Market Movers: Meta Finds Itself Back at the Senate
Happy Saturday folks,
Just when you think it's getting safe to go back in the water, the market goes and has its biggest one-day drop in more than two years. On Tuesday, the S&P 500 fell by well over 4%, while the NASDAQ said “hold my beer” and dropped by more than 5%.
This sell-off was prompted by the publishing of the August consumer price index (CPI) from the Bureau of Labor Statistics. This showed that inflation is rising in the US much faster than economists had been anticipating, with the CPI rising by 0.1% in the month and a startling 8.3% over the past year.
To cut a long story short, this served as a big indicator to the market that we still have a long way to go to get inflation under control. It also means that we can probably expect more inflation-busting rate increases from the Federal Reserve, which is not something the market likes to hear.
That’s enough about inflation though — let’s take a look at how some of the stocks on our shortlist performed:
Here were the biggest movers in the MyWallSt shortlist this week:
Moving Up ⬆️
DraftKings (DKNG) +9.0%
Yext (YEXT) +8.3%
Wix (WIX) +8.0%
Twilio (TWLO) +7.6%
Farfetch (FTCH) +4.0%
Moving Down ⬇️
Adobe Inc. (ADBE) -21.7%
Meta (META) -11.6%
Lovesac (LOVE) -11.4%
Stitch Fix (SFIX) -11.0%
Silicon Valley Bank (SIVB) -10.4%
Surprisingly, shares in Twilio were up this week, despite the company announcing plans to lay off 11% of its workforce.
On Wednesday, CEO Jeff Lawson sent out an email to all employees outlining severe restructuring plans for the company. In the note, he acknowledged Twilio’s recent growth, but conceded that “it was too fast” and came “without enough focus on our most important company priorities”.
However, it was probably the focus on these “priorities” that had Twilio stock up despite the bad news. Twilio has a target to reach profitability by 2023, which will be a very important milestone for the fast-growing company. It seems as though investors were pleased to see that Lawson and his team are not afraid to make difficult decisions in pursuit of that goal, which bodes well for the long-term future of the company.
Adobe stock fell towards the end of the week after it announced that it was acquiring its up-and-coming competitor Figma for $20 billion.
The deal — which will be comprised of half-cash, half-stock — sees Adobe pay a steep premium for the collaborative design tool. In its last funding round back in 2021, Figma was valued at $10 billion, while this year, it is on track to generate $400 million in revenues.
However, despite paying top dollar, this could be a very shrewd move by Adobe. Figma and its tools are not a direct competitor to Adobe, which means that its estimated total addressable market of $16 billion could sit alongside Adobe's main market rather than within it.
In addition to this, the fact that big tech companies like Microsoft, Google, Oracle, and Salesforce have all signed deals with Figma recently surely made the price more palatable for Adobe.
Another tough week for Meta — what’s new?
As usual, there wasn’t just one story that caused the slide in share price, so here’s a smorgasbord of the bad news coming from the artist-formerly-known-as-Facebook.
First off, an exposé from The Wall Street Journal showed us some internal research which details the performance of Instagram’s Reels feature versus its counterpart, TikTok. Unfortunately for Instagram, it appears that Reels is no match for the Chinese goliath, with users spending one-tenth of the time on Reels per day that they do on TikTok. Worryingly, the same internal report also detailed that the portion of users who think that Meta “cares about them” has fallen 70% since 2019, reaching 20% this summer.
In addition to this, Meta representatives found themselves in front of the Senate again this week to answer to the U.S. Senate Homeland Security and Governmental Affairs Committee. In the words of the committee, this hearing was an opportunity "to understand the extent to which social media companies’ business models, through algorithms, targeted advertising, and other operations and practices, contribute to the amplification of harmful content and other threats to homeland security."
But, even though there was nothing particularly newsworthy about the appearance, this was the 31st time a Facebook or Meta executive has testified before Congress in the last 5 years according to Reuters.
Definitely not a good look.