Tuesday's Headlines: Ford Warning Shocks The Industry
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Wix (WIX) +15.7%
Stitch Fix (SFIX) +4.8%
Nordstrom (JWN) +3.9%
Cloudflare (NET) +3.9%
Shopify (SHOP) +3.8%
Moving Down ⬇️
2U (TWOU) -6.0%
Eventbrite (EB) -5.1%
Upstart Holdings (UPST) -4.1%
Zillow (Z) -3.6%
Bill.com (BILL) -3.4%
Here are the stories that you need to know ahead of market-open today, Tuesday the 20th of September.
Ford Dips After Warning of $1 Billion in Extra Costs 😰
Shares of Ford Motor Company (F) are down about 5% at time of writing in pre-market trading after the company warns of outsized costs in the current quarter. Due to supply chain issues and inflation, the iconic automaker finds itself short on parts for 40,000 - 45,000 vehicles, with expected additional costs to reach $1 billion.
The parts shortage has led to a delay in the company getting its vehicles to dealers, with Ford expecting to now complete these deliveries in the fourth quarter. This will lead to some lumpy results in the second half of the year, and management expects third-quarter adjusted earnings before interest and taxes (EBIT) to be in the range of $1.4 to $1.7 billion. While not ideal, it reiterated its full-year EBIT guidance of $11.5 to $12.5 billion, indicating that it expects earnings to recover in Q4.
This is just another in a long line of supply chain issues to affect the auto industry since the outbreak of the pandemic, and it may not be the last. As automakers pivot to electrification en masse, we may see a battle play out for the vital natural resources that power EVs in the future. Something Ford has already addressed in its ambitious future plans.
If you’re interested in the company or the industry in the general, we just updated our outlook on the automakers in our shortlist.
Activist Investor Sends Wix Soaring 🚀
Shares of Wix (WIX) skyrocketed by over 15% yesterday following the announcement that activist investor Starboard had taken a sizeable position in the company. A filing with the Securities and Exchange Committee (SEC) detailed that Starboard has acquired almost 5.2 million shares in the Israeli cloud-based web development firm. This equates to roughly 9% of the company.
Since disclosing this stake, Starboard has reportedly been in talks with Wix about how operations can be improved. Wix has admittedly been struggling since late 2021 as a wholesale rotation away from tech stocks and rampant inflation have wreaked havoc on its share price. It’s currently in the middle of a three-year cost-cutting program in an attempt to rectify the losses of the past year.
Starboard sees the potential in Wix, however, stating in its SEC filing that the company’s stock was “undervalued and represented an attractive investment opportunity.” This vote of confidence seemed to rouse investors, as Wix rallied by over 15% on the back of the news.
Wix certainly has impressive opportunities for growth. It currently boasts over 220 million registered users globally, but only six million of those actually have premium paid subscriptions. Starboard will undoubtedly be looking for ways to potentially monetize the majority of users who currently use the firm’s tools for free.
Wix is down close to 47% year-to-date and sits more than 75% off all-time highs seen in early 2021. While this vote of confidence is certainly promising, big changes are likely required to reverse the slide it’s been in since those highs.
Take-Two Leak Could Spell Trouble 🎮
Rockstar Games, a subsidiary of Take-Two Interactive (TTWO), was hacked at the weekend with more than 90 videos of the latest, in-development iteration of Grand Theft Auto appearing on GTAForums. According to the hacker, known as teapotuberhacker, the footage was obtained by breaking into Rockstar’s Slack channel, the platform used for internal communication, where the videos could be readily downloaded.
Interestingly, the same hacker claimed responsibility for a recent Uber data breach, in which they used a similar, Slack-based tactic. The hacker would go on to gain administrative access and was able to control various aspects of Uber, including the initial response to the attack itself.
In Rockstar’s case though, the fun is only just beginning. Teapotuberhacker claims to have source code for GTA 5 and 6’s development builds and stated they released the videos as proof of the attack. If this is true, the attack would be the largest in video game history. It is believed the hacker is now trying to blackmail Rockstar and Take-Two.
If the games’ source code was revealed online, it could be devastating for Take-Two’s competitive advantage. Depending on the completeness of the code, it could reveal trade secrets and increase the likelihood of pirated games.
So far, Rockstar has issued takedown notices to social media accounts and YouTube channels that reposted the footage but stopping the spread completely looks unlikely. Players who have seen the footage have complained about the game’s quality but, to be fair, it is still in development. Hopefully, these initial reactions do not tarnish the game’s eventual release.
In a statement posted to Twitter, Rockstar said:
“We are extremely disappointed to have any details of our next game shared with you all in this way. Our work on the next Grand Theft Auto game will continue as planned and we remain as committed as ever to delivering an experience to you, our players, that truly exceeds your expectations.”
Take-Two’s stock is down 1% in the past five days.