Philip Morris Stock Is About to Get Smoking Hot
Philip Morris International PM +2.65% ’s main cigarette business is slowly dying, but the tobacco giant isn’t going gently into the night. The company just announced two deals that will keep it healthy in the years to come.
The past decade hasn’t been kind to the tobacco business. The number of traditional cigarettes smoked globally dropped from 5.23 billion at the start of 2018 to an estimated 4.69 billion five years later, even as companies raised prices to compensate for fewer packs sold.
Even without the burden of a U.S. cigarette business—that’s been Altria Group MO +2.38% ’s (ticker: MO) problem—Philip Morris stock (PM) has suffered.
Philip Morris, though, is a different company than it was just a few months ago. Its November acquisition of Swedish Match further cements its global leadership in oral nicotine and adds to its portfolio of what it calls reduced-risk products, which don’t require users to burn tobacco. That deal closed a month after it paid Altria $2.7 billion for the rights to sell Philip Morris’ flagship IQOS product in the U.S., marking PM’s first return to the domestic market since the two companies split in 2008.
Together, the deals mean Philip Morris could have a longer, brighter future than many investors had feared.
“They are further proof that Philip Morris is on a path to be a durable, profitable, and growing business for a very long time to come,” says Bryan Engler, a portfolio manager at Kovitz Investment Group Partners.
That future begins with those euphemistically termed reduced-risk products, or RRPs. These include IQOS, which heats tobacco instead of burning it, along with vaping and nasal and oral products, such as snuff and chewing tobacco.
With global cigarette sales falling steadily over the past decade, Philip Morris isn’t the only company branching out: E-cigarette sales alone ballooned nearly sevenfold, to $2.1 billion, from 2015 to 2018, the year that Altria made a $12.8 billion investment in vaping company Juul.
Critics charge that smoke-free tobaccos are still carcinogenic and that vaping might pose health risks. Yet even the Food and Drug Administration acknowledges that some tobacco products, including IQOS, reduce the production of harmful chemicals, compared with combustible cigarettes.
Philip Morris is betting on being the lesser evil. By 2025, the company wants over half of its sales to come from smoke-free products, and the string of recent moves makes that goal more reachable. Philip Morris’ RRP business grew 33.5% in 2021, to more than $9 billion, or 29% of sales, up from just over 13% in 2017. IQOS’ expected 2024 U.S. relaunch should offer some stabilizing dollar-denominated sales to offset foreign-exchange risk, while giving it access to one of the most profitable nicotine markets in the world.
No other cigarette maker is close. Altria still gets more than 84% of its revenue from combustible cigarettes, while British American Tobacco BATS +0.22% (BTI) gets nearly 86%. All told, Philip Morris has 28% of the global cigarette market, but 59% of the global smokeless tobacco market, according to Cowen analyst Vivien Azer. “Philip Morris’ advantaged competitive position will prove defensible, at least for the midterm,” she says.
And profitable, too. Steady increases over the years have proven tobacco’s pricing power—a crucial advantage in an inflationary environment. While the eventual exit from Russia, plus currency headwinds, and IQOS research and development costs are expected to cause earnings per share to edge lower this year and next—to $5.71 and $5.69, respectively—that’s coming off an all-time high of $6.08 in 2021.
Wall Street expects Philip Morris to return to record per-share profits of $6.68 in 2025. Profit margins should widen, too, given that the most intensive spending on development and marketing is largely in the past. Gross margins already jumped to 68.8% in 2021, above the company’s five-year average of 65.5%.
“A cigarette is by far the most profitable consumer product in existence, with very fat margins,” says Dan Ahrens, portfolio manager of the AdvisorShares ViceVICE +1.77% exchange-traded fund (VICE).
Some of these advantages are already reflected in Philip Morris stock. At 17.8 times 2023 earnings, it’s trading above its own five-year average of 15.4 times, and higher than Altria, British American Tobacco, and Japan Tobacco (2914. Japan), which fetch 9, 8.4, and 10.4 times, respectively.
