November 6, 2023

Bulls Tap Brakes Amid Low Visibility

After rallying sharply for the last week, bulls are pumping their brakes slightly as visibility remains mixed during earnings season. Let’s see what you missed. 👀

Today’s issue covers several corporate leadership shakeups, DISH Network going offline, and more from the day. 📰

Here’s today’s heat map:

4 of 11 sectors closed green. Healthcare (+0.67%) led, & real estate (-1.37%) lagged. 💚

Tesla was back in focus today following reports from Germany that a new Tesla electric vehicle will be priced at roughly 25,000 euros (or $27,000). It’s rumored that casting the vehicle’s frame instead of welding metal parts together could help drive down manufacturing costs significantly. 🚗

Constellation Energy soared to new all-time highs after raising its full-year earnings guidance, driven by gross margin expansion. Despite the recent pullback in some of the oil and gas majors like Exxon and Chevron, the energy space remains in focus for analysts and investors into year-end. 🛢️

Canadian cannabis producer Organigram jumped 19% after receiving a roughly $91.3 million investment from British American Tobacco, which is looking to diversify its portfolio further. It currently sells cigarettes, tobacco and nicotine products, vapor, and tobacco-heating products. 🥦

Legacy media companies remain unpopular with analysts. Bank of America downgraded Paramount Global, arguing that it’s less valuable if it’s not considering selling some of its assets. 📺

Shares of coworking giant WeWork were halted ahead of today’s opening bell, given the company is preparing to file for Chapter 11 bankruptcy this week. 🏢

Vacation timeshare provider Bluegreen Vacations rose over 100% after agreeing to a sale to Hilton Grand Vacations for roughly $75 per share. 🏨

Other symbols active on the streams: $TRIP (+14.48%), $NVOS (-59.50%), $TRKA (+38.46%), $CDIO (+81.62%), $PIXY (+26.64%), $XRP.X (+12.07%), and $ADA.X (+6.85%). 🔥

Here are the closing prices:

S&P 500	4,366	+0.18%
Nasdaq	13,519	+0.30%
Russell 2000	1,738	-1.29%
Dow Jones	34,096	+0.10%

Earnings

Dish Networks Goes Offline

Dish Networks is back in the news, but not for great reasons. The stock plunged 37% to 25-year lows today, let’s see why. 👇

The satellite TV and wireless services company surprised investors with a third-quarter loss, as pay-TV and wireless subscribers declined. Its net pay-TV subscribers fell by 64,000, while retail wireless subscribers fell by 225,000. Average revenue per pay-TV users rose 3.1% YoY to $105.25, and Dish TV churn rose from 1.53% last year to 1.58% this quarter. 📊

As a result, its $0.26 per share loss was well below last year’s $0.65 in earnings and analyst consensus of $0.11. And revenues tumbled 9.5% YoY to $3.70 billion, lagging analyst estimates of $3.82 billion.

Additionally, the company announced it’s selling its spectrum assets and roughly 120,000 prepaid mobile subscribers in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America. It plans to use the ~$256 million in cash to focus on its U.S. wireless business, which has been struggling to keep pace. 💰

The company is expected to merge with EchoStar Group ($SATS) by the end of the year. It plans to appoint EchoStar CEO Hamid Akhavan as CEO of Dish Networks on November 13th, with current CEO Erik Carlson remaining on the board of directors until the merger closes. EchoStar shares plummeted 31% today after its results also came in well below analyst expectations. 🤝

It appears both companies are having similar issues in keeping subscribers. That tends to be an issue with legacy providers in a highly competitive space that’s experienced a lot of disruption over the last decade. Based on the action in these stocks, analysts and investors are clearly worried that combining the two companies will not be enough to compete with the likes of Verizon and AT&T.

