The Rundown - Tesla Under Investigation for Securities & Wire Fraud, Reddit Stock Soars as Revenue Pops

Starting point is 00:00:00 Public.com presents the rundown, your daily market update in five minutes. My name is Zadmani, and today is Wednesday, May 8th. In today's episode, we recap earnings from Reddit and Uber that might surprise some investors. Also, some breaking news about Tesla and the Justice Department. And stick around to the end of the show to find out how much foot traffic is down at movie theaters. It's worse than you think. All right, let's go. Well, stocks didn't really do much on Tuesday.

Starting point is 00:00:28 the S&P and Dow squeezed out a small gain while the NASDAG finished in the red. But on the bright side, at least things are trending in the right direction for the month of May. April was pretty brutal, but May has been pretty nice so far. In fact, the S&P 500 has been up for four straight trading days in a row, and the Dow has been up for five straight trading days. But, you know, nobody cares about the Dow. We're starting to get pretty close to the end of earnings season. 80% of S&P 500 companies have reported their first quarter earnings,

Starting point is 00:00:54 and the results have been pretty good. According to Barron's, revenue in Q1 was up 3.5% on average, and earnings per share was up 7%. So that's pretty good. We still have a few earnings to look forward to a lot of the major retail companies like Walmart, Target, Home Depot, are reporting next week. Investors like to pay a close attention to earnings from retailers because it helps paint a better picture of what the overall health is of U.S. consumers. And then Nvidia is reporting in two weeks from now on May 22nd. That's going to be a big one. Can't wait for that.

Starting point is 00:01:23 Let's run through some headlines. Starting with Reddit. Reddit reported their first earnings report after their IPO back in March, and the company did better than expected. Revenues and earnings both topped Wall Street estimates. Reddit grew revenue by 48% in Q1 to $243 million. And $223 million of that was advertising, which grew by 39%. Quick fun fact, Reddit's advertising revenue is growing faster than companies like Meta's, Amazon,

Starting point is 00:01:51 and Google's advertising revenue. But to be fair, those companies are much larger than Reddit. Now, the company still lost money in Q1, losing over $575 million, but most of that cost was related to the IPO and stock-based compensation. If you take those costs out, the adjusted EBDA for Reddit in Q1 was $10 million. But, you know, adjusted EBDA is not every investor's favorite metric, so take that with a grain of salt. Now, I think the most encouraging thing for investors might be Reddit's guidance for Q2. They expect the revenues in Q2 to be between $240 and $255 million, which was better than what Wall Street was expecting. The company also posted strong user growth.

Starting point is 00:02:28 Weekly active users grew by 40% to 306 million, and daily active users was up 37% to 82.7 million. That's some pretty strong growth numbers right there. So Reddit definitely surprising some people, and the stock is up more than 9% in pre-market trading. That's a pretty big jump, given the fact that the stock was up 7% going into yesterday's earnings from their IPO. Speaking of surprises, Uber just released their Q1 earnings

Starting point is 00:02:51 and reported a surprising loss, and weaker than expected growth. gross bookings. Uber's Q1 gross bookings, which includes things like ride hailing, delivery orders, and freight was up 20% the $37.7 billion, but that was below the midpoint of what Uber had forecasted back in February. The company's CFO blamed the bookings miss on ride hailing softness in Latin America. Now, as a whole, Uber did grow revenues by 15% to $10.1 billion, which came in line with expectations. Now, going back to the loss of $654 million, it's important to note that that loss includes $721 million tied to reevaluation of equity investments.

Starting point is 00:03:29 So Uber made some investments over the years, and those investments are down. But Uber's CEO, Dara Korshahi, said on CNBC this morning that the loss had nothing to do with the operating business, which should be pretty encouraging. But this net loss does break Uber's three-quarter streak of profitability. And Uber's stock is down more than 6% in pre-market trading. Now, this report from Uber follows earnings report from Rival Lyft, which delivered better than expected reports and a strong forecast. after the bell on Tuesday.

