As the market reacts to recent labor reports, there are plenty of stocks to watch for big moves.
Tech companies have been bogarting the headlines this year for reasons they probably wouldn’t like. Aside from the broad-based market sell-off and legal tussles, we’ve also seen several layoffs in the industry.
The low-interest rate environment saw tech companies soaring to new heights, but that trend has reversed dramatically of late. Amidst rising interest and inflation rates, most companies have been cutting back on costs, and their workers are bearing the brunt of the belt-tightening measures.
Multiple tech companies have frozen or laid off many workers in recent months. Understandably this has people worried. A report from Insight Global showed that 78% of American workers fear they won’t have their jobs in the next recession.
Moreover, roughly 56% feel they aren’t prepared financially. Amidst the gloom and doom, though, let’s look at seven stocks to watch following the discouraging layoff news.
| NFLX | Netflix | $242.70 |
| DASH | DoorDash | $77.89 |
| PTON | Peloton | $11.91 |
| COIN | Coinbase | $84.00 |
| SHOP | Shopify | $40.42 |
| CVNA | Carvana | $50.13 |
Netflix (NFLX)
Streaming pioneer Netflix (NASDAQ:NFLX) is among the stocks to watch for all the wrong reasons.
A few months ago, it reported a drop in U.S. subscribers for the first time in more than a decade. Moreover, in May and June, it laid off roughly 450 workers. Netflix followed that up with an underwhelming second-quarter report, which pointed to another tough quarter ahead.
Netflix has been the most successful streaming company, boasting an enviable track record. However, with the proliferation of new entrants in the space, its market share continues to shrink every year.
Moreover, with weakening consumer discretionary spending and the pandemic fade, NFLX and other streaming players will likely suffer in the interim. The upcoming quarters will be rough for the business, so it’s best to wait for a better entry point in investing in NFLX.
DoorDash (DASH)
DoorDash (NYSE:DASH) is one of the top players in the rapid delivery services business. Its business was firing on all cylinders during the pandemic, but things have taken a dramatic turn.
DoorDash closed down Chowbotics (its robotics business) and laid off 35 employees. With lackluster sales and deplorable margin expansion, DASH stock’s investors remain displeased.
Many have questioned whether the rapid delivery business is structurally unprofitable.
The notion is based on the fact that companies such as DASH couldn’t milk a profit during the pandemic, where revenues skyrocketed to new heights. In the current economic climate, it’s tough to see how things could get better. There’s inflation, high-interest rates, and labor shortages for DASH to deal with which will further cripple its margins and make it one of the stocks to watch before jumping in with both feet.
Peloton (PTON)
Peloton (NASDAQ:PTON) specializes in producing connected fitness equipment. It went from a niche-based home fitness equipment provider to a popular faddish purchase for people during the pandemic.
The company caught lightning in the bottle and saw its share price and order book grow to new heights. However, with the pandemic tailwinds fading away, it’s one of the pandemic stocks to watch as its business is now under immense pressure.
The company was compelled to let go of nearly 2,800 positions. It represents a substantial 20% of its corporate workforce.
Also, it recently announced a potential closure of its New York plant, which would result in additional lay-offs of 600 or more workers. Hence, it’s one of the stocks that you should steer clear of despite the massive pull-back in price.
Coinbase (COIN)
The top crypto exchanges such as Coinbase (NASDAQ:COIN) are losing a ton of value. With demand evaporating rapidly, this is top among the crypto stocks to watch comfortably from the sidelines.
Coinbase laid off 18% of its workforce in June amidst a challenging business environment. Its peers are facing an even tougher time, with some calling for bankruptcy.
Coinbase’s management reassured investors that bankruptcy was off the table. Its financing book has record zero losses, and there’s no exposure to insolvencies now. Furthermore, its subscription offerings have witnessed tremendous growth, while other segments are likely to return to form in more conducive market conditions. Hence, its long-term case remains intact.
Shopify (SHOP)
eCommerce platform and services provider Shopify (NYSE:SHOP) was one of the pandemic darlings.
Its top and bottom lines grew at an insane pace during the pandemic, resulting in a humongous increase in free cash flows. However, the current business environment represents a 360-degree change from the past couple of years.
Shopify’s revenue growth is slowing. It posted a whopping $1.12 billion net loss for the second quarter. Even if you add back the $1 billion loss relating to its investment write-down, it lost $190 billion on an operating basis compared to the $139 million in operating income it generated during the second quarter of 2021.
Accordingly, it announced that it would be laying off 10% of its workers. Therefore, it faces a bumpy road ahead in winning back investors already perturbed by its lofty valuation and slowing top-line growth.
Carvana (CVNA)
Online car retailer Carvana (NYSE:CVNA) benefitted from the post-re-opening cadence posting strong revenue numbers.
However, the current macro-economic environment played spoilsport, debilitating revenue and earnings expansion. It was forced to lay off 2,500 workers in May from its operations division amidst plenty of controversies.
Despite the lay-offs, it’s tough to see how it would improve profitability, considering its revenue’s notable deceleration.
Carvana cited rising used-vehicle prices and sluggish demand for the rightsizing of its workforce. The auto retailer reported widening losses in its latest quarterly results, which showed a 92.2% drop in gross profit per unit from the prior-year period.
The used-car sales market is likely to suffer in the interim, which is why investors will be looking to avoid CVNA stock.
Uber (UBER)
Uber’s (NYSE:UBER) profitability metrics have gone deeper into the red, a trend that is unlikely to change anytime soon.
It laid off more than 3,000 workers last year and has essentially frozen new hirings. The goal is to cut costs as much as possible to maintain its positioning.
Its second quarter showed a positive net positive cash flow, a surprise to many. However, it was mainly due to an accounting move that treated share-based compensation as an investment. If we adjust the numbers, it will show a negative cash flow balance again. Despite the lackluster performance, UBER stock trades at a relatively pricey valuation.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.