Still, the Philip Morris is cheap, compared with other consumer-staples stocks, including Procter & Gamble (PG), Coca-Cola KO +1.93% (KO), and PepsiCo (PEP), which fetch around 25 times, even as Philip Morris boasts higher gross margins.
“Philip Morris is getting the world to use fewer cigarettes,” Kovitz’s Engler says. “If you believe it will be around for a long time, why shouldn’t it trade at levels like the rest of the best-in-class consumer packaged goods companies?”
The answer is clear. Philip Morris is still a company that sells a legal, addictive substance that could eventually kill customers. But ESG—short for environmental, social, and governance—investing is changing, and some investors are focusing less on exclusion and more on change.
“ESG is very complicated, and it’s often in the eye of the beholder,” says Ahrens, who notes that so-called sin stocks can also do good. “Philip Morris is doing a great job with RRPs, and that’s a socially responsible thing to do.”
Philip Morris might only be cleaning up its own mess, but it’s doing so profitably, something many other companies have not. At a recent $101, its stock looks like a buy.
It’s Pharma Time: Why Merck and Lilly Are Buys, but Not Pfizer.
My 2023 biotech outlook calls for continued momentum in name changes. I just need to figure out what the stocks will do.
Last year, Respira Technologies became Qnovia. It’s run by a former tobacco executive with vape experience, and it’s developing an inhaled nicotine platform for quitting smoking. On one hand, I found years ago that a pretty good platform for that is just to not inhale any more nicotine. But on the other hand, going from Q straight to N in a company name sounds clinically promising.
A biotech once called CytRx fell from over $4 a share in 2021 to 10 cents last September, before changing its name to LadRx LADX +32.29% (ticker: LADX). Still 10 cents. Bone Therapeutics is now BioSenic BIOS +7.91% (BIOS.Belgium) and still into bone therapeutics. The industry blog FiercePharma calls this and many other examples a “biopharma name-changing craze.”
The biotech industry could use a fresh look. The SPDR S&P Biotech XBI +0.78% exchange-traded fund (XBI) gained 32% in 2019, and then 48% in 2020, before sliding 20% in 2021, and another 26% last year. Now it’s back to a price it hit in 2015. There was a rush of companies going public when shares were riding high. Many weren’t only prerevenue, but also not yet testing in humans. With interest rates rising, investors have favored pharma stalwarts instead.
Geoff Meacham, who covers drugs for BofA Securities, wonders if Big Pharma will sell off when the economy strengthens, but that doesn’t seem likely during the first half of this year, he says. Favor quality companies with good growth prospects, he says. This past week, he downgraded Pfizer PFE +2.54% (PFE) to Neutral from Buy, and did just the opposite with Merck MRK +1.06% (MRK), raising it to Buy.
Pfizer faces a double whammy. It got a revenue lift for the ages during the pandemic, but this year it could see a massive decline in sales of Paxlovid, its Covid-19 treatment, and Comirnaty, better known as the Pfizer vaccine. The brand name, just in case you’re wondering, is a mashup of Covid, community, immunity, and mRNA, a genetics acronym. Meacham puts Pfizer’s Covid comedown at $32 billion. The Street says $24 billion. The company did an estimated $100 billion in total revenue last year.
“We’ve always been skeptical that people are going to regularly get boosters every year, especially if the new strains of Covid or new variants aren’t that worrisome, and people are already vaccinated,” Meacham says. Whammy No. 2 for Pfizer is that it faces an estimated $17 billion in revenue declines from the loss of patent exclusivity on key drugs from 2025 to 2030.
Merck faces an even bigger patent cliff. Its Keytruda for cancer, one of the top-selling drugs in history, could do $24 billion this year, or 40% of company revenue. And it’s expected to peak around $30 billion a year. But it will lose exclusivity beginning in 2028. Management’s strategy has been to promote using the drug as the backbone of a long list of combination therapies. Those could sell well long after sales of the stand-alone drug decline.
