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Semiconductor stocks fall, Endeavor wins on sports betting, Naked Brand shares surge

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  • NAKD
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  • HUN
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Yahoo Finance's Brian Sozzi and Julie Hyman break down the morning top stock movers, including Endeavor, Naked Brand, and Huntsman.

Video transcript

[MUSIC PLAYING]

BRIAN SOZZI: Let's get a quick look at the futures here as we inch closer to that opening bell. Really futures have been under pressure all morning long, Julie. S&P 500, Dow, NASDAQ, all in the red. Also Russell 2000 futures in the red as well. And really a lot of folks are saying this is because of the rise in yields.

Of course, we have testimony coming up shortly from Fed chief, Jerome Powell. You have Treasury Secretary Janet Yellen's testimony of her own. Volatile session on tap and really this sell-off we were talking a little about it coming into the show, Julie, has been really focused on high-growth tech stocks, and semiconductors continue to come under pressure.

JULIE HYMAN: Yeah, I mean this is a group as Willem Sels was just pointing out, that tends to react to yields. We've been talking about that pretty consistently as well here during this latest round of selling. And sort of to add insult to injury if you will, when it comes to semiconductor capital equipment, in other words, chip equipment makers, we're getting a downgrade here from New Street Research cutting that semiconductor capital equipment sector to neutral, saying, "Valuation is getting lofty here. There's limited room for positive revisions," says Pierre Ferragu, the analyst over there, "multiples will be under pressure as we're getting closer to a cycle peak." So Applied Materials and ASML are both being downgraded as part of this call here. And both of those stocks are under pressure in today's trading.

So again, sort of, you know, it's on top of the negative sentiment because of those higher yields. But also illustrates, I think, Sozz, that these stocks are-- some of them particularly vulnerable because of those high valuations. So as we start to see perhaps a re-rating of some of them.

BRIAN SOZZI: No. And it is important to note, you are seeing these semiconductors come under pressure, a lot of high growth tech stocks. But if you're trading these names, it's not necessarily that their earnings growth is going to fall off a cliff over the next two years because of rising yields. What essentially the sell-off means is that you're seeing PE multiple compression, that's the other part.

JULIE HYMAN: Right.

BRIAN SOZZI: Component of the stock price. So that's what you're seeing with this pressure here. But Julie--

JULIE HYMAN: Yeah.

BRIAN SOZZI: --you're also flagging Huntsman. No, go ahead, Julie.

JULIE HYMAN: Yeah, I just wanted to say one more thing on the semiconductors, and that is we have consistently heard, and I know you've talked to a lot of these executives, you know, they think that this demand cycle is going to be protracted. So they expect the demand to your point that earnings should at least according to them be able to hold up. They say demand is actually going to last for quite some time, this robust demand. So that's something that suggests that earnings could hold up.

BRIAN SOZZI: Yeah. Key report this week, we'll get Micron earnings later this week. It'd be fascinating to see what they're saying on the supply shortage. But you also flag to us a little, not a name, not necessarily a popular name per se but Huntsman really on the move here in the pre-market.

JULIE HYMAN: Yeah, not necessarily a name that we talk about a lot. This is a chemical company, and if you recall, it went public back in 2005. Hasn't done a whole heck of a lot since then in terms of what the price has done on this company.

So this morning the Wall Street Journal flagging that Starboard Value has now taken a stake in the company of more than 8%, and is going to push for some kind of change. We don't know exactly what kind of change yet that that is but it's going to push for some kind of change. And as we know when Starboard gets involved, historically, we've seen some potentially positive outcomes. So that has to do with why we are seeing the shares rise in today's session. They did sell a couple of units a couple of years ago but we'll see if there's anything more significant that they do as a result of this interest. But definitely, that mover caught my eye this morning, Sozz.

BRIAN SOZZI: Yeah. No, really, Starboard involved in the game that's Jeff Smith. I think back to his is two really, I would say legendary attacks. I mean, that's Darden, he was the one that put forth that presentation many years ago, led to a complete shake-up of the company. And then more recently, Papa John's, I mean, now you have Shaquille O'Neal on the board in large part because of Jeff Smith and Starboard and how he tried to clean house there as well.

But a little more of a positive story, Julie, it's Endeavor getting deeper into sports betting. $1.2 billion acquisition of OpenBet here. And by and large, just looking at the analyst chatter at least that I've come across, they like this arena, they like Endeavor using their access to all things sports, all things content, and applying that really to sports betting.

[BELL RINGING]

And there we have the opening bell on Wall Street. MoneyLion roaring into today's session, Julie. MoneyLion ringing that opening bell on Wall Street. I couldn't help it. You know, I'm a big pun guy. I really, I had to do that.

JULIE HYMAN: I like it. I like it. What I was going to say is interesting about this acquisition that Endeavor is making is that this is a servicer of sports betting companies. So it's interesting here it's not as though it is buying the consumer end, the front end, right? This is sort of the back end if you will.

So has a sportsbook I believe or they already operate a sportsbook called IMG ARENA. So this sort of adds to the other side of the business. It says the revenue from this unit is going to hit $340 million next year as it combines that IMG ARENA with this OpenBet business. So it seems like the market is really hot on anything sports betting. Some of the questions about DraftKings and some of the short calls on it notwithstanding, the market has been hot on this area.

BRIAN SOZZI: No. Absolutely. You've seen a lot of transactions in this space. Another hot name, Julie, and we've been watching this one really for the past five sessions, one of the hottest tickers right now on the Yahoo Finance platform, that is Naked Brands, a lingerie company with its CEO making some, I would say bizarre comments.

JULIE HYMAN: Yeah. Apparently, the company making cryptic comments let's say. So the chairman of the company, Justin Davis-Rice, said in a letter to shareholders, he says the company has found a quote, "disruptive potential acquisition in the clean technology sector." Now, I don't know if they're going to make swimsuits and lingerie out of recycled plastic or I don't know what that's about. He didn't give any more details. He said there's due diligence being done on both sides.

Listen, you know, Naked Brands is one of these meme names, right? So it doesn't take much if anything sometimes to make these stocks go higher. And that potentially-- you know, also, let's call that price back up I mean, this is effectively a penny stock. It's less than a dollar, right? So you know, it takes less to move these kinds of names around.

BRIAN SOZZI: Well, Julie, I mean, we clearly know the clean-tech play here, Naked Brands is going to hook up with General Electric here and start building wind farms.

JULIE HYMAN: Sure, why not?

BRIAN SOZZI: Why not?

JULIE HYMAN: I keep trying to figure out if there is some like apparel tie-in. I don't know.

BRIAN SOZZI: Julie, I don't think they even know. We'll table that discussion. We'll take that off.

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