Netflix Flops | Johnson and Johnson

20 April 2022

Global markets were mixed overnight, with US Markets (S&P 500 Index, +1.6%) starting off in a positive tune following strong earnings releases, as all sectors traded higher except for energy. 

Citizens financial rose +6.8% after both its top and bottom line beat estimates, while rising interest rates also saw bank stocks outperform. Interestingly most tech names were up stronger despite rising treasury yields as investors felt more confident buying into the recent dip. 

In saying that, Netflix shares slumped -25% in after-hours trade, when the streaming giant reported its first quarterly decline in subscribers in a decade. Netflix loss 200,000 subscribers in the first quarter of 2022 – bringing their total number of subscribers to 222m and expect to lose 2m more subscribers in the second quarter. 

European markets (Stoxx 600 index -0.8%) were lower as investors cautiously watch developments in Ukraine and rising bond yields, both weighing down on the market. The International Monetary Fund also cut its global growth projections for 2022 and 2023, saying the economic impact from Russia’s invasion of Ukraine will “propagate far and wide.”

Johnson and Johnson (JNJ:NYSE)

Johnson and Johnson (JNJ) rose +3% after its first quarter earnings came in at $2.67 per share, beating market expectations and increasing +3.1% over the same period last year. JNJ will lift its dividend pay-out even as revenue fell short of expectations and management lowered its full year revenue and earnings guidance due uncertainty regarding covid vaccine demand and supply surplus – the company adding that the covid vaccine does not contribute to company profitability.
Encouragingly sales growth was stable across the group and particularly its medical device business and pharmaceutical divisions, indicating a stable growth backdrop post covid.

We are BUY rated on JNJ as a stable company that is attractively priced and can achieve modest growth, importantly navigating economic uncertainty. 

Australia & New Zealand Market Movers

The Australian market was in positive territory yesterday (ASX200 index +0.6%). Most sectors traded higher, as gains were led by commodity sectors, as the price of oil jumped, and miners gained on rating upgrades, while healthcare and tech stocks traded in the red.

Cleanaway shares jumped +5.9% on reports that US private equity firm KKR is considering making a bid for the waste management company. Ramsay Healthcare didn’t get the same attention falling -0.3% on rumors the same KKR is in talks to acquire the healthcare company in a deal potentially worth $20 billion. 

The New Zealand market was lower on Tuesday (NZX 50 index -0.5%), following the long weekend break as investors prepare for the release of NZ’s inflation (CPI) data due on Thursday.

Interest rate sensitive stocks were generally weaker, Ryman (-4.3%), Pushpay (-3.7%), A2 Milk (-2.7%) and Fisher and Paykel Healthcare (-2.4%) dragged the market lower. New Zealand King Salmon suffered the largest loss for the third day in a row down -8%, extending losses following its weak guidance and capital raise. 

Kiwi Property group shares were unchanged after upgrading its 2022 full year dividend guidance to 5.6 cents per share, as sales remained solid across the final quarter and KPG experienced healthy rental growth throughout the year despite the spread of omicron.

3 Things Markets will be Watching this Week

  1. Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
  2. CPI (inflation) data in New Zealand and Eurozone
  3. US earnings from Netflix, Johnson and Johnson, Tesla Verizon, Proctor and Gamble this week. Quarterly updates from Australian miners and oil producers are due. 
Global markets were mixed overnight, with US Markets (S&P 500 Index, +1.6%) starting off in a positive tune following strong earnings releases, as all sectors traded higher except for energy.

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