Merck goes for 15 times this year’s projected earnings, and Pfizer 10 times. Eli Lilly (LLY) goes for more than 40 times, and is up more than 300% over five years, but remains one of Meacham’s favorites. Its drug for diabetes, which could win approval for obesity this year, delivered up to 22.5% weight loss in trials, making it more effective than Novo Nordisk’ s (NVO) drug, which is already approved for weight loss. The Lilly drug is also being tested for obesity-related diseases of the heart, liver, kidneys and more.
“To put it in perspective, a patient on this drug that is nondiabetic, just, you know, a straight obese patient, their blood pressure, their heart rate goes down more than if they’re on a heart rate med,” says Meacham. “Their lipids crash almost more than if they’re on a statin. Their blood sugar goes down as if they’re on a diabetes medicine. So, it isn’t just about the weight.”
The breadth of these trials could both increase the drug’s potential patient population and make insurance companies more likely to pay. Meacham says that making only moderate assumptions about the drug’s success, it could eventually bring in $100 billion a year in revenue, making it by far the best-selling drug ever. Total sales for Eli Lilly this year are pegged at just over $30 billion.
A year ago in this space, I mentioned Devon Energy (DVN), a leading U.S. shale driller, whose stock was up 181% over the preceding year. Its CEO had vowed to hold the line on production despite high crude oil prices. The stock since then has returned another 43%, versus a 12% decline for the S&P 500 index. But surely energy stocks, after two consecutive years of shining, can’t three-peat in 2023. Can they?
Raymond James is mighty bullish. U.S. crude production will increase just 0.8% this year, it reckons. But OPEC+ cuts will offset that. Non-OPEC producers will grow output by 0.9%, but that won’t be enough to keep up with a 1.4% rise in global demand. Put it all together and Raymond James expects Texas crude to rise from a recent $74 a barrel to a year-end price of $110, averaging $100 along the way. The firm’s analysts call Devon a Strong Buy and say it will hit $87, for a further gain of 42%.
Too bullish an outlook after such a wild rally? Definitely. Unless of course it pays off, in which case I had a feeling it would. It’s my highest-conviction noncommittal.
This Company Is an Inflation Winner. Its Stock Looks Like a Buy.
Accelerating inflation, rising interest rates, and worries about a coming economic slump have made it difficult for companies to thrive.
With more of the same likely this year, investors hoping to play defense might look for companies that use inflation to their advantage. That’s where a stock like Bunzl (ticker: BNZL.UK) can be attractive. The British company is a worldwide distributor of equipment for food-service providers and other companies. Its logo can be found on disposable cutlery in fast-food restaurants and on the sides of trucks delivering cleaning and safety products.
The company, which operates in 31 countries in the Americas, Europe, and Asia Pacific, had a decent 2022. It benefited from the pickup in activity as most of the world emerged from the pandemic—and was able to raise prices along the way.
The stock fell about 4% last year, compared with a 0.9% gain in the U.K.’s FTSE 100 index of blue-chip companies. It offers a 2.1% dividend yield.
While that may sound better than stocks in the S&P 500, which fell almost 20% last year, it’s important to note that the British pound depreciated more than 10% against the dollar in 2022, making returns for dollar-based investors that much weaker. By the same token, any recovery in the pound in 2023 would boost returns.
Bunzl had a “strong 2022, benefiting from the highest levels of product inflation in decades, plus continued post-lockdown rebounds,” says Karl Green, an analyst at RBC Capital Markets, who rates the stock a Hold.
On Dec. 21, Bunzl updated the market to say that it expects revenue for 2022 to increase 17% at actual exchange rates and 10% at constant exchange rates. It expects an increase in revenue in 2023 and operating margin to be higher than historical levels.
“Our teams have successfully navigated the inflationary environment and supply-chain disruption experienced this year to ensure customers have reliably received the essential products they need,” said Chief Executive Officer Frank van Zanten.
