Stocks in focus: MillerKnoll, Adobe, Salesforce, Beyond Meat

Yahoo Finance's Julie Hyman and Jared Blikre detail furniture company MillerKnoll down 5% after the company missed estimates, Adobe and Salesforce shares falling after UBS downgraded the stocks, and Beyond Meat making its debut at KFC.

Video Transcript

- A little more than two minutes before the opening bell on this Wednesday morning. We've got futures indicating a very slightly lower open. Although, it's a little bit deeper for the NASDAQ, in terms of being in the red. And in terms of some movers that we're watching this morning, I am looking at MillerKnoll. Now, this is the furniture company that was formed from Herman Miller and Knoll. And the shares are down about 5 and 1/2%. And that's after the company's results missed estimates by a relatively wide margin. Earnings per share coming in at $0.51. $0.56 is what analysts have been predicting.

And although sales were up 64% year over year, they were a little bit shy of estimates. We also saw gross margin coming in below what analysts have been looking for. Why this stock sticks out to me is that the company said it has to do with supply chain and internal manufacturing capacity disruptions in the quarter. So, Jared, that seems to be pretty emblematic, of course, of what we continue to hear from a lot of companies.

- You bet it is. And I don't think this is something that's going to go away anytime soon. I mean, first of all, home furnishings, office furnishings, we've seen a real boom in those, at least in some parts. I would think office furnishings not as much as home. But people are coming back to the office, basically, within the last six months. And these companies are facing margin pressures, labor pressures just like everybody else. So even though it's kind of a booming market, I think with respect to a lot of the earnings that were going to get out in the coming quarter here, we're just going to see some of these problems continue.

- Yeah. It definitely feels that way, at least for the short to medium term. Even if we start to get some of these supply chain issues worked out-- I mean, the furniture issues have been going on for at least a year now, in terms of the difficulty of getting that stuff in stock. As I mentioned, we're coming up on the opening bell on this Wednesday morning. It looks like we had that Santa Claus rally. And now things are falling back a little bit here as we get to the middle of the week.

[BELL RINGING]

You've got a female-lead SPAC, Athena ringing the opening bell here on this Wednesday morning. And as we get here, the opening prices, again, we've got that pullback. The NASDAQ continuing some of its declines from yesterday. I think-- correct me if I'm wrong, Jared. I think the NASDAQ was alone among the three major averages in not having positive performance during that Santa Claus period. That is the last five sessions of 2021 and the first two of 2022. Is that right?

- Yeah. I was just checking the numbers. It was down about 20 basis points. So it did not participate in the rally. The official statistics, they cover the S&P 500. We saw about 1 and 1/2% there. 2 and 1/2% on the Dow. Does it mean anything in the big picture? I think it does because any time you see this low volatility, low volume melt up at the end of the year and also continuing into the beginning of the year-- and, remember, we don't have traders really coming back until next Monday. A lot of people still off on vacation this week.

So when we see that, we tend to get follow through in the month of January because if the market can rally on fumes, the thinking is it can rally on more substantial things in January. We talk about the January effect. And that is a real thing because we see the most inflows into the stock market in January. A lot of times January will have bigger inflows than the entire 11 months that follow it. And that's significant because there's a lot of tax loss selling. People reinvest in the new year. And all of that tends to drive prices up in this month.

And so also the converse of that is when we have a big sell off in January, that can be kind of a precursor of what's going to happen for the rest of the year. So they say, as January goes, the entire year goes. And so far, kind of good. Doesn't look like we're off to much of a start here. Excuse me.

- I want to talk about some of the software stocks that we're watching here, Jared, because that accounts perhaps for some of the underperformance that we're seeing in the NASDAQ today. I know you've been watching enterprise stocks recently as well that have not been performing well. UBS is downgrading both Adobe and Salesforce this morning to neutral from buy. And what's interesting here is that in both cases they're talking about pull forward of tech spending.

In other words, what we saw with the sort of acceleration of all the trends that we were talking about in technology in 2020 and 2021, what UBS is now positing is that a lot of these companies clients pulled forward that tech spending. And now they're not going to be spending perhaps as heavily in 2022. So kind of an interesting thesis here. UBS saying the risk of disappointing beats or even amiss is not insignificant.

When it comes to Adobe, UBS is recommending Microsoft or ServiceNow for investors wanting to play defense. Although, unclear why those companies would be performing better in terms of this pull forward effect. But you've been monitoring that sort of enterprise performance recently. And it looks like here are some of the rationale, if you will, behind that.

