Global markets were mixed overnight, as US Markets (S&P 500 Index -0.1%) edged lower on a day filled with mixed earnings results. Company earnings are keeping the focus on stock specifics as interest rate speculation takes a back foot.
Netflix shares slumped -35% after delivering their disappointing result, dragging down other streaming media company stocks – Disney (-5.5%), Roku (-6%), Paramount (-8.6%), Warner Bros. (-6%). The sell off was not limited to that, as there was a broad-based tech sell off which saw the NASDAQ fall -1.5%, while other stay at home type stocks also suffered big losses.
Tesla was up +4% after hours on result but warned of supply chain challenges for rest of the year. Procter & Gamble rose +2.6%, after reporting a better-than-expected result, and lifted its full year revenue guidance as prices increases helped offset rising costs. IBM rose +7.1% following a strong earnings and revenue beat for the quarter.
European markets (Stoxx 600 index, +0.8%) were higher, lead by tech shares with a day full of generally positive earnings results.
Netflix (NFLX:NASDAQ)
Netflix shares slumped -35% wiping $50 billion off its market cap. The headline -200,000 loss in subscribers for the first quarter (its first quarterly decline in a decade), and management has expectations that they lose -2m subscribers this quarter did not bode well with investors. The fall marks a -62.5% fall year to date and NFLX is now the worst performing stock on the on the S&P500 US market index.
Netflix attributed the losses to several headwinds including increasing competition, lifting pandemic restrictions and conflict in Ukraine where they lost 700,000 Russian subscribers in the first quarter.
Looking ahead we believe things will continue to be challenging, with increasing competition likely to bleed subscribers and lose revenue. On the flip side content costs are likely to continue to rise to maintain its positioning so it is a similar situation to Sky TV was in 6-8 years ago. While trading down at 4-year lows it may appear cheap we think profits are likely to have peaked and for that reason we are HOLD rated and prefer to avoid the stock.
Australia & New Zealand Market Movers
The Australian market edged higher yesterday (ASX200 index +0.05%) moving closer to all-time highs.
Most sectors were higher, but market wide gains were offset by losses from materials and energy stocks, the former being a major part of the ASX, while Financials (the largest sector) ended the day only marginally higher).
Healthcare stocks lead gains, with Ramsay Healthcare rising +24% after receiving a $88 per share takeover valuing the company at $20.1 billion, from KKR and a consortium of investors. The gain leading other healthcare stocks higher.
Rio Tinto fell -2.8% after warning markets that it had faced a challenging first quarter operationally, however did not alter their full year production guidance – the news dragged other miners lower.
The New Zealand market was up on Wednesday (NZX 50 index +1.1%), as most stocks found some support amidst the recent sell off.
Fisher and Paykel Healthcare rose +3.3% after touching a 2-year low, NZ King Salmon rose +7.6% after losing over half its market cap in as little as a week.
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- CPI (inflation) data in New Zealand and Eurozone
- US earnings from Netflix, Johnson and Johnson, Tesla Verizon, Proctor and Gamble this week. Quarterly updates from Australian miners and oil producers are due.