The firm traces its origins to the Austrian Empire. Moritz Bunzl opened a haberdashery shop selling clothing and textiles in the city now known as Bratislava in 1854. It moved to Vienna in 1883 and started manufacturing paper products, and relocated to London in 1938. It has been listed on the London Stock Exchange since 1957. The company expanded into distribution of paper in the 1980s. In 2002, it sold its fine-paper distribution business.
Bunzl thrives on acquisitions—historically they have driven three-quarters of the firm’s growth. Depressed share prices after the recent increase in interest rates might spur more purchases. The firm announced four in December, with CEO van Zanten emphasizing that they all offer double-digit margins.
Bunzl, based in London, employs 21,000 people and has a market value of 9.3 billion pounds sterling ($11 billion). Its distribution services are used by industries including groceries, cleaning, and healthcare. It trades at 15 times expected earnings for the coming year and is valued at a 100% premium to its peers. Its shares traded at £27.78 at the start of 2023. Dominic Edridge at Deutsche Bank thinks they could go to £33 and rates them a Buy.
Overall, analysts are divided on the valuation. Of the 12 ratings collected by FactSet, four are a Buy, six are a Hold, and two are a Sell. “Bunzl has a reputation for guiding conservatively and raising expectations through the course of the year,” says Deutsche Bank’s Edridge. “Guidance does not appear to include future acquisitions and is likely to err on the cautious side, if history is any guide.”
Tesla’s Battered Stock Looks Like a Buy Again
Times are tough for Tesla TSLA +2.47% . Demand is slowing. Costs are rising. Elon Musk is distracted and a distraction.
It’s time to buy the stock.
Yes, Tesla (ticker: TSLA) is a mess right now, and signs point to difficult times ahead. The wait time for U.S. buyers of its cars has shrunk from more than three months to, well, nothing. Delivery growth has slowed below the company’s own goal, while production has exceeded deliveries by an increasing amount in recent quarters and prices are getting cut, all signs of waning demand. Musk’s behavior since taking over Twitter has also raised questions about whether shoppers will buy other electric vehicles now that they are available. And the U.S. could face a recession by the end of the year.
Ignore all that. Instead, focus on what Tesla is—the leading EV manufacturer in the world and one that has a decade-plus head start on other auto makers, as well. Tesla is able to produce cars at a much lower cost than its competitors, giving it room to cut prices to stoke demand in a way others can’t. Tesla stock is a risky bet, to be sure, but with shares off 72% from their all-time high, to $113.06, and near 21 times 12-month forward earnings, down from 201 times two years ago, the opportunity is too good to pass up.
Friday’s news that Tesla would be cutting prices in China underscores the current dilemma. Tesla has been focused on growing production—it plans on making 2 million cars in 2023, up from 1.4 million in 2022—triggering concerns it will make too many cars and then be forced to cut prices to sell them all. That seems to be what’s happening in the world’s second-largest economy, where Tesla cut prices for its Model 3 by 14% and the Model Y by 10%. Those price cuts, which may be coming to the U.S. in the future, will hurt its profit margins, and Wall Street’s per-share earnings estimates for 2023 have already slipped 10% since the end of September. That dynamic puts Tesla in a bind.
“Tesla will need to either reduce its growth targets, and run its factories below capacity, or sustain and potentially increase recent price cuts globally, pressuring margins,” writes Bernstein analyst Toni Sacconaghi, who rates the stock Underperform.
For Tesla, the choice is obvious: It will cut prices to juice sales. That will hit its margins, but Tesla has margin to spare. It is expected to post operating margins of 18% in 2023, while the rest of the industry’s should be closer to 8%. Tesla could sacrifice some 10 percentage points of margin and still be as profitable as, say, BMW (BMW.Germany). Ultimately, Tesla has the ability to sacrifice profitability if it means undercutting competitors on price.
