Cruise stocks upgraded, Oracle lowers guidance, ARK Invest buys DraftKings dip

Myles Udland, Brian Sozzi, and Julie Hyman break down Wednesday’s early market movers which include: Oracle’s stock taking a dip after announcing lower quarterly revenue guidance than expected, Wolfe Research upgrading cruise industry stocks as the firm says all signs are pointing to a strong restart in the industry, and Ark Invest buying $42 million in shares of DraftKings after short-seller report.

Video transcript

JULIE HYMAN: We're watching some movers here this morning. Oracle is among them. As you can see, the company's earnings beat estimates. So did its sales. That's not the problem. The shares are down 5% this morning, and that's because they are going to be spending more capital expenditures to support cloud computing workloads.

So interesting here, the company is talking about its demand is holding up, but it needs more robust systems to handle that demand, so the CEO Safra Catz saying they're going to make at most $0.98 in terms of their guidance for this quarter, and revenue is going to rise 3% to 5% in the current quarter.

So that looks like it is on the low end, at best, of what analysts had been predicting. And speaking of analysts, I know, Brian, you've been looking through what some of the analysts have been saying in response.

BRIAN SOZZI: Yeah, one note in particular, and if you're a company, this is what you don't want to see on the day after your earnings here. It comes from Brent Thill on Oracle. He's over at Jefferies, noting Amazon and others are taking major market share away from Oracle. Amazon Web Services, just that infrastructure component of that business, they'll haul in about $60 billion in sales this year.

Based on Thill's estimates, Oracle's entire revenue stream for its infrastructure business, $40 billion. So you just really get the sense that Oracle remains a laggard in the cloud. They're going to have to spend big to try to at least close the gap with the likes of an Amazon. But again, that's going to come at a cost. And the market's pricing that in here.

JULIE HYMAN: Yeah. Another stock that we continue to watch-- I don't know what's priced in at this point for this one. DraftKings is what we're talking about. Yesterday, Hindenburg Research was out with a new note, saying that folks should short it. It said they are shorting it too, and the stock tumbled. It's coming back a little bit this morning.

And a lot of analysts are weighing in on this one as well this morning. Basically, at the center of Hindenburg's allegations are a company that DraftKings owns called SB Tech, although now it's been renamed, I believe, and basically saying some of this stuff was known about and that maybe they should divest.

There's some different opinions on this. But Myles, it's always interesting when Hindenburg targets a company, because we've seen some pretty spectacular blow ups in the wake of those kinds of revelations.

MYLES UDLAND: Yeah, and really, the story here that I think got us animated this morning is that ARK Invest purchased shares of DraftKings on this news. ARK Invest, of course, really, you don't have to wait for the 13F with those guys. They have a daily update on all of their positions inside all of their funds, and of course, has exchange traded funds. They must update that and also offer daily liquidity to investors if they so choose.

So I just think it's always fun to track the ARK-iverse, as we have come to know it, the ARKK innovation ETF. It is off its highs but has-- for a long time, people were discussing a return on this back to 80 or 90, which is the level it traded at really before things got as animated as they did, let's say, in the early part of this year. But trading in ARKK has been pretty stable of late, and always interesting to see ARK's process as well.

They're very transparent with how they go about their research. They open source so much of their modeling. And I'd hate to see them just kind of take a pretty public Hindenburg said this, well, we'll take the other side with the stock down. And sure, DraftKings plays into all kinds of future of X trends that ARK is betting on.

But I saw it kind of as a as a more straightforward high profile short seller comes out against this name and then almost reflexively-- they probably wouldn't care for that characterization-- but almost reflexively going in and buying the stock as a result, which is the thing people do. It's not-- they didn't invent that strategy.

And I don't think-- it's certainly something that people haven't thought about. And they're certainly not the only folks who went and did that as a result of that report that came out yesterday, just interesting to see it in a publicly disclosed.

BRIAN SOZZI: Yeah, the only two things, all I hear is DraftKings taking the approach yesterday afternoon coming out forcefully and saying that, essentially, they don't believe what Hindenburg is writing.

Now, Lordstown didn't come out and do the same thing after Hindenburg attacked its company. Nikola didn't either as well, so DraftKings taking a different approach. And then secondarily, I'm here to promote my TikTok that is going up on DraftKings very shortly on the Yahoo Finance page, TikTok.

MYLES UDLAND: How are you-- how are you doing that? Like, who's filming it? Do you have a script? What's your thought process here?

BRIAN SOZZI: Yeah what I did for this one, Myles and Julie, I just took my phone, and I went like this in selfie mode, and I just taped it like this in my parking garage.

MYLES UDLAND: Interesting. So there's no production.

JULIE HYMAN: Parking garage.

MYLES UDLAND: We didn't do the-- we didn't swap. You didn't change outfits. There's no text. It's just you speaking.

BRIAN SOZZI: No, actually, I am wearing an interesting hat, so a deep tease there.

JULIE HYMAN: OK, I can't wait for that. I'm looking forward to it.

MYLES UDLAND: Sozzi in a hat, I mean, come on. Who doesn't want that?

JULIE HYMAN: I'm not sure how he would do a TikTok on the next one. Cruises is something that we're watching as well. Maybe you could do, like, one of those cut out on water on a boat and , kind of do the old school, like no? Anyway, we've gotten some cruise calls this morning, Soz.

BRIAN SOZZI: Yes, so some of the investment banks, or one in particular, Wolf Research, always doing some great work, come out here bullish on all the major cruise lines ahead of a lot of them restarting their operations in about a month and a half. Again, I wouldn't say this is a new call per se. We saw a lot of the sell side analysts come out bullish, starting to raise their estimates a couple of months ago as they got clarity into these reopenings for cruising.

But let's keep in mind, the businesses emerging from the pandemic in terms of cruises are a lot different than when they went in. There's a lot of new debt on the balance sheet. And hopefully for the sake of the investors that are still riding the cruise trade, this demand better come back very, very strong if these companies are going to meet their debt obligations in the coming years.

JULIE HYMAN: Yeah, we'll see. I don't know. Maybe if you have to get on a boat or do a TikTok about cruising, maybe that'll help.

BRIAN SOZZI: Yeah, I put on my little-- put on my floaties. I'll go right in the water, take a picture next to the big giant ship. I'm all for it. I'm ready to go. Let's go right now. Let's do it. But obviously, you have to wear a suit, a suit, floaties.

BRIAN SOZZI: Totally fine, whatever you need.

JULIE HYMAN: I think that's what the brand calls for.

MYLES UDLAND: I mean Lonely Island wore tuxes in the video. So I think it's fine.