Why is Wheels Up stock so volatile?

The company has laid off pilots, after racking up major losses in 2023

7/10/24 9:39AM

In the last month, the second most volatile US stock worth more than $2 billion has been the headline-hogging meme stock GameStop. The most volatile, per data from FinViz, is "on-demand" private aviation company Wheels Up, which has seen its share price move: +36%, +7%, +23%, -24%, and +11% in the last 5 days alone, with the stock having doubled since June 21st.

Part of the reason for that volatility is that only a small portion of its shares are available for public trading (what’s known as a low float). Another is that the company’s business model remains unproven at scale.

The 30,000 foot view

The first rule of business is that you usually shouldn’t sell a product for less than it costs to produce.

Restaurants, for example, make healthy profits — or specifically gross profits — on their sales. Salad chain Sweetgreen only spends about $4.15 out of a $15 salad on the ingredients and packaging of the food. Nike makes a ~45% gross margin, leaving itself a healthy buffer to cover marketing, admin expenses, and other overheads.

Now, the premise gets a little bit more complicated when you’re trying to be “Uber for the sky”, as you juggle planes, pilots, software, and fuel, but the fundamental rule remains: try not to lose money on each flight. Wheels Up, which opens up access to private jets not just to the super-wealthy but to the moderately super-wealthy, doesn’t make the math work.

Last year, the company reported $1,253 million in revenue. However, just delivering on its service cost it almost its entire takings, with aircraft leases, fuel, maintenance, fees, cabin crew labor, plane parking, and more setting it back $1,233 million. Once other overheads were accounted for, that left the company deeply in the red.

Turbulent times

Wheels Up landed on the public markets in 2021 as part of a wave of SPACs during the pandemic. It’s time as a public company has not been smooth — despite the recent uptick, the stock is down more than 96% from its peak. Last year, Delta and a group of investors stepped in with a $500 million lifeline for the company, but UP’s woes have continued. Revenue dropped 44% year-on-year in Q1, and the company reportedly laid off around 11% of its pilots as it moves to reduce its fleet size.

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Holiday cheer turned into chaos this week for Starbucks after the coffee giant’s new “Bearista” holiday cup sent fans into a frenzy.

Dropped alongside its 2025 holiday menu, the $30 beanie-wearing glass bear tumbler sparked long lines, sellouts, and even in-store scuffles before Starbucks stepped in with an apology.

“The excitement for our merchandise exceeded even our biggest expectations,” the company said in a statement to People. “Despite shipping more Bearista cups to our coffeehouses than almost any other item this holiday season, the Bearista cup and some other items sold out fast.”

Within hours of launch, frustrated fans flooded Starbucks’ social media pages and even store hotlines. Some customers waited in line before dawn and others said their stores received only a handful of cups. In one Houston location, the craze even turned physical, with police reportedly called to break up a brawl. Meanwhile, the cup is already reselling on sites like eBay, with listings topping $600.

“We understand many customers were excited about the Bearista cup and apologize for the disappointment this may have caused,” Starbucks said. While in-store customers may be upset, investors seem happy about the viral hit, as the stock has risen over 3% on Friday.

If you’re still hoping for a Bearista at market price, that may not be on order: the chain didn’t disclose how many cups were made or whether a restock is planned.

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Dubbed the “10-4 program” internally, the rule mirrors rival Walmart’s own 10-foot policy, formalizing behavior Target had previously only encouraged.

Target Mandates Worker Smiles, Friendliness to Boost Sales

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Monster surges on energy drink buzz, while Celsius sinks on distribution concerns

Shares of Monster Beverage climbed 5% after the bell on Thursday, and held most of those gains into early trading on Friday, following strong Q3 results.

The energy drink giant topped market expectations, with quarterly sales up 17% year over year to $2.2 billion and adjusted net profits growing 41% to $524.5 million — 11% ahead of Wall Street’s estimates. In the report, Monster highlighted its zero-sugar line and new product launches, with a stack of novel flavors already released this year, as bright spots.

During a call with analysts, Chief Executive Hilton Schlosberg said that the global energy drink category “remains healthy with robust growth,” The Wall Street Journal reported, adding that demand for more affordable caffeinated drinks is rising as coffee has become “really expensive.”

Meanwhile, rival beverage business Celsius saw shares fall as much as 23% on its Q3 results yesterday — despite beating expectations, with revenue jumping 173% — largely due to concerns about a change in the company’s distribution channel, as its newly acquired Alani Nu brand joins the PepsiCo distribution network.

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