“Arguably, if [Tesla] cuts price, it’s a worse situation for their competitors, given many struggle to make any profit,” explains RBC Capital Markets analyst Joseph Spak.
What’s more, Tesla is one of only two auto makers that makes a profit off EVs; the other is BYD 1211 –2.60% (1211.Hong Kong). Everyone else is losing money, even General Motors GM +2.60% (GM), which sells a $110,000 Hummer and has targeted EV profitability by 2025. Others, like Toyota Motor 7203 +0.97% (TM), appear to be getting cold feet in the rush to meet EV demand that may not materialize.
Most EV start-ups, including Rivian Automotive (RIVN) and Lucid Group LCID +1.76% (LCID), are far from profitable and don’t have the scale to compete. It’s a precarious position to be in at a time when investors are demanding profitable growth, and not just growth.
Numbers like that demonstrate why Tesla, with a market cap around $350 billion, is the world’s most valuable car company, even after dropping 69% over the past 12 months.
It helps that Tesla is expected to generate the most free cash flow among auto makers in 2023, some $12.2 billion, up from $9 billion in 2022. Toyota, the second-most-valuable auto company, is expected to generate free cash flow of about $10 billion this year and next. But even price cuts shouldn’t hit Tesla too hard, says New Street Research analyst Pierre Ferragu, who projects almost $11 billion in Tesla’s 2023 free cash flow while assuming its vehicle prices drop 8% over 2022.
Tesla isn’t stopping there. It plans to launch its much-delayed Cybertruck in 2023, and could also announce a badly needed lower-cost car at its investor day scheduled for March 1.
And like it or not, Tesla is more than just a car company. Its “self-driving” software, though still far from living up to its name, continues to improve, and drivers have shown a willingness to pay $15,000 for its top driver-assistance software. That’s a product—and revenue line—no other auto maker has.
It also has a $12 billion nonautomotive business based on renewable-power generation and battery-storage technologies, which is only getting bigger. Tesla quietly opened a “megapack” facility in Lathrop, Calif., in 2022. It’s designed to produce up to 40 gigawatt hours of utility-scale battery storage a year, something Future Fund Active exchange-traded fund co-founder Gary Black sees generating up to $3 billion in incremental operating profit a year.
Nor is the EV business as bad as it seems. In China, EV sales grew about 90% in 2022, accounting for 25% to 30% of all new car sales. In the U.S., battery-powered EV sales increased 70% through the first three quarters of last year, and Canaccord analyst George Gianarikas expects tax credits to help spur sales growth in 2023.
Tesla, of course, still has many issues. Since Musk’s acquisition of Twitter in late October, the company has taken a reputational hit, with more people now having an unfavorable view of Tesla’s brand than a positive one, according to a December YouGov poll. It appears to have taken an operational hit as well, with two-thirds of respondents in a Morgan Stanley poll saying they believe that Musk’s behavior at Twitter is hurting Tesla’s fundamentals.
Nowhere was that more clear than in Tesla’s fourth-quarter deliveries, released on Jan. 2. It delivered 405,278 vehicles, well below analyst projections for about 420,000. Tesla’s stock dropped 12% on Jan. 3, its worst start to a year ever, and Musk got most of the blame, though there were a lot of headwinds, from lockdowns in China and inflation pressuring potential car buyers. “He is viewed right now, fairly or unfairly, as asleep at the wheel,” says Wedbush analyst Dan Ives. “It’s not a good look from the Street’s view.”
Musk has also been selling stock in a haphazard manner far from the organized 10b5-1 trading plans most CEOs use. The selling doesn’t need to stop, but even longtime shareholders are losing patience with Musk’s do-it-yourself approach. “I am confused why [the board] allowed Elon to crash Tesla stock price,” says Leo Koguan, chairman of SHI International and Tesla’s third-largest individual shareholder. “Why not use block sales?” Tesla’s board didn’t respond to a request for comment.
