When a company fires or furloughs staff, cancels a stock buyback and scraps its outlook, investors should have second thoughts on investing in them.
On Mar. 19, Yelp (NYSE:YELP) withdrew its first-quarter guidance due to the uncertainties around COVID-19. It also cut 1,000 staff and furloughed another 1,000.
The lockdown across the world, especially in North America, hit the restaurant business. With Yelp’s site unhelpful to users during this virus crisis, its future is not certain. The review site may regain visitor traffic once the shutdown ends but if many restaurants close or business does not return, Yelp will lose revenue.
Under Armour (NYSE:UAA) said on April 3 that it would continue its store closure, lay off around 600 staff, and lower executive pay by 25%. While the executive cost cut is a positive development for investors, UAA stock will underperform as sports clothing falls.
Despite the near-term headwinds, people still need such clothing when working out at home. For example, Peloton (NASDAQ:PTON) subscriptions may hold as people make full use of the service.
In the near term, both stocks which operate in different sectors of the economy will trade with plenty of volatility. But once the lock-down ends, clothing and restaurant businesses could rebound quickly.