Gapping up
In reaction to earnings/guidance:
- APP +24.9%, ALRM +9.9%, CPRX +8.4%, HLLY +8.1%, RAMP +7.5%, FLNC +7.4%, YETI +6.9%, MNTK +6.1%, CYBR +5.6%, CARG +5.2%, AOSL +5%, ODD +4.9%, PRMW +4.5%, SONO +4.4%, AQN +4.4%, KGS +4.1%, VERV +4%, BABA +3.5%, AVPT +3.3%, HROW +3%, LAW +2.9%, MFC +2.8%, JAZZ +2.8% (also resumes repurchases under previous program), CENX +2.8%, IDYA +2.8%, UTZ +2.7%, CPA +2.3%, WYNN +2.3%, FREY +2.2%, VSAT +2%, LGF.A +2% (also plans to exit Latin America), EGY +2%, IMVT +2%, WKME +1.9%, DIS +1.5% (also to boost Disney+ and Hulu prices; also to launch ad-supported offering in several countries across Europe and Canada), TSM +1.5% (July revs), USFD +1.4%, NDLS +1.1%
Other news:
- CPRI +57.5% (Tapestry (TPR) confirms definitive agreement to acquire Capri Holdings for $57.00 per share in cash for a total enterprise value of approximately $8.5 billion; expected to be immediately accretive)
- YELL +7.6% (got alternative financing offers according to Bloomberg)
- DWAC +7.2% (reaffirms commitment to merger)
- SABR +4.3% (several executives disclose insider purchases)
- ARAY +4.2% (receives FDA Clearance for VitalHold on the Radixact System; Breast cancer treatment option will also be available in the EU market)
- ATSG +3% (to offer $350 mln in convertible notes)
- SILV +2.6% (to repurchase ~5% of shares)
- PTN +2.4% (initiates clinical program for Bremelanotide co-formulated with a PDE5i for the treatment of ED in patients non-responsive to PDE5i treatment) MRTX +2.3% (Cancer Discovery publishes data for MRTX1719)
- KVUE +1.9% (to join S&P 500)
- LAZR +1.6% (stock offering by selling shareholders)
- BMY +1.5% (enters into $4 bln aggregate accelerated share repurchase agreements)
- BEN +1.3% (reports July AUM)
Analyst comments:
- DCPH +5.6% (upgraded to Buy from Hold at Stifel)
- KRNT +3.5% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- ADCT +2.7% (upgraded to Neutral from Underweight at JP Morgan)
- GDRX +2.6% (upgraded to Buy from Neutral at DA Davidson)
- RBLX +2% (upgraded to Equal-Weight from Underweight at Morgan Stanley)
- GPN +1.7% (upgraded to Buy from Hold at Jefferies)
Early premarket gappers
- Gapping up:
- APP +24.3%, ALRM +14%, SONO +9.8%, YELL +8.8%, DWAC +7.1%, FLNC +7.1%, ARAY +6.9%, CARG +6%, RAMP +5.3%, BLBD +5%, AOSL +5%, SABR +4.9%, AVPT +4.2%, ADMA +4.2%, KGS +4.1%, CPRX +4.1%, FREY +3%, WYNN +2.9%, LAW +2.9%, MFC +2.8%, JAZZ +2.8%, CENX +2.8%, LGF.A +2.8%, BABA +2.8%, CYRX +2.6%, YETI +2.5%, MRTX +2.4%, OR +2.4%, CPA +2.3%, ODD +2.1%, EYE +2.1%, VSAT +1.8%, DIS +1.6%, KVUE +1.5%, TSM +1.4%, BEN +1.3%, NDLS +1.1%, LAZR +1%
- Gapping down:
- ORGN -53.3%, ORGO -33.6%, STKL -20.8%, INVZ -17.2%, TASK -13.3%, PAR -12.5%, MGNI -11.5%, PLUG -10%, FLYW -6.4%, ILMN -6.2%, CERT -5.6%, DNA -5.5%, WEST -5.5%, BXSL -5.4%, PLBY -5.4%, PRPL -4.8%, SIX -4.8%, INFN -3.8%, QNST -3.8%, HIMX -3.4%, UHAL -3.1%, PLRX -3%, ARMK -2.9%, BLNK -2.8%, ATSG -2.6%, NVO -2.2%, HCCI -2.1%, IDYA -2.1%, CLNE -2%, ENVX -1.8%, SPNT -1.8%, BRP -1.8%, MRUS -1.7%, G -1.7%, OEC -1.5%, CDE -1.5%, MXCT -1.4%
At least 36 people have been killed as a result of the wildfires that have torn through Maui, devastating the popular tourist town of Lahaina, authorities said.