Worse still, a recession has become the base case for many economists heading into 2023. Recessions typically mean new-car sales drop by around a third, though sales in the U.S. are already 20% below prepandemic levels due to persistent parts shortages. A slowdown, though, would also give Tesla time to develop a badly needed lower-cost model, especially if other auto makers decided to spend less aggressively on EVs. “A recession could slow Tesla in 2023, but the company is by far best positioned to fly through tough times,” Ferragu writes. “Recent concerns are overblown.”
Even if they aren’t, Tesla stock appears cheaper than it has ever been. Shares trade for just 21 times 12-month forward earnings, making it less expensive than PepsiCo (PEP), Visa (V), and Walmart (WMT). Other methodologies also point to Tesla trading at what looks like a reasonable valuation. Sacconaghi, who is a bear, has a discounted cash-flow-based valuation of $120 a share, and admits he is “torn” on the stock at current levels. Spak’s multiple-based valuation puts Tesla’s value at $186, up 65% from Friday’s close, while Ferragu, who has a Buy rating on Tesla stock, has a $320 price target, up 183%. “We see room for the stock to nearly triple if 2023 plays out our way,” Ferragu says.
Nothing would do more to help Tesla stock find a bottom than for Musk to swat away his Twitter distraction, a process that seems to have already started. The social-media company is making a concerted effort to woo advertisers that had been abandoning the platform. It planned to have its representatives meet with clients and ad agencies at this year’s CES tech show. Now Twitter needs to find someone who can run the company on a daily basis and let Musk focus on other things.
“Elon needs to hire a new CEO at Twitter to get the Twitter noise out of Tesla’s stock price,” says Future Fund’s Black. “It will show investors he is 100% focused on Tesla, with all its opportunities and risks, on its path to a $3 trillion valuation.”
That valuation might seem far-fetched, but it doesn’t need to reach those levels to make it a good investment. Tesla is a volatile stock, and it could even fall from here in the short term. But looking out a year or two, Tesla is unlikely to be trading below or even near $100.
Get it while it’s cold.
Why Small Brands Are Poaching Athletes From Big Names Like Nike
After four years with Nike, the US tennis star Sloane Stephens is the latest to defect to a small, more athleisure-focussed apparel brand after an endorsement deal with a big name sportswear brand.
KEY INSIGHTS
- Sofia Kenin, Simone Biles and Allyson Felix are among the top sports stars who have become ambassadors for smaller brands in recent years.
- To sweeten endorsement deals, brands often offer sports stars a greater say in product design or promotion.
- In turn, a sports star can also help get these brands in front of consumers without having to rely so heavily on increasingly costly social media ads.
Tennis player Sloane Stephens is leaving the biggest name in sportswear behind.
After four years with Nike, the 2017 US Open champion has signed a new apparel endorsement deal with FP Movement, a sister brand to Free People that sells sportswear staples like track shorts and leggings as well as athleisure-friendly pieces such as onesies and fleece jackets. She has worked with Nike since 2018, and previously worked with Under Armour for seven years.
With the move, Stephens joins a growing list of mostly female athletes that are leaving Nike and other major sportswear brands to team up with smaller labels: 2020 Australian Open champion Sofia Kenin left Fila for FP Movement at the start of the year. Olympic gymnast Simone Biles ended her Nike partnership in favour of Gap-owned Athleta. Track star Allyson Felix, with 11 Olympic medals, left Nike in 2017 after criticising the sportswear giant for not doing enough to support pregnant athletes. She signed with Athleta two years later, and co-founded her own brand, Saysh, in 2021. American steeplechase athlete Colleen Quigley left Nike in 2021 for Lululemon.
The trend represents a new phase in female athletes’ decades-long quest to receive the same public recognition and financial compensation as their male counterparts. Traditionally, signing a deal with a giant brand was seen as an athlete’s ultimate goal, and large corporations like Nike have stepped up their investment in women’s sports in recent years. But athletes on a big company’s payroll can find themselves competing for resources and attention. Brands often sign players after early career successes, but interest quickly wanes if they don’t continue hitting the same highs.