Starting point is 00:03:56 Lyft's gross bookings grew by 21% to $3.69 billion, and the number of active riders jumped to $21.9 million, climbing at the fastest pace since 2022. So Lyft's still hanging around, you know? Lyft stock is up more than 5% in pre-market trading and was up 20% for the year going into the earnings report last night. We got some breaking news this morning regarding Tesla. The Justice Department is examining

Starting point is 00:04:21 if Tesla committed wire and securities fraud, in its self-driving claims. This is according to Reuters. Investigators are looking into whether the company misled consumers and investors about its autonomous driving capabilities. This investigation was first reported in October of 2022, but the news here is the specific charges of wire and securities fraud. Royder says the probe is looking into specific claims made by Elon Musk and some of the promises he may or may not have made. But look, this story is just breaking and developing, so we'll share more details on future episodes of the rundown once they come out. Always some drama going on with Tesla.

Starting point is 00:04:54 about more stocks making moves today. A winner this morning is a firm. Shares are up more than 3% in pre-market trading after the buy now pay later company reported Q1 earnings and beat on both earnings and revenue estimates for the quarter. A firm's management noted that credit performance was stable. The delinquency on their loans, which is the people not paying back their loans, stands around 2% and have slightly decreased from their past quarter and year over year. Now, what's interesting, though, is that that 2% number doesn't include Peloton. Don't really know why they excluded Peloton from the delinquency numbers. Maybe because nobody's paying back their bike loans.

Starting point is 00:05:30 But yeah, I thought that was very interesting. A stock having a tough morning is Shopify. Shares are tanking down more than 17% in the pre-market after the company reported Q1 earnings and a net loss of $273 million for the quarter. That was bad because estimates were calling for a profit. It's never great when you report a loss when investors were expecting a profit, especially a loss of $273 million.

Starting point is 00:05:53 Declining profit. It's come after the sale of Shopify's logistics arm in 2023. The e-commerce company previously wanted to provide its own product shipment services to its users, kind of like Amazon, but decided to focus on the software storefront instead. Now, on the bright side for you Shopify investors, Shopify did grow their revenues by 23% to $1.9 billion, which came in higher than expected. Let's wrap the show with a fun fact. Today's fun fact is about movie theaters.

Starting point is 00:06:18 Food traffic at movie theaters is still way below pre-pandemic levels. AMC locations in April of this year saw 65% lower foot traffic compared to April of 2019. And it was a similar story for Cinemark which saw visits drop 48% in April of this year compared to 2019. This data is according to Placer AI. Now this data isn't really that surprising, but I was kind of surprised to see how much foot traffic was down. I mean, seeing drops of 50 to 60% is pretty huge. I guess the only way to get people to see movies these days is like turning it into a meme, like we saw with Barbie and Oppenheimer last summer, because both those movies,

Starting point is 00:06:53 did huge numbers. By the way, AMC is reporting earnings today after the bell. We'll get more insight into how their business did in Q1. The company is expected to lose over $160 million in Q1. Well, all right, guys, that's the rundown for today. If you guys enjoyed the show, please give us a five-star rating on Apple and Spotify. And if you know as someone that would enjoy listening to Market Recaps with the sprinkle of dad humor, then consider sharing the show. Maybe they'll even laugh at our jokes. Thank you guys again for listening. Shout out to Mike and Connor for all the work behind the scenes. We'll see you guys back here. tomorrow. This is the rundown, your real-time resource for news events and trends in the markets.

Starting point is 00:07:29 All views presented in this show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell, or hold that security. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult, respective professionals. Learn more at public.com disclosures. In partnership with Zaid Admani, brokerage services for U.S. listed, registered securities are offered by open to the Public Investing Incorporated, member FINRA and SIPC.

The Rundown - Tesla Under Investigation for Securities & Wire Fraud, Reddit Stock Soars as Revenue Pops

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