Weekend Update #218
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Stocks had their worst session of 2025 on Friday, driven by weak economic data and a surge in long-term inflation expectations. Disappointing reports on consumer sentiment, housing, and services rattled investors, especially with the Federal Reserve showing no urgency to cut rates. Adding to the volatility, Covid-19 vaccine stocks surged on reports of a new coronavirus study in China. Short interest in the median S&P 500 stock hit 2% of market cap, its highest level since 2020, while gold extended its rally for an eighth straight week amid rising geopolitical and trade tensions.
On the trade front, former President Donald Trump said he is likely to impose 25% tariffs on automobile, semiconductor, and pharmaceutical imports, with an announcement expected by April 2. The move would significantly expand the trade war, following previously announced 25% tariffs on steel and aluminum set to take effect in March.
In economic news, the Federal Reserve's January minutes revealed officials' intent to keep interest rates steady amid persistent inflation and economic uncertainty. Policymakers seek further progress on inflation before considering rate adjustments, assuming the labor market remains strong. Investors currently anticipate one rate cut in 2025, with a potential second, based on futures markets.
U.S. housing starts fell 9.8% in January as builders slowed new construction, citing concerns over mortgage rates and rising inventories of unsold homes.
The S&P Composite PMI fell sharply from 52.7 to 50.4, missing expectations of 53.2 and marking the lowest level since September 2023. Employment dropped from 54 to 49.4, and new orders declined to their weakest level since April. Price data signaled margin pressure, with input costs rising while output prices fell. The slowdown, likely influenced by tariff uncertainties, contributed to a drop in bond yields. While manufacturing expanded for a second month, the boost may be temporary as some factories increased production ahead of expected tariffs.
U.S. consumer sentiment dropped to 64.7 in late February from 71.7 in January, driven by concerns over tariffs under President Trump. Long-term inflation expectations surged to 3.5%, the highest since 1995, marking the biggest monthly jump since May 2021. Worsening buying conditions and rising unemployment fears contributed to declines across all sentiment index components. The Federal Reserve may remain cautious on rate cuts as inflation uncertainty persists.
Corporate Highlights:
Walmart shares declined as the first major retailer to report post-holiday earnings, with its CFO citing “uncertainties related to consumer behavior and global economic and geopolitical conditions.”
SolarEdge Technologies Inc. surpassed sales forecasts, triggering an apparent short-covering rally.
Hims & Hers Health Inc. is expanding beyond its successful foray into providing copycat weight-loss drugs with the acquisition of a home blood-testing company.
Coinbase Global Inc. announced that the SEC, pending commissioner approval, has agreed to drop its lawsuit alleging the company operated an illegal exchange.
Rivian Automotive Inc. tumbled after warning it’s poised for a first-ever decline in electric-vehicle deliveries in 2025, heralding a new challenge after the company achieved a long-held profitability goal.
Friday’s Close (Weekly Performance)
S&P 500 6,013.13 (-1.67%)
Nasdaq 19,524.01 (-2.11%)
Dow Jones 43,428.02 (-2.87%)
Thank you Blue Room Senior Analyst NICK PEART.
EXECUTIVE SUMMARY
Vimeo reported bookings of $104.5M, a 3.3% Y/Y increase, slightly exceeding consensus estimates of $101.3M (+3.1%). Gross margin slightly compressed by 21 bps to 75.8%, missing the consensus estimate of 78.4%. Operating income dropped 77.3% Y/Y to $1.3M, below the consensus of $1.8M (-29.1%). Adjusted EBITDA declined 19.8% to $10.7M but was in line with consensus expectations (+0.5%). Diluted EPS came in at $0.01, an 80.4% drop Y/Y and well below the consensus of $0.03 (-65.1%). Shares fell on lower 2025 Adj. EBITDA guidance as the company looks to capitalize on growth opportunities and invest in its product roadmap spanning new video formats, enterprise solutions and security, and AI. VMEO shares are poised to rise as the company’s Enterprise segment continues to accelerate, while Self-Serve is expected to rebound in 2025, with line of sight to double-digit growth heading into 2026.
CORPORATE PROFILE
Vimeo is the world’s leading all-in-one video software solution, providing the full breadth of video tools through a software-as-a-service model. Vimeo’s comprehensive and cloud-based tools empower its users to create, collaborate and communicate with video on a single, turnkey platform. Our platform enables any professional, team, and organization to unlock the power of video to create, collaborate and communicate. We proudly serve our growing community of over 200 million users — from creatives to entrepreneurs to the world’s largest companies. The company offers professional video hosting solutions for small businesses. It provides solutions for creative professionals, small businesses, enterprises, education sector, fitness centers, and faith teams. The company was founded in 2004 and is based in New York, New York.
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