“If you’re with one of those companies, and you’re not the number one athlete, if you’re not LeBron, the chances of you getting used all the time and people seeing you visibly are pretty low,” Stephens said.
Athletic wear and athleisure sales have exploded, and McKinsey projects sales will continue to grow 8 percent to 10 percent annually through 2025. Whether it’s Lululemon and Athleta, newer brands like Outdoor Voices, Girlfriend Collective, or fast-expanding retailers like Vuori or Alo Yoga. Not all have yet expanded into traditional athlete endorsements, but they have arguably built up enough of a reputation for top athletes to see them as a viable alternative.
Partnering with a smaller brand like FP Movement can offer athletes a greater role in the creative process, whether it’s designing their game-day ensembles or dreaming up the campaigns they’ll star in.
“We’re very keen on seeing what [Stephens] is interested in and what she gravitates to from a fashion perspective, and how that starts to impact what we design long term,” said Jack Reynolds, chief marketing officer at FP Movement.
To sweeten the deal, these brands often offer athletes specialised attention on causes important to them: With her deal with with FP Movement, Stephens will also work with its non-profit partner Girls, Inc., a female-empowerment-focussed charity. Some can even come with equity in the business. And in teaming up with brands that are more directly marketing to women, there’s less concern that they’ll be sidelined for male sports stars.
“Athletes just want to have more say in the creation of what they’re wearing,” said Alexandra Grayson, basketball marketing director at sports marketing agency Octagon. “They have an opportunity when working with these other brands to really have an impact on the products, the marketing, the campaigns, and see a business grow.”
There’s more talent to court, too, now that college athletes in the US have the freedom to ink brand deals of their own, thanks to a number of states passing laws that allow them to profit off of their name, image and likeness, which was previously forbidden by the NCAA.
Smaller brands sign athletes to signal that “‘we’re upping the game, we’re not just a pair of leisure pants, but we’re also good enough for the best athletes in the world,’” said Doug Shabelman, chief executive of Burns Entertainment, a marketing agency specialising in celebrity partnerships.
A sports star can also help get a brand in front of consumers without having to rely so heavily on social media ads, which have become more expensive and less effective since Apple’s 2021 privacy changes.
And while an influencer may post a selfie wearing a brand at their daily yoga class, a world-class athlete sporting a logo at a major sporting event offers a different level of gravitas.
“We’re still a fairly small brand, certainly in terms of competitors in the athletic wear realm,” said Reynolds. “So to bring in [marquee athletes] to open up the brand to new audiences is also a key growth focal point for us.”
WWE Shares Skyrocket As Ex-CEO Vince McMahon Returns To Board, Seeks Possible Sale
World Wrestling Entertainment (WWE) shares jumped more than 18% -- one of the largest intraday surges since June 2021 -- as the company announced founder Vince McMahon, who retired last year amid allegations of sexual misconduct, will return to the board as the company explores a possible sale.
"Today, we announce that the founder of WWE, Vince McMahon, will be returning to the board."We also welcome back Michelle Wilson and George Barrios to our Board of Directors. Together, we look forward to exploring all strategic alternatives to maximize shareholder value," Chairwoman & Co-CEO Stephanie McMahon, Co-CEO Nick Khan and Chief Content Officer Paul Levesque, wrote in a statement.
Shares of Stamford, Connecticut-based WWE skyrocketed to as high as $85.89 per share -- nearing an all-time high.
Nearly 20% of WWE's float is short.
Maybe a good ole' squeeze.
McMahon stated that he wouldn't have an active role in day-to-day operations:
"WWE has an exceptional management team in place, and I do not intend for my return to have any impact on their roles, duties, or responsibilities."