As we can see from the 20-year total return chart below, investors in both stocks have had a rough ride and are likely sitting deep in negative territory at current levels. 😬

Lastly, since we’re talking telecom news, we should include Telecom Italia selling its fixed-line network to U.S. private equity firm KKR for more than $20 billion. It’s part of the former monopoly’s plan to reduce an increasingly unmanageable amount of debt (25 billion euros). 💶

Company News

Several Corporate Shakeups

There were several high-profile management changes announced today. We’ve got you covered with a summary below. 📝

First up, the founder and CEO of dating app Bumble, Whitney Wolfe Herd, is planning to step down early next year as she transitions to a new role as executive chair. She’ll be replaced by Lidiane Jones, the current CEO of Salesforce’s cloud-based messaging platform Slack. The announcement came ahead of Bumble’s earnings results, which will be released Tuesday after the bell. Like other pandemic-era companies that came public during the bull market, Bumble’s share price has struggled since day one and is currently sitting at all-time lows. 📉

Next, as Overtstock.com completes its transition to Beyond, Inc., it’s doing so under the direction of a new CEO. Pressure from activist hedge fund JAT Capital finally drew enough support to oust Jonathan Johnson, who has been with the company for over twenty years and led the acquisition of Bed Bath & Beyond out of bankruptcy. Beyond’s president, David Nielsen, will be interim CEO while the board searches for a permanent candidate. Meanwhile, JAT Capital has recommended Camping World CEO and TV personality Marcus Lemonis as their preferred choice. 🛒

Disney has itself a new CFO, tapping PepsiCo’s longtime CFO, Hugh Johnston, as its next financial leader. Christine McCarthy stepped down earlier in the year, and the company has been searching for a replacement since. He’s leaving PepsiCo after a 34-year tenure and will join Disney as it undergoes a massive restructuring effort to turn around its lagging stock price. The company is set to report earnings on Wednesday after the bell, likely providing more color on the transition then. 🐭

The Washington Post announced that Will Lewis will become publisher and CEO on January 2, 2024. The former journalist turned media executive has served as the CEO of Wall Street Journal parent Dow Jones and will now be tasked with returning the historic newspaper company to profitability. With The Post on track to lose $100 million this year and resorting to cost-cutting to stay afloat, he must balance employee morale, further expense reductions, and growth investments. 📰

Lastly, Citigroup is not getting a new CEO. However, current CEO Jane Fraser said her reorganization efforts could result in job cuts of at least 10% in several of its major businesses. Executives could see cuts beyond 10%, particularly as Fraser looks to eliminate regional managers, co-heads, and others with overlapping job responsibilities. The internal project dubbed “Project Bora Bora” has stakeholders on edge as they wait to asses whether the global bank can turn its stock around. 🏦

Bullets

Bullets From The Day:

🧑‍💼 Bain Capital is nearing a deal to buy a rival consulting firm for $5.3 billion. One of the world’s largest multi-asset alternative investment managers is looking to purchase consulting firm Guidehouse, which advises government organizations and businesses. It was previously acquired by private equity firm Veritas Capital in 2018 from PricewaterhouseCoopers in 2018, rebranding it as Guidehouse and operating it since. Reuters has more.

🌎 Only 4% of corporate net zero targets meet U.N. climate goals. The number of companies setting net zero emissions targets has risen over 40% since June 2022 to 1,033. Still, analysts from Net Zero Tracker say just 4% of the targets set meet the United Nations criteria for success. The report indicates many companies are relying on low-quality offset credits rather than emissions reductions to meet their goals. Many of the problems happening at the international level are seen at the corporate level, highlighting the need for public-private cooperation. More from Axios.

🤖 OpenAI promises to defend business customers against copyright claims. As the company unveiled its most powerful artificial intelligence tool, GPT-4 Turbo, it’s also looking to reduce copyright issue concerns among businesses that use its product. Given the legal gray area around who owns the rights to content created through the use of AI tools, there has been a hesitancy among businesses to adopt the technology. That prompted OpenAI to create a “Copyright Shield” program designed to pay the legal costs incurred by customers using the “generally available” features of its platforms. TechCrunch has more.

🧑‍⚖️ Epic Games challenges Google’s app store practices in court. The maker of the popular game “Fortnite” is heading into battle against Google in federal court in an antitrust lawsuit that could reshape how smartphone users get Android apps and pay for in-app content. Its argument targets the Google Play Store, focusing on Google’s fees for in-app subscriptions and one-off transactions, plus other terms that many app developers say help Google maintain an app distribution monopoly. More from CNN Business.

🏭 British Steel to cut up to 2,000 jobs. The company is making a 1.25 billion pound investment to replace two blast furnaces with electric arc furnaces as it looks to create “a clean, green, and sustainable business.” The firm could not keep these furnaces and meet environmental commitments, but unions estimate the shift could lead to the permanent loss of 1,500 to 2,000 jobs. The government is pitching in hundreds of pounds of support for projects like this that it says are essential to driving decarbonization in the country. BBC News has more.