Wednesday's Headlines: Uber Falls As The Gig Economy Comes Under Threat

Wednesday's Headlines: Uber Falls As The Gig Economy Comes Under Threat

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Upstart Holdings (UPST) +8.3%

ShotSpotter (SSTI) +3.8%

Texas Roadhouse (TXRH) +3.6%

THOR Industries (THO) +3.6%

Chuy's (CHUY) +2.9%

Moving Down ⬇️ Group (TCOM) -11.2%

Wynn Resorts (WYNN) -7.0%

Evolent Health (EVH) -6.9%

Netflix (NFLX) -6.8%

Pinterest (PINS) -6.7%

Here are the stories that you need to know ahead of market-open today, Wednesday the 12th of October.

Uber Falls As The Gig Economy Comes Under Threat 🚲

Shares of Uber crashed more than 10% yesterday after the Biden administration proposed a new rule that would make it more likely for gig workers to be classified as employees rather than independent contractors.

The ride-sharing giant, alongside its gig-worker-dependent compatriots like Lyft and Doordash, experienced the heavy drop yesterday off the back of comments from U.S. Labor Secretary, who said that his department had witnessed numerous cases where "employers misclassify their employees as independent contractors, particularly among our nation's most vulnerable workers”.

As such, the government is proposing a rule that aims to tackle “employee misclassification” , and to stop workers being deprived of “their federal labor protections, including their right to be paid their full, legally earned wages.” This proposal will begin public consultation tomorrow and run for 45 days.

Although none of the companies most heavily affected have commented yet, this could prove to be an existential threat for both the ride-sharing and food-delivery businesses. Both of these modern industries depend heavily on the so-called ‘gig worker’ economy to operate — essentially, hiring drivers and cyclists as independent contractors that get no employee protections like minimum wage or holiday pay.

Both regulators and workers alike have been pushing back on these practices recently, however, with the UK Supreme Court ruling that Uber drivers needed to be treated as workers rather than self-employed last year.

Intel Plans Restructuring, Potential Job Cuts 😬

Chipmaker Intel is making headlines this morning after two separate reports alluded to major restructuring in the business. The first entails the company’s plans to separate the design and production arms of the business, allowing it to fully utilize the potential of its factory capacity. The plans, led by new CEO Pat Gelsinger, will see Intel’s factories operate like a contractor, building semiconductors for the company as well as external chip makers. This is a stark change from how Intel has traditionally worked, with its factories exclusively producing chips for its own business up until Gelsinger launched a contract chip-making arm last year.

The second report alludes to potential job cuts in an effort to reduce costs in the face of weaker PC demand. People close to the business have alluded to thousands of redundancies in the business, likely to be announced around Intel’s Q3 earnings report on October 27. It is reported that divisions like sales and marketing could see cuts of up to 20% of their workforce.

Gelsinger alluded to as much during Q2’s earnings report a few months back:

“We are also lowering core expenses in calendar year 2022 and will look to take additional actions in the second half of the year”.

The semiconductor industry as a whole is really in a state of flux at the minute. Legislation brought in last week looks to curb the amount chip companies can export to China. The Ethereum Merge also reduced demand for GPUs as the future of crypto mining comes under question. However, both of these events follow on from a $50 billion stimulus package that is meant to encourage domestic semiconductor production, likely one of the reasons behind Intel’s expansion of production facilities to external companies.

For Intel — whose stock is down more than 50% year-to-date — to return the business to its former heights is a tall task. Industry rivals have gained a technological edge, with Intel arriving late to profitable industries like data centers. Its efforts to hone in on domestic chip production could prove prescient, however, as companies look to reduce dependence on the Chinese supply chain. It seems it will enter this next chapter as a much leaner business too.

LVMH Proves There is Still an Appetite for Luxury 👜

Yesterday, the world’s largest luxury group, LVMH, announced its third-quarter results and defied the pessimistic market. The French holding company had the strong summer tourism season to thank for its 19% sales increase, which matched its impressive growth from last quarter. This saw LVMH bring in €19.8bn ($19.21bn), compared to analysts’ expectations for €19.1bn ($18.5bn).

Driving this performance was the company’s all-important fashion and leather goods division which was up 22% for the quarter. In this segment, you can find big names like Louis Vuitton and Christian Dior. Together, the two brands represent more than 66% of the group’s operating profit.

Due to a strong dollar and pent-up tourism, LVMH saw its most significant growth in the European market, where sales were up 43% year-over-year. Meanwhile, China, a region known for its luxury consumption, was hit by COVID-19 restrictions and was only up 2% year-over-year.

LVMH was formed in 1986 through the merger of Louis Vuitton and Moët Hennessy. It controls many of the world’s most famous luxury brands including Fendi, Givenchy, Marc Jacobs, Stella McCartney, Loewe, Bulgari, and Tiffany & Co. It is overseen by co-founder and CEO Bernard Arnault, the second-richest person in the world and the richest in Europe.

LVMH trades on the stock exchange in France, the Euronext Paris.

The stock is down 16% so far this year but is performing better than smaller luxury competitors Hermes and Gucci-owner Kering.

LVMH is up 2.5% so far today.

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