WWE added more color about maximizing shareholder wealth in a possible sale:
In connection with the change in the composition of the Board of Directors and in cooperation with Vince McMahon as majority shareholder, the company intends to undertake a review of its strategic alternatives with the goal being to maximize value for all WWE shareholders. There is no assurance that this process will result in a transaction.
Here's what Wall Street analysts are saying about WWE (courtesy of Bloomberg):
MKM Partners analyst Eric Handler (buy, PT $90)
- If McMahon attempts to push for a sale the firm will be an "attractive asset" that could be of interest to a sizable bidding pool of major players like Comcast, Fox, Disney, Amazon and Netflix
- "There is a scarcity of independent content creators that can match the global popularity and size of WWE" *
Guggenheim analyst Curry Baker (buy, PT $94)
- WWE could be attractive to several larger media platforms and companies
- Optimistic about WWE's renewal prospects — the US rights for RAW and SmackDown are up for renewal this year
- While the content is relatively cheap to produce, the value of sports rights continue to rise
Crypto exchange Huobi to cut 20% of its staff as ‘bear market’ strikes
Other digital asset companies including Silvergate and Genesis also announced job losses this week
Crypto exchange Huobi Global has revealed plans to cut hundreds of jobs amounting to about a fifth of its workforce in the wake of last year’s implosion of competitor FTX.
Huobi, which is one of the world’s most prominent digital asset companies and was founded in China, said the job cull came as a result of the “bear market” in crypto, adding that it would seek to maintain a “very lean team”.
Describing the job cuts as “personnel optimisation”, the company said the move was taken “to implement the brand strategy, optimise the structure [and] improve efficiency”.
Huobi is the third leading crypto player this week to announce a reduction in headcount after a painful 2022 in which several big firms collapsed and the value of tokens such as bitcoin tumbled. Silvergate, a crypto-focused US bank, said on Thursday it would shed about 40 per cent of its staff, while digital asset lender Genesis is cutting 30 per cent of its employees.
Justin Sun, Huobi Global’s advisory board member and a Chinese crypto entrepreneur, told the Financial Times that the job cuts would begin as early as next month and that “most” of the losses would happen in Asia. “We are gradually reducing our concentration in Asia although the region will remain an important market,” he said.
The announcement came at a time of rising concerns about trading platforms such as Huobi and industry leader Binance after the implosion late last year of Sam Bankman-Fried’s FTX empire.
Huobi’s in-house token called “HT” has dropped 10 per cent since Wednesday and by about 25 per cent over the past month, according to data provider CryptoCompare. Sun, also the founder of crypto blockchain Tron, said he was not concerned about the risks of a big jolt of withdrawals at Huobi, such as the one that ultimately pushed FTX over the edge, and said the exchange could handle clients cashing in tokens.
“We are not in financial trouble,” Sun said in a voice message, explaining that Huobi’s current performance “does not match” its operational objectives because of redundancy and market deterioration, adding that it was “mostly done” with the reduction plans. But he was unable to say whether there could be another round of job cuts. He also said that employees’ year-end bonuses had been reduced.
Sun added: “The [job cuts] have nothing to do with FTX.”
While Sun and Huobi’s statement did not confirm the number of employees affected, Sun told the FT in October that Huobi had about 1,600 staff members globally.
In his October interview with the FT before FTX’s collapse, Sun struck a more bullish tone as he said the company was planning to expand its workforce to roughly 2,000 people as it recently hired employees in Kenya and Nigeria. He also said the company was looking to move its headquarters from the Seychelles to the Caribbean.
Huobi is ranked as the world’s 16th largest crypto exchange based on daily trading volume with a 24-hour trading volume of about $340mn — about 4 per cent of Binance’s volume — according to CoinMarketCap. The platform was number two globally but slipped following China’s ban on crypto transactions in 2021, hammering its biggest market at the time.
FTX’s disgraced founder Bankman-Fried held talks with Sun in November as he looked to save the now-bankrupt platform by seeking a capital raise in an attempt to avoid the company’s collapse.