Three wildfires started on the Hawaiian island earlier this week and had been fanned by the arrival of Hurricane Dora on Tuesday. The cause of the wildfires hasn’t been determined.
More than 271 structures have been damaged or destroyed and at least 1,000 acres of Maui’s Upcountry, an agricultural inland area that includes Haleakala National Park, have been charred. Power has been knocked out across the west of Maui.
Search-and-rescue efforts are under way, bolstered by a federal team, and evacuations have been ordered in 13 communities and towns. Helicopters have been dropping water over Lahaina to contain the blazes. State and county authorities have urged tourists to stay away or leave if they can.
Smoke and fire caused people to flee to the ocean on Wednesday, Maui County officials said.
Wildfires and other forms of extreme weather have ravaged several regions of the world this summer. Blazes have swept across Greece, Portugal and Canada, while China has contended with extreme flooding and a searing heat wave. July was the world’s hottest month on record.
Videos of the Maui blazes posted online show flames on both sides of a single lane of fleeing vehicles. Buildings, palm trees and cars are engulfed in flames. Others show wind-whipped walls of fire and smoke spreading through Lahaina.
Lt. Gov. Sylvia Luke issued an emergency proclamation Wednesday encouraging the suspension of all nonessential air travel to Maui. Luke, who is serving as acting governor while Gov. Josh Green returns from a trip, activated Hawaii’s National Guard to help with response efforts.
Three wildfires were also burning on the island of Hawaii on Wednesday, though authorities didn’t report any deaths there.
Authorities said they had prepared for the arrival of Hurricane Dora on Tuesday but not for the wildfires that followed.
Maj. Gen. Kenneth Hara, adjutant general of Hawaii’s Department of Defense, said the wildfires were fueled by long-running dry conditions, low humidity and high winds.
Maui is the second-most visited Hawaiian island, after Oahu. There were nearly 1.5 million visitors to Maui in the first half of the year, up 5.7% from the same period in 2022, according to the state’s Department of Business, Economic Development and Tourism. Total visitor spending during that time was $3.47 billion, up about 25% from last year.
“It will be a long road to recovery,” Luke said in a press conference. “We are just so deeply saddened by the tragedy on Maui, especially for individuals who lost family and friends.”
Coach Owner Near Deal to Take Over Parent of Michael Kors, Versace
Deal would be one of the biggest fashion tie-ups in recent years
Coach owner Tapestry TPR -0.87%decrease; red down pointing triangle is in talks to buy Capri Holdings CPRI -1.70%decrease; red down pointing triangle, parent of well-known fashion brands Michael Kors, Jimmy Choo and Versace, in a move that could help the new company better compete with the European fashion giants.
The deal, which has been under discussion for months, could be announced as soon as Thursday barring any last-minute snags, according to people familiar with the matter.
Capri has a market value of $4 billion; Tapestry’s is around $10 billion. Including a typical premium, a deal could value Capri in the high single-digit billions.
The U.S. companies have been scooping up fashion brands in a bid to take on LVMH and Gucci parent Kering, but are still dwarfed by the European giants, which have been striking deals of their own. Kering last month said it was purchasing a stake in Valentino, bringing another large fashion label under its tent. Kering had tried last year to acquire Tom Ford, but the French company lost out in a heated auction to cosmetics giant Estée Lauder, which paid more than $2 billion for the high-end fashion label.
LVMH in 2021 completed a blockbuster deal to buy luxury jewelry retailer Tiffany, bolstering the French company’s diverse stable of high-end brands.
Capri had been set to report its fiscal first-quarter earnings on Tuesday before pushing them back to Thursday morning without providing a reason.
Capri’s market value has dropped steeply from a peak of $20 billion in early 2014 as it has struggled with an oversaturation of its Michael Kors brand and acquisitions that have delivered mixed results. London-based Capri’s U.S.-traded shares are down about 40% this year after the company warned of disappointing sales.
