NZX to 10,000 | Netflix Disappoints

18 April 2019

Global markets​ were lower overnight as weakness in healthcare stocks dragged Wall Street lower, offsetting a spate of upbeat corporate earnings and encouraging economic data from the United States and China. ​

​Closer to home, the NZX 50 market index is close to major milestone, with the index trading just below the 10,000​ level. Local investor senti​ment was buoyed by the ​NZ ​government's decision to ditch a proposed capital gains tax​ as well as weak inflation data which increases the chances of interest rate cuts by the Reserve Bank of New Zealand. Several stocks such as A2 Milk and Serko hit fresh all-time highs.
NZX chief executive Mark Peterson welcomed the government's decision​ on capital gains tax​, saying it will give investors confidence in the share market and promote broad participation in local markets​.
 

Stock in Focus: Netflix (NFLX:Nasdaq)

Netflix Inc reported quarterly results ​overnight that beat Wall Street targets, ​but ​the world's largest online streaming service ​announced a forecast which disappointed investors as it ​​​predicted it would hook fewer new customers than expected through June, just as Walt Disney​, Apple​ and others prepare to escalate the streaming video wars​.

CEO Reed Hastings said the U.S. price increase contributed to churn, or customer turnover. Hastings also said he wasn’t concerned about rivals’ new streaming services.
We are not so easily convinced, especially given the deep pockets of new competition entering the market. While Netflix is a great business, it has not had to deal with serious competition to date and it will be interesting to see how things play out.

We currently have a HOLD recommendation on Netflix.
 

 
Australia & New Zealand Market Movers

​The Australian share market slipped on Wednesday (ASX 200 index -0.33%) as gains from the major banks and a big jump from DuluxGroup failed to offset losses from the major iron ore miners.
Shares in mining giant BHP fell after the miner cut its iron ore production guidance and said it would face higher costs as a result of the fallout from the wild weather that hit its export operations in Western Australia. Other major iron ore miners also closed lower as Brazilian miner Vale's clearance to resume production at its Brucutu mine will likely push iron ore prices lower over the coming weeks.

 
The New Zealand market powered higher (NZX 50 index +0.75%) to a new record high as retirement village operators including Summerset Group and Metlifecare rallied on the government's decision to ditch a capital gains tax. The prospect of a capital gains tax had been an unwelcome uncertainty for the sector, which in recent years had enjoyed the tailwind of an ageing demographic and a hot property market. Several stocks such as A2 Milk and Serko hit fresh all-time highs.
Restaurant Brands bucked the trend of gains, adding to Tuesday’s decline when the fast-food operator reported a small increase in annual earnings and said it would retain cash for its major capital spending programme rather than pay a final dividend.  
 

3 Things Markets Will be Watching this Week

  1. ​The​ US first-quarter reporting season​ gets into full swing this week​.
  2. Minutes from the last RBA meeting are released on Tuesday.
  3. ​Aussie employment figures are published Thursday, while NZ inflation data is released on Wednesday.

 

Have a Great Day,
 

Team

The NZX 50 market index is close to major milestone, with the index trading just below the 10,000​ level. Local investor senti​ment was buoyed by the ​NZ ​government's decision to ditch a proposed capital gains tax​ as well as weak inflation data

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