Market check: Stocks waver, Under Armour shares drop on earnings, Zillow cuts workforce

Yahoo Finance's Julie Hyman and Brian Sozzi discuss how stocks opened, Under Armour stock declining with supply chain challenges, and Zillow cutting its workforce after reporting lower revenue.

Video Transcript

JULIE HYMAN: Welcome back to Yahoo Finance Live. We're a few minutes from the opening bell, and there are some more movers that we were watching this morning. Sozzi and I looking at Under Armor. And that company, sort of a lot of different pieces to this commentary.

So first of all, let's take the fourth quarter earnings. As you can see, they're beating estimates, just about double what analysts were looking for. Revenue also coming in ahead of estimates.

But on the flip side, the company talking a lot about supply chain issues that it said will have material impacts on the spring and summer season and maybe beyond that. So this quarter, Under Armor says revenue is going to grow at a mid-single digit rate compared with a forecast that it made back in November for low single-digit growth.

So you would think that that would be a little bit better. But at the same time, it looks like it's going to get hit by supply constraints. So when I say it's sort of mixed here, or a little bit confusing, the outlook, that's what I'm talking about, Sozz.

BRIAN SOZZI: Yeah, Julie, this quarter from Under Armor gets a blah rating from me. Really-- wasn't-- they beat on earnings, but the outlook was about $0.12 below consensus for the first quarter. And if you go down to the bottom of the earnings release-- and to your point-- look at what they had to say about inventories.

Inventories down about $80-- about $85 million year over year. So you are probably concerned do they have enough inventory against all these supply chain bottlenecks to meet just that spring demand? And secondarily, we've also heard from, I think, a lot of retailers, Julie, that January was slow. So there's a lot of expectation, hopefully, that sales bounce back in February and March for retailers.

JULIE HYMAN: Yeah. And they're also talking about gross margin being down 200 basis points compared to last year-- this current quarter. And so that's sort of similar also to some other companies that we have heard from. So we'll continue to watch this one as we see a trend a little bit lower.

On the flip side, we got Zillow. And Zillow also-- so it's interesting. Under Armor called this a transition quarter to the current one. Zillow is certainly in a transition as well as it gets rid of some of the inventory it had as part of its I Buy program.

The loss shrinking for the company and the loss coming in, better than estimated even as revenue came in better than estimated as well. For the first quarter, Zillow is estimating revenue of up to $3.44 billion. It looks like that is better than estimated as well. The shares are up some 15% this morning.

And the company is saying that the net impact of those I buying operations, the wind down of inventory, operating costs, restructuring costs, that all of that will end up being cash flow-positive as they go through that transition, Sozz.

BRIAN SOZZI: Well, this earnings call for me, Julie, definitely conjured up some laughing, some LOLs, for sure. Let's keep in mind this is a company that saw its stock price in early last year about $202 at its high, essentially now down in the toilet at under $50 because of their really operational miscues on buying homes now that they continue to sell off those homes.

And while I was laughing on the conference call last night, they had the hubris, I should, say co-founder Rich Barton and his team saying, we're going to put out 2025 targets, looking for revenue of over $5 billion and $2.25 billion in adjusted operating profits. That is a four-year compound annual growth rate for sales and profits of 24% and 29%, respectively. And to me, they look absolutely absurd. And secondarily, it's hard to believe those type of targets coming from a team that just has destroyed the stock price.

JULIE HYMAN: What about the housing super app, Sozz? That's what they're working on now.

BRIAN SOZZI: Doesn't do it for me. Doesn't do it for me.

JULIE HYMAN: Well, you're not excited about a housing super app?

BRIAN SOZZI: I'm not excited about it. They have a lot to prove.

JULIE HYMAN: Well, that's something that the CEO Rich Barton touted also--

BRIAN SOZZI: Good luck.

JULIE HYMAN: --talked about that it would help people schedule tours and sort of take them through different steps of the buying process. We'll see. He's talking about $5 billion in annual revenue and 45% margins on EBITDA by the end of 2025. We'll have to see--

BRIAN SOZZI: Wish him well.

JULIE HYMAN: --what happens here. [CHUCKLES] All right, let's take a look at futures here this morning as we get ready for the opening bell. Looks like we've got a mixed picture at the moment.

[BELL RINGING]

There's the opening bell on this Friday morning, and sort of a muddle if you will, in terms of stocks here, because investors are trying to figure out what the heck is going on, right? Are there going to be five interest rate increases this year? And they're going to be seven? Are there going to be more?

Are we going to see a 50 basis point hike at the March meeting? Are we not? What is the-- not just the wind down in the back of the bond buying program, but the wind down on the balance sheet, what does that look like? What's the effect on the economy?

And, oh, by the way, all of this happens with the lag. You know, that's something to think about as well. The Federal Reserve raising interest rates. It's not like it raises rates and inflation goes down. So by the time all of that makes its way through the economy. What are going to be the underlying effects on inflation, and what'll be happening then? Yes, Brian Sozzi.

BRIAN SOZZI: Wait, so you're telling me that my deodorant might go from $14 to $20 soon? Is that what you're teasing to me?

JULIE HYMAN: Oh, boy, you need deodorant. And I have never talked about deodorant so much in my entire.

BRIAN SOZZI: Just tying that thread throughout all the shows, Julie. Just tying the thread. We do.

JULIE HYMAN: It's a thread. It's a bludgeon. I don't know what it is. All right--