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Pfizer, GameStop and Roku: Investments in the Spotlight

By Donald Moore and Heesu Lee

 Pfizer Inc. said Wednesday that a third shot of its Covid vaccine may be needed to help boost resistance against the omicron variant of the virus. The announcement helped allay fears that the new strain would be entirely resistant to the vaccines currently in use, though it had little effect on shares, which dropped less than a percent. 

The company’s stock surged after the pandemic arrived in the U.S. and the hunt to develop a vaccine began. Since its March 2020 low, shares of the drugmaker have roughly doubled.

Photo by Anna Nekrashevich from Pexels

Along with stimulating the booster push, a recognition of the need for a third dose may increase the likelihood that an omicron-targeted shot may ultimately be required. Pfizer said this would be ready by March.

What’s next? “The takeaways from PFE’s update underscore our belief that the durability of PFE’s vaccine sales for Covid-19 remain underappreciated by the Street,” said Cantor Fitzgerald analyst Louise Chen. The shot’s strong results against omicron, along with promising data for Paxlovid, the company’s new antiviral drug for the disease, add up to what Chen calls “a best in class Covid-19 franchise.”

Unclear Vision

Reddit hype wasn’t enough to sustain GameStop Corp.’s momentum: On Wednesday the video-game retailer reported a third-quarter loss that was worse than analysts expected, causing the stock to drop 10.3% in Thursday trading.

In addition to the underwhelming results, investors were disappointed with the lack of a clear message about how the company plans to lure gamers back to stores. Board member Ryan Cohen has outlined a strategy to turn the company around after years of declining sales, but management hasn’t taken any questions during the last four earning calls.

Once the subject of bankruptcy speculation, GameStop became a poster child of the meme stock movement, which saw day traders on online forums intentionally boost shares over 700% so far in 2021. Wednesday’s tumble, however, is a sign that investors may be becoming impatient waiting for a strategy to bring the company back to profitability. 

What’s next? The lack of a defined vision for the company might be intentional on the part of the GameStop board in an attempt to appeal to all of its shareholders, noted Jefferies analyst Stephanie Wissink. “Management is speaking to both a sophisticated institutional investor base and individual shareholder enthusiasts, providing just enough strategic visibility but yet leaving room for both dreamers and discounters,” she wrote in a note.

Teaming Up

Video streamers and investors alike had news to cheer when Roku Inc. and Alphabet Inc.’s Google agreed to a multiyear contract extension to keep YouTube available on the Roku platform. Roku shares jumped 18% on Wednesday. 

The streaming company was a pandemic-era darling, posting record revenue as millions consumed content from home during lockdowns. It’s since lost some of its luster, dropping nearly 30% in 2021 as economies have opened back up. Roku also recently issued a disappointing fourth-quarter revenue forecast amid global supply chain issues.

The announcement about YouTube, as well as renewed concerns over omicron, are both welcome boosts to the company, whose 56 million active customer accounts streamed 18 billion hours of content in the third quarter. 

What’s next? The deal might be a winner for both Roku and YouTube, according to Bloomberg Intelligence analyst Mandeep Singh. Specifically, “their potential to take market share by aggregating hundreds of channels and premium content” gives Roku the opportunity to offer a better user experience than traditional TV. 

Homecoming

China’s Twitter-like platform Weibo Corp. began trading in Hong Kong this week. The listing comes after Didi Global Inc., the ride-hailing giant, announced its plans to delist in the U.S. and file for Hong Kong listing amid mounting pressure from Chinese regulators.

Weibo, which has amassed millions of registered users since internet pioneer Sina Corp. launched the service in 2009, is the first home-bound listing by a Chinese company after Didi’s announcement last week. 

After Weibo’s listing on Wednesday, shares extended declines, trading below the listing price of HK$272.80 ($35). The company’s primary listing remains on the Nasdaq.

What’s next? “China’s internet sector will continue to be weighed by regulatory uncertainty in 2022 after the rapid and broad-reaching moves by authorities in 2021 across a wide spectrum of companies,” Bloomberg Intelligence analyst Matthew Kanterman wrote in a note.

Evergrande Crisis 

China Evergrande Group was officially labeled a defaulter for the first time. Fitch Ratings made the call after the world’s most indebted developer failed to make two coupon payments this week. 

In an effort to prevent a debt crisis in China’s property sector, the nation’s central bank plans to reduce most banks’ reserve requirement ratio by 0.5 percentage point next week, releasing 1.2 trillion yuan ($188 billion) of liquidity. Still, Beijing showed reluctance to bail out Evergrande as massive debt build-ups can threaten broader financial stability. The People’s Bank of China Governor Yi Gang made remarks that Evergrande will be handled in a market-oriented way.

Fitch also downgraded another heavily indebted developer, Kaisa Group Holdings Ltd., to restricted default after it failed to repay a $400 million bond that matured earlier this week.  

What’s next? It’s unlikely that Evergrande’s distress itself will lead to a financial crisis as the sector’s exposure to the company and other developers is relatively limited, according to David Qu, an economist covering China for Bloomberg Economics. Still, it spells trouble for investment in the sector over the next several years, and the government will have to fill the void with public spending, he added.

More stories like this are available on bloomberg.com.

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