The company was founded more than two decades ago by fashion designer Michael Kors, with the backing of two investors who had previously turned Tommy Hilfiger into a household name. In 2011, the company, then known as Michael Kors Holdings, went public.
Under CEO John Idol, Capri grew rapidly by practicing a version of so-called luxury populism. Rather than restricting access to its goods to maintain an aura of exclusivity, it made them widely available through its own stores, independent boutiques and department stores, while also launching lower-priced lines.
In 2017, the company bought designer footwear label Jimmy Choo, followed in 2018 by Versace, the Italian fashion house. When the Versace deal closed, the company changed its name to Capri, after the Italian Island known to attract the jet set.
Tapestry, meanwhile, has attempted to create its own house of brands to rival the European luxury conglomerates. Besides Coach, its brands include Kate Spade and the much smaller Stuart Weitzman.
Japanese and South Korean shares surge on return of Chinese tour groups
Markets cheer Beijing’s move to scrap pandemic-era restrictions on overseas travel to 78 countries
Tourism-related stocks in Japan and South Korea surged on Thursday after China said it would relax pandemic-era restrictions on tour groups travelling to dozens of countries, as investors anticipated the lucrative return of the mass-market visitor.
China’s tourism ministry said on Thursday it was lifting restrictions on group travel to 78 countries with immediate effect. The list included Japan and South Korea — favourite destinations of Chinese tour groups before 2020 — as well as Australia, Germany, the UK and the US.
Before the coronavirus pandemic, Chinese group tours were a boon to multiple sectors and economies. Travellers spent on everything from the highest-end luxury goods to electronic rice cookers, making them among the most powerful forces in retail sales.
In Tokyo, shares in department stores climbed sharply on Thursday, while those of Japan Airport Terminal, which operates the capital’s newly expanded Haneda airport, rose more than 9 per cent. Kyoritsu Maintenance, which runs a hotel chain favoured by mainland Chinese tourists, gained more than 11 per cent.
The term “inbound” jumped to the most searched on Japanese online trading platform Kabutan, displacing “semiconductors” and “generative AI”, in an indication of retail investor excitement.
In Seoul, the impact was even more striking, with shares in Lotte Tour Development surging nearly 30 per cent and those in Paradise Group, which runs casinos that cater exclusively to foreigners, rallying more than 18 per cent. Cosmetics conglomerate AmorePacific rose 7 per cent.
Airline stocks in China, Japan and South Korea, which analysts said were likely to be longer-term beneficiaries of the move, rose between 1 and 5 per cent.
China mostly closed its borders to international travel for almost three years during the pandemic. It has since resumed flights to 62 countries, 10 fewer than before, according to the country’s Civil Aviation Administration.
In a statement, South Korea’s culture and tourism minister Park Bo-gyoon said the resumption of Chinese tour groups would “breathe new life” into the airline and retail sectors damaged by Covid-19.
Despite the euphoria, investors said it was probably too early to expect Chinese tourists to return to pre-pandemic levels and added their spending was likely to be reduced.
“The Chinese are not spending that strongly in their own country right now, as the numbers are showing. I think it may be a stretch to hope they will suddenly resume spending abroad,” said one Tokyo-based fund manager who owns Japanese airline and hotel stocks.
Chinese travel group Trip.com and airline China Southern added 3.5 per cent and 3 per cent, respectively, but the country’s equities were broadly downbeat, with shares focused on domestic travel tumbling on the prospect of increased competition. China Tourism Group Duty Free fell as much as 6.6 per cent.
Prior to the pandemic, mainland Chinese led an unprecedented tourism boom in Japan. At its peak in July 2019, Japan welcomed just under 3mn overseas visitors a month, more than a third of them from mainland China. While arrivals from Hong Kong, South Korea and Taiwan have rebounded, the Chinese figure has languished, creeping just above 200,000 in June.
While only about 20 per cent of Chinese visitors to South Korea in 2019 were on group tours, which were unofficially banned in 2017 as part of an economic blockade, they are highly valued for outspending their American or Japanese counterparts. According to the Korea Tourism Organisation, the average Chinese visitor spent 42 per cent more than that from the US and more than double that from Japan.
