Shares of Carvana and Beyond Meat soared on Friday, making them the latest companies to gain investor returns in recent weeks after announcing layoffs or cost-cutting amid a challenging economic environment, as Wall Street analysts largely scoffed at cost savings measure cheers.
Shares of Beyond Meat surged nearly 22% despite the plant-based food maker’s dismal quarterly revenue and profit, with investors apparently optimistic about the company’s plans to save costs by cutting 4% of its workforce.
Shares in online used car retailer Carvana rose 40% on Friday, a day after the company said it was aggressively cutting costs as the prospect of high inflation and a recession hit consumer demand.
Shares of popular stock-trading app Robinhood rose 12% on Wednesday after the company reported dismal second-quarter earnings and a 23% drop in its workforce, as Wall Street analysts broadly cheered cost-cutting measures.
Meanwhile, shares of e-commerce platform Shopify have risen about 30% since July 26 when it warned of falling consumer spending and announced layoffs, although its shares initially plunged 14% on the news before rebounding.
In late July, Bloomberg report The automaker Ford plans to lay off 8,000 employees as part of its transition to electric vehicles — the stock rose 2% on the day and has risen nearly 20% since.
Even Tesla stock, which has fallen sharply since April, is up 1% after the company announced a small reduction in its holdings layoffs July 12, weeks after CEO Elon Musk warned he had a “super bad feeling” about the economy and would cut 10% of the company’s workforce.
Jeffrey Roach, chief economist at LPL Financial, noted in a recent report that the U.S. economy “is not in a recession” because of current consumer spending despite “companies increasing layoffs to cut costs” remains stable. He did point out that higher rates “are seriously impacting business investment” after the Fed raised rates by 75 basis points in two consecutive hikes.
Fears of a recession receded as the U.S. economy added 528,000 jobs in July, up from 398,000 in June and well above analysts’ expectations of 258,000, according to new data from the U.S. Bureau of Labor Statistics on Friday. Meanwhile, the unemployment rate fell to 3.5%, back to pre-pandemic levels in February 2020, suggesting the labor market remains strong despite recession fears.
What to look out for:
“It’s hard to reconcile this jobs report with other data (including weekly jobless claims) and anecdotal reports from companies (the number of layoff/hiring freeze announcements has been increasing),” said Adam Crisafulli, founder of Vital Knowledge.
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