Top US stocks: Affirm, GameStop and Sea

Buy now, pay later outfit Affirm reports later today, GameStop keeps quiet on its strategy, Sea looks to raise over $6 billion, Ford plans to shutdown plants in India, Lululemon beats expectations, United Airlines sees bookings struggle, and Google faces fresh investigations.

USA (1)

Affirm

Affirm Holdings is scheduled to report fourth quarter earnings after the closing bell today, with the company set to build momentum after stating it was ‘just getting started’ in the previous quarter when it delivered stellar rates of growth.

Wall Street is expecting Affirm to beat the top-end of its topline target with revenue of $226.4 million in the fourth quarter but is anticipating an adjusted operating loss of $86.7 million. Investors will be keen to know how the buy now, pay later (BNPL) firm’s new deals with Shopify and Amazon are progressing.

The BNPL sector is attracting attention due to its fast growth prospects and signs that the industry is starting to undergo consolidation. Square ignited things by acquiring Afterpay in a $29 billion deal and yesterday PayPal said it has agreed to acquire Japanese BNPL provider Plaidy.

You can read our full preview ahead of the Affirm earnings here.

GameStop

GameStop shares are in play today after the company posted strong growth in sales as its stores recover from the pandemic, but disappointed shareholders with a lack of engagement.

Net sales jumped 25% to $1.18 billion from $942 million as customers returned to its stores, coming in ahead of the $1.12 billion expected by analysts, and its net loss narrowed to $61.6 million from $111.3 million the year before.

However, investors were left disappointed by the lack of details about how the new board plans to turn GameStop’s fortunes around. GameStop provided no guidance and the call with the firm’s new CEO Matt Furlong lasted less than 10 minutes. Chairman Ryan Cohen said back in June that the board were set to digitally disrupt the video game industry in the same way Chewy and Amazon disrupted their respective fields by leading online and in areas such as fulfilment. But details have remained scarce.

Sea

Sea has announced plans to raise $6.3 billion by selling shares and convertible bonds, representing the biggest ever capital raise in southeast Asia.

The company, which runs ecommerce outfit Shopee and a gaming arm Garena, said it plans to sell 11 million American Depositary Shares (ADSs) with an option for the underwriters to buy a further 1.7 million. It also plans to raise $2.5 billion in convertible notes with an option to sell a further $375 million worth. Based on the closing share price of $343.8 yesterday, the share sale could raise up to $3.8 billion.

Sea ended June with over $6.1 billion worth of cash and cash equivalents on its books, with the latest fundraise set to significantly bolster its cash pile to help it capitalise on new opportunities.

Lululemon

Lululemon Atheltica said it continued to build momentum in the second quarter and surprised analysts by forecasting faster growth than anticipated this year.

Net revenue was up 61% to $1.5 billion, driven by a recovery in store sales and continued growth online. Company-operated store sales were up 142% from last year when they suffered from restrictions, while its direct-to-consumer unit posted 8% growth as it came up against tougher comparatives following the boom last year. Adjusted EPS climbed to $1.65 from $0.74. That beat the $1.34 billion in revenue and $1.19 EPS forecast by analysts.

Lululemon said annual revenue should be between $6.19 to $6.26 billion with EPS of $7.38 to $7.48 – both of which were also well ahead of Wall Street’s forecasts.

Ford

Ford is set to become the latest company to exit the Indian market with plans to stop producing cars in the country by shutting its two manufacturing plants, according to reports from Reuters.

Citing unnamed sources, the report said Ford had made the decision because the plants were not profitable. The process is expected to take about one year to complete. Reuters reported the move could cost as much as $2 billion.

Ford is expected to continue selling cars in India by exporting them into the country, the sources said.

Alphabet

Alphabet’s Google is facing fresh investigations by the EU antitrust regulator over whether it forces device makers to use its Google Assistant as the default voice assistant on Android phones, according to reports from MLex.

The European Commission has made it known that it is concerned about how Big Tech firms dominate the market of internet-connected devices and the use of exclusivity practices. The report said the regulator has asked device makers to provide evidence that they have been forced to use Google Assistant and whether Google tries to ban rivalry from competitors using exclusivity clauses.

Caesars Entertainment

Caesars Entertainment has agreed to offload the non-US business of William Hill to London-listed 888 Holdings for £2.2 billion.

888 has reached an agreement to buy the non-US business of William Hill from Caesars, which bought the company itself for £2.9 billion earlier this year. Caesars was only interested in the US arm of the business and has swiftly moved to sell of the rest of William Hill, with the deal including its European and UK businesses. 888, which operates purely online at present, will be taking on William Hill’s 1,400 betting shops in the UK.

Caesars said it expects to book net proceeds of around $1.2 billion from the deal, which should close in the first quarter of 2022. It said 888 ‘shares the same objectives, approaches and longer-term ambitions’ for the William Hill brand.

United Airlines

United Airlines has warned customer bookings have deaccelerated over recent weeks due to a spike in coronavirus cases associated with Delta variant, meaning it will not achieve its guidance in the third quarter.

The airline said it now expects revenue in the third quarter to be around one-third lower than pre-pandemic levels. It originally expected capacity to be 26% lower than 2019 levels in the third quarter but said it will now be around 28% lower.

As a result of the weakness in revenue that the company has experienced to date and expects to continue to experience, the company now expects an adjusted pre-tax loss in the third quarter of 2021 and if current trends continue, the company also now expects an adjusted pre-tax loss in the fourth quarter of 2021,’ United Airlines said. It had previously targeted a third quarter profit of around $82 million.  

Humanigen

Humanigen said this morning that the US Food & Drug Administration has declined its application for emergency use approval for its lenzilumab drug to treat hospitalised patients suffering from coronavirus.

The FDA said it was ‘unable to conclude that the known and potential benefits of lenzilumab outweigh the known and potential risks of its use as a treatment for COVID-19.’ The company is hoping its ongoing trial involving over 500 patients may provide more data to support its application and said the FDA has committed to working with the business to develop the potential treatment.

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