But Steve Cochrane, chief Asia-Pacific economist at Moody’s, warned that spending habits in China had changed during the pandemic as more consumers began buying luxury goods domestically and that confidence remained weak amid underwhelming economic growth.
“The bottom line is we’re probably not going to get back to pre-pandemic levels that quickly,” he said.
>>> Up
* F-Secure Raised to Buy at Nordea; PT 2.60 euros
* Flutter Raised to Hold at Numis; PT 13,100 pence
* Flutter Raised to Hold at Numis; PT 13,100 pence
* Kapsch TrafficCom Raised to Buy at Erste Group; PT 17 euros (+)
* Quilter Raised to Neutral at BNPP Exane; PT 100 pence
* Remy Cointreau Raised to Outperform at BNPP Exane; PT 190 euros
* Sampo Raised to Accumulate at Inderes; PT 44 euros
* Sampo Raised to Buy at ABG; PT 47.50 euros
>>> Down
>>> Down
* ABN Amro GDRs Cut to Underperform at Mediobanca SpA
* Airbnb Cut to Accumulate at Phillip Secs; PT $152
* Chr. Hansen Cut to Hold at DNB Markets; PT 536 kroner
* Chr. Hansen Cut to Hold at DNB Markets; PT 536 kroner
* Equinor Cut to Neutral at SpareBank; PT 370 kroner
* Magellan Midstream Cut to Hold at JonesTrading
* Raisio Cut to Accumulate at Inderes; PT 2.30 euros
* TietoEVRY Cut to Sell at DNB Markets; PT 21 euros
* WastBygg Cut to Hold at Nordea
>>> Initiation
* Edenred Rated New Overweight at Barclays; PT 70 euros
>>> Initiation
* Edenred Rated New Overweight at Barclays; PT 70 euros
* Sika Resumed Neutral at Citi; PT 288.50 Swiss francs
>>> Call
>>> Call
* Edenred a High-Quality Compounder, New Overweight at Barclays
* KBC’s Risk-Weighted Asset View May Disappoint: Morgan Stanley
* Sika Offers Quality But at a High Price, Resumed Neutral at Citi
* Sika Offers Quality But at a High Price, Resumed Neutral at Citi
Disney Gets Iger’s Second Show on the Road
Streaming price increase and ESPN partnership are first strategic moves as growth slows
The Mouse House is taking a page—or three—from “House of Cards.”
Disney’s DIS -0.73%decrease; red down pointing triangle fiscal third-quarter report late Wednesday was an eventful one. The entertainment giant reported weaker-than-expected revenue and better-than-expected operating profit. That was due to an odd pairing reflective of a turbulent box office, slipping tourism in Florida and less cash going out the door because of Hollywood’s ongoing strikes.
The company also used the occasion to announce a significant boost to some of its streaming prices with the intention of pushing more subscribers to its ad-supported tiers, along with a plan to start cracking down on password sharing some time next year.
In other words, it is acting like Netflix. The streaming giant that pioneered ad-free, binge-worthy TV with the “House of Cards” series more than a decade ago has been making the same pivots over the past year. Actual numbers from its ad-supported and account-sharing tiers still aren’t clear since the paid-sharing option only went live in late May for its major markets.
But investors have applauded. Netflix shares have surged 87% over the past 12 months; Disney’s stock has slumped 19% in that time. The return of Robert Iger to Disney’s corner office hasn’t reversed that slump yet, and Wednesday’s results didn’t initially look like they would either.
The stock slipped more than 1% initially in after-hours trading following the release, which showed disappointing revenue growth and operating margins at the company’s domestic theme parks division. It was hurt by weaker business at the flagship Disney World park in Orlando, Fla. The recent quarter was also the fourth consecutive period of revenue declines for the linear networks business, which mostly reflects advertising and fees from the fast-shrinking traditional cable-TV business.
Disney also lost about 300,000 subscribers from its domestic Disney+ service—triple the number that Wall Street had anticipated—which led to disappointing revenue from its direct-to-consumer business as well. In all, Disney’s total revenue grew only 4% year-over-year to $22.3 billion during the June quarter. It was the company’s worst growth rate in more than four years.
