Tuesday's Headlines: Ford Takes Drastic Measures To Cut Costs
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Evolent Health (EVH) +3.9%
Trip.com Group (TCOM) +1.7%
Avalara (AVLR) +0.1%
Moving Down ⬇️
Stitch Fix (SFIX) -13.3%
Nautilus (NLS) -9.1%
Lemonade (LMND) -8.6%
Bumble (BMBL) -8.4%
Coupa Software (COUP) -7.5%
Here are the stories that you need to know ahead of market-open today, Tuesday the 23rd of August.
Ford Takes Drastic Measures To Cut Costs ✂️
U.S. automaker Ford (F) has announced plans to cut approximately 3,000 jobs as part of a restructuring effort aimed at lowering overall costs at the company. An internal email circulated Monday informed workers of the company’s plans, with 2,000 salaried workers expected to be affected. The remainder of the workers to be laid off currently hold contract positions from outside agencies.
These cuts come as part of Ford’s aim to transition into an electric-focused company. According to the internal memo sent on Monday, co-signed by CEO Jim Farley and executive chair Bill Ford:
“Building this future requires changing and reshaping virtually all aspects of the way we have operated for more than a century…it means redeploying resources and addressing our cost structure, which is uncompetitive versus traditional and new competitors.”
This news prompted investors to sell, sending Ford’s stock down by over 5% yesterday. These cuts weren’t entirely unexpected, however, with Farley adamant that over $3 billion in annual costs are to be cut by 2026 as part of his Ford+ plan for the company’s future.
Ford is currently down just over 30% year-to-date as it has had to deal with the rampant supply-chain issues that have run roughshod over the entire automotive industry. Its refocus on electric vehicles could certainly bode well for the future of the company, but in such a competitive landscape, with first movers such as Tesla already years ahead in terms of development, Ford will really need to get motoring sooner rather than later.
Zoom’s Revenue Slows, Cuts Guidance 📹
Zoom (ZM) disappointed in last night’s earnings call as revenue slowed to single-digit growth. The video-conferencing software specialist posted revenue of $1.1 billion for the quarter, which was just 8% higher than the same period last year. A far cry from the rip-roaring growth the company experienced during the pandemic.
The slowdown at Zoom has been attributed to a number of factors, including the strong dollar, underperformance in its online subscriptions, and higher-than-expected deferred revenue as the company’s sales patterns shift back to enterprise clients. All of this has cumulated in the company revising down its full-year revenue and earnings guidance to $4.385 - $4.395 billion and $3.66 to $3.69 per share respectively.
The company will shift its spending for the second half of the year to focus on areas of greater return on investment such as R&D and sales, and it has also launched a new pricing structure entitled Zoom One. With the stock down almost 50% since the start of the year, and a further 9% in pre-market trading, management may need to employ some more drastic measures to turn around the once high-flying business.
AMC Plunges Thanks To New Share Class 🎞
Shares of AMC plummeted close to 42% during the trading day yesterday thanks to the issuing of the company’s new preferred share class, although wider industry worries are also rocking the boat.
Yesterday, AMC’s new class of share — known as ‘APE’ units — began trading. These have initially been distributed as a special type of dividend to all existing AMC shareholders for free.
However, with the company authorized to issue 1 million APEs in total and less than half of them distributed so far, it is expected that AMC will sell the remaining units at a later date to raise cash. This might go some way in paying off the $10 billion of debt AMC held at the end of the last quarter.
Because each APE unit can be converted in the future to a common share of AMC, the issuing of this new share class had the partial effect of a stock split on the company’s share price, leading to yesterday’s precipitous drop.
However, yesterday’s news that industry-rival Cineworld is considering filing bankruptcy should also have had some impact on AMC, with the wider cinema industry still reeling from the rise of streaming services and COVID-19 lockdowns.
It was in the midst of COVID-19 that AMC became a well-known ‘meme’ stock on Wall Street. Founded in 1920, AMC has the largest share of the U.S. theater market, but has struggled alongside industry compatriots in recent times due to a multitude of factors. After closing all of its locations and furloughing its staff during the lockdowns of 2020, its share price then surged more than 300% in January 2021 thanks to a Reddit-fuelled short squeeze.
Since then, AMC and its management has embraced the meme-stock culture it has become associated with. For example, last year the company began accepting cryptocurrencies like Bitcoin and Ethereum as payment through its app.