $6.8 billion, while earnings are forecast between $0.94 and $0.96 per share. Wall Street expected sales of $7.02 billion and earnings of $0.97 per share in the current quarter.
While investors were impressed with PayPal’s earnings and revenue beat, it also disclosed an information-sharing agreement with Elliott Management which should create value for PayPal in the future. Elliott Management has invested $2 billion in PayPal, making the activist hedge fund one of the largest investors in the company.
Due to an uncertain economic environment, PayPal is focused on reducing costs and improving capital efficiencies. In 2022, PayPal claimed costs would decline by $900 million. It also aims to reduce expenses by $1.3 billion next year.
Additionally, PayPal appointed Blake Jorgensen as its CFO, a Wall Street veteran, having previously worked with companies such as Electronic Arts, Levi Strauss, and Yahoo.
Robinhood Continues to Struggle 😰
Robinhood announced on Tuesday that it will reduce its headcount by 23% citing the difficult macro environment including “inflation at 40-year highs” and a “broad crypto market crash”. These layoffs follow an initial wave in April that saw the FinTech firm slash its ranks by 9%. The layoffs will be seen primarily in operations, marketing, and program management and will impact 780 employees. This will allow the company to close two of its offices.
The announcement prompted Robinhood to release its quarterly report a day early and results were certainly mixed. While revenue beat analysts’ expectations, earnings-per-share missed forecasts. Revenue was $318 million vs. $321 million estimated while net loss was 34 cents per share vs. 37 cents expected.
The report also detailed a decline in funded accounts, active users, and assets under custody — a troubling sign for Robinhood’s long-term prospects. During the retail trading hype of 2016 to 2021, Robinhood boasted that 50% of all newly opened brokerage accounts could be found on its platform, bolstering growth and fueling its 2021 IPO.
However, these high-flying days would appear long gone. This quarter, the firm only added 100,000 funded accounts bringing its total to just under 23 million.
Active users on the platform dropped by almost 2 million to 14 million, leading to a significant decline in trading activity. Constant buying and selling is necessary for Robinhood which generates the majority of its income from payment for order flow. Hence, the 44% drop in revenue year-over-year.
Never one to shy away from controversy, Robinhood also agreed this week to pay a $30 million settlement to the New York State Department of Financial Services, which alleged the brokerage failed to comply with cyber security, anti-money laundering, and customer protection laws.