But the stock then recovered during the company’s conference call during which Iger announced the latest increase to the company’s streaming prices. The hikes are targeted by design: Subscribers to the ad-free tiers of Disney+ and Hulu will see their monthly rates go up between 20% and 27% while prices for the company’s ad-supported tiers won’t change.
PHOTOS: HOW IGER RESHAPED DISNEY, FROM STAR WARS TO STREAMING
“The advertising marketplace for streaming is picking up,” Iger said on the call. Netflix has noted in its own investor calls that its cheaper ad-supported plan generates a higher average revenue-per-user than its standard plan, which costs more than twice as much on a monthly basis.
Disney can’t afford to stop there, though. Unlike Netflix, it has enormous legacy TV and theatrical film businesses to manage through some notable market shifts. The latter has suffered lately from disappointing box-office sales for recent releases such as “The Haunted Mansion,” “Elemental” and even the long-awaited Indiana Jones sequel, “The Dial of Destiny.”
Iger on Wednesday repeated an earlier commitment to improving the quality of the company’s movies while also reducing the number and production cost of its releases. But he also put the studio operation on top of his list of three businesses that “will drive the greatest growth and value creation over the next five years.”
The company’s linear TV business was notably absent from that list. And Iger on Wednesday didn’t backtrack on comments made during a CNBC interview last month in which he seemed to raise the possibility of selling off some TV assets such as ABC and FX Networks. Disney also struck a notable $2 billion deal Tuesday with Penn Entertainment to allow the ESPN brand to be used in Penn’s online sports-betting service.
But investors seeing dollar signs from divestitures should catch their breath; Iger noted Wednesday that any strategic moves with its TV networks would need to preserve its ability to produce content for its streaming operations. That will make any such deals complex, to say the least.
He also splashed some needed cold water on the baseless-but-still-long-running speculation that the company could be an acquisition target for Apple, noting correctly that “anyone who wanted to speculate about such things would have to immediately consider the global regulatory environment, and I’ll say no more than that.”
At least one aspect of Disney’s future has a clear answer.
U.S. and China Poised to Drift Further Apart After Investment Ban
President Biden’s order comes on top of a slowing Chinese economy, Covid lockdowns and rising tensions between the two powers
WASHINGTON—After years of blacklisting Chinese companies and scrutinizing their investments in the U.S., the Biden administration is sending an unmistakable signal to American business to steer investment away from China.
An executive order President Biden issued Wednesday—while narrowly targeted at critical leading-edge technologies with military, surveillance and cyber capabilities—more broadly aims to reorder the flow of American capital and expertise away from its biggest global rival.
The order prohibits U.S. investment in advanced semiconductors and quantum computing, and requires American investors to notify Washington about investments in other types of semiconductors and artificial intelligence. It also bars U.S. citizens and permanent residents from taking part in prohibited deals.
In doing so, White House officials said, the order intends to deny China the know-how, market access and other benefits U.S. venture-capital and private-equity firms bring with their investments. That is likely to further rattle American companies doing business in China, coming on top of weakening Chinese growth, Covid lockdowns that made travel to China difficult and a recent pressure campaign against U.S. and other foreign companies amid rising tensions between Washington and Beijing.
Andrew Polk, a partner with the boutique research firm Trivium China, said that while U.S. companies he advises remain interested in China’s market, many have grown hesitant.
“What we always say—and this resonates with our clients—is that the risk-adjusted return in China has changed dramatically,” Polk said. “So what we see is a lot of companies fundamentally rethinking their China strategies. It doesn’t mean they’ll necessarily change them, but they’re stress testing them now, because we’re clearly in a new environment.”
Wednesday’s order lands in the middle of a fragile nursing of relations by Washington and Beijing after months of bruising tensions, over Taiwan, the Ukraine war, espionage and technology controls. In the short term, officials and security specialists said, the fragile diplomatic progress of recent months is likely to hold.
Chinese leader Xi Jinping sees a calm in relations with the U.S., at least temporarily, as a boost to his prestige at home as the economy slips into deflation while growth falters and foreign investment plummets. A senior Chinese Foreign Ministry official, Yang Tao, held discussions with State Department and other officials in Washington last week with a prime focus on preparing for Xi to attend a summit of Asia-Pacific leaders in San Francisco in November and convene separate talks with Biden, according to people briefed on the discussions.
