The market had its first negative week in 7, and the bears began pouncing again with the message that the bear market rally had ended, and stocks were in for another big tumble. Bulls took the view that the bottom was in and the market was taking a breather after a better than expected earnings season. September is usually a rough month for stocks, as asset managers often sell and rebalance portfolios as they come back to work from their August vacations.
Target's lackluster earnings fell short of expectations, casting doubts over whether the consumer is strong enough to keep the economy afloat amidst rising costs for...everything.
Wayfair (W) also reported bad news this quarter, laying off 5% of the company as demand for home furnishings weakened. Wayfair did incredibly well during the height of the pandemic when everyone was improving the homes we never left, but as consumers switched to spending more on vacations than couches and pergolas, revenue took a -15% hit year over year. Net income fell nearly -400% from the same quarter the year prior. On news of the layoffs, the stock slid -20%. It's now down -80% over the past year.
The sole maker of a Monkeypox vaccine, Bavarian Nordic (BAVA.CO), went shopping for a partner in the U.S. last week to help produce more doses. The drugmaker stated they can produce 30 million doses per year, but would need more help to get above that figure. The U.S. case count of Monkeypox sits at 13,500, but at this stage in the pandemic, the figure is likely 10X higher due to underreporting.
Shares of BAVA.CO were up 9% last week while Siga Technologies, which makes an anti-viral treatment for Monkeypox, was down 8%. SIGA is still up from July, when we flagged it as breaking out of its pattern in the Quick Sprints scenario. It's up over 200% this year.
Play of the Week
Endo International, a pharmaceutical company, agreed to pay out $450 million for lawsuits for its role in promoting an opioid epidemic in the U.S. while simultaneously filing for bankruptcy. The stock dropped -23% on news of the filing, then rallied +43% the next day.
- Bankruptcy's are a risky but rewarding play, as investors bet the company is able to restructure and emerge from debt.
- Previous bankruptcies followed similar patterns, with Revlon and Enjoy bouncing back 91% and 81%, respectively, days after their filings.
Did You Miss?
Foot Locker, known for its streetwear shops, caught air Friday- surging more than 20%. The company appointed former Ulta Beauty head Mary Dillon as its next CEO, effective September 1st.
LevelFields users were alerted to the CEO hired/appointed and the CEO's departure scenario. Foot Locker also reported earnings Friday morning, revealing a slower drop in comparable sales and beating profit estimates.
The events marked a catalyst in the turnaround of Foot Locker's stock, which had been down by -58% in July and has since surged by 40% over the past month.
Where Are They Now?
In response to the announcement of Activist Investor Ryan Cohen's 8 million shares and 1.6 million out-of-the-money Bed, Bath and Beyond (BBBY) call options he bought in the first quarter of this year, BBBY shares jumped over 300% this past month.
Cohen's purchase fueled a speculative frenzy on Reddit, as Cohen's involvement with Gamestop fueled what became the most famous short squeeze of all time. Traders scooped up shares of BBBY, hoping Cohen's endorsement of the company meant a turnaround was coming along with a short squeeze. To their dismay, Cohen then dumped all of his shares, netting close to $70 million on the trade. News of the sale pushed the price of BBBY down over -50%.
LevelFields tracked the first Activist Investor's entry into BBBY back in April 2020. Since then the stock has been on a roller coaster ride due to meme trading, influencer involvement and heavy short covering. From April 2020 to peak, the price rose +900%, then gave back all the gains, only to rise again another 340% the past few weeks.
BBBY: Wild Times
Highlights from the LevelFields Calendars section and beyond.
Tesla, Inc. (TSLA), 3 for 1
Nasdaq (NDAQ), 3 for 1
MindMed (MNMD), 1 for 15 (reverse split)
Palo Alto Networks (PANW) earnings will show how the cybersecurity industry is holding up.
Build-a-bear-WorkShop (BBW), Dicks (DKS), Macy's (M) and Best Buy (BB) will give more indications about consumer spending. Meanwhile, Medtronic (MDT) will show how medical devices are doing.
Nividia (NVDA), Malibu boats (MBUU)
Affirm (AFRM) the buy now pay later fintech will give some more indication of consumer demand and its struggles with competitors. BIG lots (BIG), Dollar General (DG), and Dollar Tree (DLTR) - all discount stores - will tell us how the cost conscious consumer is doing and whether they've seen an increase in foot traffic to their deals. BILL.com (BILL) should also be an interesting one as it gets closer to profitability and beat on earnings last quarter.
The LevelFields Team