Monday's Headlines: DraftKings Pop On ESPN Deal
Here were the biggest movers in the MyWallSt shortlist on Friday:
Moving Up ⬆️
DraftKings (DKNG) +3.3%
Markel Corp (MKL) +0.7%
Hasbro (HAS) +0.6%
THOR Industries (THO) +0.5%
Nordstrom (JWN) +0.5%
Moving Down ⬇️
2U (TWOU) -12.0%
Redfin (RDFN) -10.3%
Shopify (SHOP) -9.5%
Cloudflare (NET) -9.2%
Farfetch (FTCH) -8.9%
DraftKings Pops on Rumored ESPN Deal 🚀
Shares of the online bookmaker DraftKings (DKNG) were trading higher on Friday on the news of a purported new deal with ESPN, according to people close to the matter. The stock spiked as much as 9% in intra-day trading after the news hit the Street, before receding on what was a tough day for the wider market.
With many commentators viewing ESPN as an underutilized asset, with some even looking for Disney (DIS) to spin it off, steering into the world of sports betting could be one way of monetizing the brand. CEO Bob Chapek recently came out to say the sports network is critical in his overall vision for the company and “sports betting is a part of what our younger, say, under-35 sports audience is telling us they want as part of their sports lifestyle”.
While details of the partnership are not forthcoming, Disney has reportedly been on the hunt for a sports betting partner for ESPN for the better part of a year. The scale and reach that it could afford DraftKings would no doubt amplify the platform to new heights. The company is keeping schtum for now, with a spokesperson for the bettor stating:
“We have a great, long-standing relationship with ESPN. However, we speak to a variety of companies on a regular basis and don't comment on the specifics of those conversations."]
Chip Stocks Fall on Weak Demand and New Restrictions 📉
The chip sector is under increased pressure today after the United States Government issued new restrictions on the sale of semiconductors to China. On Friday, the US Department of Commerce expanded its list of chip technology that requires a license to be sold to China in an effort to dampen the country’s military expansion.
That news sent chip makers down across the board, with the PHLX Semiconductor Index falling 6% for the day. That came after a number of companies in the sector issued profit warnings in recent weeks.
Last week, electronics giant Samsung warned investors of a 32% drop in quarterly earnings — far worse than analysts had predicted. It was led by a sharp drop in demand as inflationary pressures hit. That has led consumers to hold back on bigger purchases like televisions and smartphones. Advanced Micro Devices (AMD) and Micron technology had both previously issued warnings of about a $1 billion shortfall in sales.
The new restrictions on sales to China expand on a decision that focussed on Californian chipmaker Nvidia last month. That led the company to cut its forecast for the third time this year.
Both Nvidia and Advanced Micro Devices have seen shares fall about 60% year-to-date. Micron Technology is currently down 44% for the year. Samsung is due to release full results on October 27th.
Retail Woes Hit Levi’s 👖
Shares of Levi Strauss & Co fell heavily on Friday and remain down at the start of this week after the retailer missed its revenue expectations in the last quarter and cut its forecast for the rest of the fiscal year.
Reporting last Thursday evening, the makers of iconic jeans like the 501s reported adjusted earnings of $0.40 per share in the last quarter, beating estimates of about $0.37 a share. However, revenue of $1.5 billion represented year-on-year growth of just 1% or 7% when viewed on a constant currency basis (i.e, eliminating the effects of foreign currency fluctuations).
While these results can be partially blamed on the effects of the strengthening dollar and the global reach of Levi’s business, the company also cut its expectations for full-year net revenue growth to just 6.7% - 7.0%. On a constant currency basis, this would represent 11.5% to 12% net revenue growth, which is down slightly from previous forecasts of 11% to 13%.
It was a parade of the usual suspects when it comes to Levi’s reduced outlook — supply chain disruptions, the rising cost of materials, and the effects of inflation starting to soften consumer demand. In particular, the company cited Europe as a region of difficulty as prices rise and the Euro falls against the dollar, though other markets like China saw much stronger growth of 53%.
Founded in the 1800s by a German immigrant to the US, Levi’s pioneered the popularity of the blue jean throughout the 20th century. However, both the brand and the business declined in popularity throughout the late 1990s and early 2000s. A rapid resurgence in the past decade helped to reestablish the business amongst consumers and, in March 2019, Levi's debuted for the first time on the New York Stock Exchange under the ticker LEVI with a valuation of $6.6 billion.