Both sides also pushed ahead to repair communication channels, agreeing tentatively this month to set up working groups to discuss Asia-Pacific regional and maritime issues, officials said. Discussions are still under way for Commerce Secretary Gina Raimondo to travel to Beijing, perhaps later this month, in what would be the fourth visit by a senior Biden administration figure since June.
Longer term, however, the U.S. and China are locked in rivalry, driving them to disentangle the economic and commercial ties that for decades gave ballast to relations, and the new investment restrictions are likely to accelerate the momentum to draw further apart.
“That talk of diversification, de-risking, decoupling, disentangling—choose your ‘D-word,’ whichever one you like—it’s really baked into the minds in Washington, increasingly in Silicon Valley, and this is really being beamed right at Wall Street,” said Liza Tobin, a former National Security Council official now with the Special Competitive Studies Project, a Washington-based group focused on technology policy.
Venture-capital firms, which once poured into China energetically, have already pulled back responding in part to sharpening tensions; U.S. investment in Chinese startups fell by more than 30% from 2021 to 2022 and is on pace to fall further this year, according to Crunchbase data.
Lightspeed Venture Partners, for example, a California-based venture firm that launched its China arm in 2006, has pared its investment in Chinese startups out of U.S. funds because of the risk, according to a person familiar with the firm.
“The real message to come out of this move is that it’s an enduring trajectory” that companies and investors must consider, said Nate Picarsic, a fellow at the Foundation for Defense of Democracies and co-founder of supply-chain intelligence firm Horizon Advisory. “Geopolitical and national security risks have become a permanent fixture.”
As the executive order took shape in recent months, Chinese officials urged the U.S. not to adopt it and accused Washington of trying to stymie China’s development. After the order’s unveiling Wednesday, the Chinese Embassy in Washington expressed Beijing’s disappointment and said the U.S. is weaponizing trade and backtracking on statements to maintain economic relations.
“The U.S. side has repeatedly expressed its non-intention to ‘decouple’ with China, but what it actually did is repeatedly ‘decoupling and severing supply chains’ from China,” embassy spokesman Liu Pengyu said in a statement. “It has continuously escalated suppression and restrictions on China.”
Disputes over technology and market access, which have simmered for years, erupted into sharper conflict in the middle of the past decade after Xi’s government outlined plans to dominate leading-edge sectors and increased pressure on foreign companies to transfer proprietary technologies.
Moves by the Trump administration to blacklist suppliers to China’s military and to intensify screening of Chinese investment in the U.S. were followed by a broad Biden administration ban on the transfer of advanced semiconductors, the equipment to make them and the involvement of U.S. citizens and permanent residents in that sector. The U.S. also got allies Japan and the Netherlands to follow suit.
China retaliated, introducing controls on exports of minerals critical to green technologies and banning products from U.S. chip maker Micron Technology in key infrastructure.
Treasury Secretary Janet Yellen, in a trip to Beijing last month, tried to allay Chinese concerns about the investment restrictions, then under discussion, and head off retaliation. She said that she explained that the measures were intended to be narrow in scope and done for national-security purposes, not for economic advantage, and that she expected Beijing would do likewise.
“National security is something that we can’t compromise about and we will protect, and we will do so even if it harms our own narrow economic interests. But that when we take such actions, which do have an effect on the Chinese economy, that we will make sure that they are transparent, narrowly targeted, and well-explained,” Yellen said last month on CBS’s “Face the Nation.”
“I would point out that the Chinese also protect their own national security through export controls and other similar devices,” Yellen said.
While the statement Wednesday from the Chinese Embassy didn’t suggest retaliation, Chinese officials have said that Beijing is likely to do so, given that Xi has put priority on standing up for China’s interests. If Beijing does, it is likely to choose carefully to avoid hurting its companies and further weakening the economy.
One particular vulnerability is technologies for electric vehicles and solar power, where China dominates supply chains. Picarsic, of the Foundation for Defense of Democracies, said he sees the investment restrictions rippling out, affecting U.S. investors’ willingness to dive into other sectors, particularly ones such as biotechnology, which could enhance military or police capabilities.
“The structural fundamentals here are ones of competition and escalation, and I don’t think there’s anything that we’ve seen so far—from the U.S. government signaling around this move, Chinese expectations and potential reactions—that would suggest any break from that,” he said.