The S&P 500 and Nasdaq 100 both had their worst weeks since early March, as the market adjusted to the idea that rates will likely be higher for longer than anticipated. Let’s see what else you missed. 👀
Today’s issue covers Scholastic slumping on book market weakness, a now micro-cap tech company making fresh lows, and Tinder’s new premium tier costing $500/month. 📰
Here’s today’s heat map:
2 of 11 sectors closed green. Technology (+0.14%) led, & consumer discretionary (-0.98%) lagged. 💚
The Bank of Japan elected to leave rates unchanged, continuing its easy-money monetary policy due to concerns of ‘extremely high uncertainties’ in its economy. Meanwhile, two key Fed officials toed the hawkish line by expressly supporting maintaining high interest rates. ⏯️
Chinese stocks like Alibaba, PDD Holdings, JD.com, and more jumped on reports that China is considering easing rules that cap foreign investment in domestic publicly traded companies. 🔺
Activision shares continue to crawl higher after its new deal proposal from Microsoft cleared major antitrust worries with U.K. regulators. 🎮
Recent IPOs continue to give back gains, with Arm Holdings, Instacart, and Klaviyo all trading near their initial price offerings. 🤷
Here are the closing prices:
It was a slow-ish news day today, so the talk of the town was Tinder’s new $500-per-month plan. Like other “zero-interest-rate-policy” (ZIRP) darlings, the company’s parent, Match Group, has struggled to keep public market investors happy in a post-pandemic world. 😓
Growth has slowed significantly, so the company is betting big on premium “power users” who will pay $500 monthly for features like exclusive searching and matching. Tinder Select is currently only being offered to less than 1% of users among the app’s most active. But don’t fret; it plans to open up applications on a rolling basis, so you’ll still have a shot if you didn’t make the first cut.
While it sounds wildly ridiculous to most, Match Group has previously experienced success with high-priced subscriptions. Its 2022 acquisition of an invite-only dating app for ambitious career-oriented singles, called The League, charges $1,000 per week for its VIP plan. And the strong results from that program inspired the higher-priced tier for Tinder (and other apps in its portfolio). 💸
Executives hope this “low-hanging fruit” can significantly impact revenue and potentially margins. Its competitors already have higher-priced tiers to monetize their most active users further, so in a sense, it’s essentially playing catch up here.
Match has experienced subscriber declines in the last three quarters but managed to grow average revenue per user YoY. If users aren’t growing, Wall Street at least wants to see the company make more from its existing base. And this new product tier should help accomplish that. 🔺
Whether or not it’s enough to “match” investors back with its stock remains to be seen. $MTCH shares are down 60% since separating from IAC in mid-2020, drastically underperforming the Nasdaq 100. We’ll have to wait and see if investors keep swiping left on the stock in the quarters ahead. 🙄
Scholastic Corporation shareholders received another chapter of the company’s book. And unfortunately, they didn’t like what they read. ☹️
The education and media company’s first-quarter loss widened, and revenues declined due to continued softness in the retail book market. An adjusted loss per share of $2.20 on revenues of $228.5 million missed analyst expectations of a $1.35 per share loss on $268.8 million in revenues.
While the company typically records a loss during its fiscal first quarter, when schools are out of session, the loss grew due to investments in other growth areas. Additionally, its Education Solutions division experienced unfavorable timing and seasonality of sales. 📊
The timing of state-sponsored program revenue impacted its U.S. segments, while weakness in Canada and Australia’s retail book market pressured international results.
Looking ahead, the company expects 3%-5% revenue growth in fiscal 2024, reiterating its adjusted EBITDA guidance of $190 to $200 million. 🔮
$SCHL shares fell 13% back toward the middle of their long-term trading range as investors digested the lackluster news and guidance. 📉
There aren’t many companies reporting earnings these days, but one that caught our eye today was NetSol Technologies. Unfortunately for investors, it did not grab our attention for a positive reason.
The micro-cap company provides IT and enterprise software solutions to the global automobile financing and leasing, banking, and financial services industries. It released fiscal fourth-quarter earnings today that apparently the market didn’t love.
As a result, $NTWK shares plunged 24% to new all-time lows. It’s now down 99.96% from its post-split all-time highs of 4,000 set during the dot-com bubble. When you see charts like this, it’s a not-so-subtle reminder that investing is hard… 😱
Bullets From The Day:
🍟 Inflation is now hitting McDonald’s franchising fees. The fast-food giant is raising royalty fees for new franchised restaurants for the first time in nearly three decades. Newly opened U.S. restaurants will see royalty fees rise from 4% to 5%, in a move that threatens to further disturb the company’s already rocky relationship with U.S. franchisees. While it’s a hefty price hike, McDonald’s is betting that being part of its system provides enough value for operators that they will eventually get used to the higher fees on new restaurants. CNBC has more.
🌏 More investment firms are separating their Chinese offices and operations. Due to the growing geopolitical tensions, venture capital firm GGV is joining Sequoia Capital and other peers in spinning off its China operations. However, the fact that it’s never raised geography-specific funds makes its decoupling more complicated than others. So far, it’s rumored that GGV won’t make management changes to existing funds but doesn’t plan to add new Chinese portfolio companies. More from Axios.
🧑⚖️ EU regulators (re)fine Intel for multi-decade-old antitrust violations. The European Union has reimposed a fine of roughly 376 million euros on Intel, a fraction of the over a billion euro fine levied on the company in 2009. Back then, the regulator found Intel had abused its market dominance for chips to exclude AMD by paying PC manufacturers and retailers to delay, cancel, or not sell products containing its chips. After years of legal appeals and fighting, the company will now pay part of the fines that have been upheld, though the amount of interest it will pay remains unclear. TechCrunch has more.
🤝 The U.S. and China look to ease tensions by launching working groups. The two countries are establishing economic and financial working groups through the U.S. Treasury Department and China’s Ministry of Finance. The groups aim to establish a durable communication channel between the world’s two largest economies. Although the world’s two largest economies are among each other’s biggest trading partners, recent tension around access to technology deemed vital for the future has caused a significant rift between them. More from AP News.
📺 The streaming to cable transformation continues as Prime Video rolls out ads. When streaming services first came into our lives, they promised us the world. But as competition has heated up in the space, resulting in more streaming services than days of the week, the product began looking more and more like traditional cable. While ads were initially proposed as a way to watch for free (or receive a discount), Amazon Prime Video will now show paying users ads unless they pay an extra $2.99/month. Monetizing media has really come full circle. Variety has more.