- Yeah. This is something that's been developing over the last two months. We heard some rumblings of this in the prior earnings season. And we're going to be covering this more in-- I guess it's going to be about mid-February when we get into the heart of fourth quarter earnings right now. But if we take a look at the Wi-Fi interactive, we can see indeed Salesforce and Adobe are the two biggest losers, laggards, in this group. Adobe is down 5%. Salesforce is down 6%.

Let me just show you what the software industry group has done over the last two months. We're sitting on some pretty big losses here. DocuSign down 44%. Vroom down 43%. Teladoc down 38%. Zoom down 33 and 1/2%. And a lot of these names were overvalued. And I think what we saw in the latter part of last year, there was this huge selling. There was a big sell off in high multiple names. And so a lot of these names were overvalued, I guess, by fundamental metrics. And for whatever reason, they were sold off.

But I think we're seeing some of the reasoning here building off of that commentary that we got in the prior earnings season that there was, in fact, a lot more spending in the prior year that was pulled forward. And so there's not going to be as much spending in the current year. But nevertheless. Really interesting too I would add, Julie, that-- look at the three green names. IBM up 12%. Cisco, 7%. Palo Alto networks. That's up 3%. So a lot of these legacy names have become kind of hedges. So interesting to just kind of note that phenomenon.

- Yeah. And even though Microsoft is down, you know, and it was on that list of defensive names, if you will, it's down less than a lot of the other newer upstarts. One other mover I want to mention-- a little bit out of left field here, doesn't have to do with these ongoing trends necessarily-- is Beyond Meat. The shares are up more than 5% this morning. This is a company that tends to move on product announcements. And that's what's going on here. KFC is going to add Beyond Meat plant-based chicken to its menus. I guess you fry anything, it's going to taste good, right? So that's part of what is perhaps going on here.

- I'm not a big Beyond Meat person. I've tried the burgers. I've tried the sausage. I actually kind of like the impossible ones. But if anybody can pull off fried plant-based chicken, I think it's KFC. KFC can almost do no wrong in my book. But I'm looking at the Wi-Fi interactive, and Beyond Meat has really sunk to some pretty historic lows here. This was yesterday's price action. We're up a little bit today. But we're talking about a 4% or 5% gain today. That looks like almost nothing in the grand scheme of things because this is a very volatile stock.

So here's a max chart going back to the IPO. This price level right here right around 60 has been in play since the very [AUDIO OUT] day. And we're right back below it. You have to think that if this stock breaks below this price point, below $60 per share, probably going to get some more downside momentum. We've just seen a lot of the momentum stocks from 2020, 2021 have their comeuppance. And it's been very volatile. We talk about the gains in the overall market. Underneath the hood, there have been a lot of pain trades over the last year.

- Yeah. I mean, in the case of Beyond Meat, also a lot of its much-touted product introductions and partnerships didn't really pan out over the past year, right? Some of the stuff that it introduced in restaurants was pulled back a little bit. Some of the tests that have floated in various restaurants did not end up getting expanded. So there was actually some-- besides the sort of loss of momentum, there was actually some fundamental reason it seemed for that stock to be selling off. Elsewhere this morning, I've been looking at the China stocks that are declining after Tencent is doing some more divestitures. So we've got that on the move. And what else are you watching, Jared, on the interactive?

- Well, let's just look at the China stocks here on the Wi-Fi interactive first because the fallout-- it seems like what headline are we going to get out today that suggests that headline risk from China is not going away any time soon? And it just keeps pouring on day after day. So this is a one day view. I'm just going to get a six month view. So we can see kind of retrospectively what's going on here. And hard to find any kind of green we got Xpeng. Xpeng is up 8.2% over the trailing 6 months. Up 11% over the trailing year. And that is it.

So you take a look at some of the education stocks. Those are at the bottom, down 80%, 90%. I don't have a lot of commentary other than if you're long China stocks, headline risk is probably front in mind because these stocks probably have not seen their worst days yet. Now, looking at the secular action for today, energy up for the third straight day. That is the sector leader. That's up almost 1%, followed by materials, health care, financials, utilities, industrials. And let's take a look at what's going on with energy here. This is a one day view. I'm going to expand this to a three day view. That's not working right now. Maybe we can get to two days.

Anyway, ExxonMobil and Chevron each up 1%. We have seen an incredible run here by the energy sector. And also financials. Financials. XLF just made a record high. That is the S&P 500 financial sector ETF. We can see JPMorgan making a little bit of a gain here. Bank of America up 4/10 of a percent. But some of these stocks have really put in some outsized performance over the past few days. Bank of America up 8%. Wells Fargo, Julie, up 10%.