Friday's Headlines: Storm Clouds Loom for FedEx

Friday's Headlines: Storm Clouds Loom for FedEx

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Roku Inc. (ROKU) +8.0%

Wynn Resorts (WYNN) +7.5%

Netflix (NFLX) +5.0%

Chegg (CHGG) +4.5%

DraftKings (DKNG) +4.5%

Moving Down ⬇️

Adobe Inc. (ADBE) -16.8%

ServiceNow (NOW) -4.8%

Arista Networks (ANET) -4.4%

Prologis Inc. (PLD) -4.0%

Workday (WDAY) -3.6%

 

Storm Clouds Loom for FedEx 🌩

FedEx (FDX) shares are down close to 20% in pre-market trading this morning after the delivery pioneer issued a profit warning for the coming months.

After the bell last night, the Memphis-based company reported its earnings for the last quarter ended August 31st. This ended up being much softer than analysts had expected, with revenue coming in marginally below expectations at $23.2 billion, but earnings per share of $3.44 falling well short of analyst forecasts of $5.14 per share.

Management blamed macroeconomic weakness in Asia for the poor performance, as well as a general cooling down of package volume as we emerged from the pandemic-induced boom in online shopping. In a prepared statement, FedEx CEO Raj Subramaniam said, “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first [fiscal] quarter results are below our expectations.”

Based on this, the company has scrapped its guidance for the rest of fiscal 2023. In addition to this, FedEx also announced plans to close dozens of offices and enact hiring freezes in order to reduce costs, especially considering the landscape of rising fuel and labour costs.

Though FedEx shareholders might be dismayed by the news, there’s a likelihood that the effect of this warning will spread to the wider market too considering the company’s pivotal role in the wider economic network.

 

Is a Takeover on the Cards for Roku? 💸

Roku (ROKU) stock popped 8% yesterday after rumours emerged that the company is preparing to be acquired.

Yesterday, some eagle-eyed investors noticed that Roku had made a number of amendments to the language regarding severance in its executive contracts. These revisions include the mention of the phrase “change in control” an extra nine time in the executive severance plan, leading investors to believe that a change of control was now in the offing.

Of course, all of this remains pure speculation at the moment, with no statement coming from Roku at time of writing. However, one could perhaps forgive investors for expecting a takeover.

Back in June, there were rumours abound of a buyout after Business Insider reported that the company had suddenly closed the trading window for Roku employees, not allowing them to sell any vested stock. Add to this that the company’s stock is well over 80% off all-time highs, and the possibility of a larger player coming in to snap up the company and its 63+ million subscribers doesn’t seem all that wild.

 

Adobe Acquisition Upsets Investors 😢

Adobe (ADBE) was down more than 16% yesterday after it was announced the software giant is acquiring its up-and-coming competitor Figma for $20 billion. Adobe will pay for the deal using half cash and half stock.

Figma was valued at $10 billion in its latest funding round taking place in 2021. So far this year, it is on track to generate $400 million in revenue, meaning Adobe is paying a pretty steep premium.

Clearly, investors and analysts have yet to be sold on the deal, punishing the stock. Many felt that this was an admission from Adobe that its products are falling out of favor and growth is slowing. In its latest quarter, Adobe reported net income of $1.14 billion and revenue of $4.43 billion, up 13% year-over-year. This was somewhat disappointing considering Adobe routinely achieves revenue growth in the low 20% range. The company was also forced to temper its full-year guidance, citing foreign-exchange challenges.

However, Figma is not exactly a direct competitor to Adobe’s suite of products. While it is considered a design tool, it is not directed at designers like Illustrator or Photoshop. Instead, Figma is used by developers and product managers when planning the look and feel of apps and websites. According to David Wadhwani, Adobe’s Executive Vice President of Digital Media, Figma’s total addressable market is valued at about $16 billion while Adobe’s suite of products has a target market of $60 billion. Clearly, Figma is meant to complement existing offerings and bring in a new type of customer.

Interestingly, CNBC reported in August that more and more big tech companies were using Figma in combination with traditional Adobe products. Microsoft, Google, Oracle, and Salesforce have all penned deals with the company, so the addition of Figma could present a great opportunity for Adobe to bundle products and upsell.

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