Pavan Sharma

Netflix (NFLX) reversed their trend of decelerating subscriber growth, adding +2.4M subscribers in Q3. The stock rallied +14% in after-hours trading on the news. Revenue grew 5.9% to $7.93B, whilst net profit fell 3.5% to $1.4B. Notably Netflix’s operating margin fell to 19.3% from 23.5% YoY. Management attributed this largely to the strong US dollar relative to other currency. Management expects operating margin in Q4 to be ~4.2% vs. 8.2% a year earlier, as the strong US dollar continues to weigh. We think this is cautiously optimistic news for the embattled streamer, but we note that the valuation is still relatively high compared to peers such as WarnerBrothersDiscovery, Paramount and Disney. We remain NEUTRAL on the stock.

The New Zealand market (NZX 50 Index, +0.6%) lifted on Tuesday despite annual inflation coming in at 7.2% for the September quarter, when the market expected a figure closer to 6.5%. Markets are now beginning to price in the possibility of a 75-basis-points rate hike from the Reserve Bank of New Zealand in November, with a 50-basis-points hike or more almost certain. 

Costa Group shares plunged lower, after the fruit and vegetable grower released a disappointing update, saying 2022 full year earnings would come in only a touch higher than the previous year – a big downgrade from earlier which implied strong growth on top of a challenging year in 2021. This implies a weak second half, driven by adverse weather conditions, lowering citrus crop quality and pack out rates, given the recent acquisition and the citrus business making up a larger portion of Costa’s earnings.

The New Zealand market (NZX 50 Index -0.8%) fell in the lead up to the release of the country’s inflation data, due today at 10:45 am NZDT.  Tower (+5.7%) surged after announcing its annual underlying profit was about NZ$40m in the year ended Sept 30, beating forecasts by ~30%, and improving on last year’s underlying profit of NZ$30.8m. 

The New Zealand market (NZX 50 Index, +0.5%) rose on Friday, following the US markets’ Thursday rally. Fonterra (+1.7%, Shareholders’ Fund Units) trimmed its milk collection forecast by -1.0% to 1,480 million kilograms of milk solids due to “variable weather conditions…contributing to lower collections through September and early October”. A2 Milk (-2.5%) and Synlait Milk (-0.6%) moved in the opposite direction on Friday. 

We initiate coverage of Estée Lauder Companies (NYSE: EL) with a BUY (underweight) rating. The company is engaged in creating and selling high quality cosmetics, skincare, and perfumes. We think the company is best-in-class in its industry and acts as a compliment to a portfolio which is exposed to the rise of luxury and consumer disc. purchases.

The New Zealand market (NZX 50 Index, -0.5%) fell in the lead up to US CPI data. Napier Port (-1.4%) fell after reporting it had approved an on-market share buyback programme over 12 months, beginning next week, for up to 5% or 125,000 of its ordinary shares. Additionally, the port operator reported its second highest annual total cargo movement volume, although this represents a decline of -7.9% for the year ending September. 

The New Zealand market (NZX 50 Index, -0.8%) fell on Wednesday but not without a few bright spots occurring in the market. NZX (+2.6%) reaped gains on a market update that Westpac (+2.9%) director Rob Hamilton will become its new chair beginning April 2023 and Datacom’s current CFO will join the board.