Jul 17, 2018
The Daily Chase: Netflix falls as subscriber growth disappoints; oil touches correction
By Noah Zivitz
Netflix is reminding us that there isn’t much room to maneuver when your price to earnings ratio is 176. The streamer’s stock is down more than 10 per cent in pre-market trading as investors look right past a nearly six-fold year-over-year surge in net income, and instead hone in on second-quarter subscriber growth that came in shy of expectations.
Question is whether Netflix can bounce back in its third quarter, or whether this is the start of a new trend amid intensifying competition. The stakes for the broader market are significant, considering Netflix has more than doubled this year, good enough to be the second-best performer on the S&P 500.
LUNDIN GOES SOLO
If nothing else, credit to Lundin Mining for its persistence. After more than five months of trying and failing to negotiate a friendly takeover agreement with Nevsun Resources, Lundin has ditched its buyout partner Euro Sun, gone all cash, and says it’s ready to go hostile and take its offer directly to Nevsun shareholders. Early this morning, Nevsun advised shareholders to take no action, with the CEO arguing Lundin “continues to ignore the fundamental value” of his company.
GOLDMAN SUCCESSION
He steered Goldman Sachs through the financial crisis and now, 12 years after taking the Wall Street giant’s top post, Lloyd Blankfein is passing the baton to David Solomon, who will become chief executive and senior chairman on Oct.1. Today we’ll size up what the future holds for Goldman under its news boss. Should be pointed out Blankfein is exiting on a high note, with Goldman reporting a 19 per cent surge in second-quarter revenue.
OIL TOUCHES CORRECTION
At the low point this morning, U.S. oil futures were in correction territory – having dropped a little more than 10 per cent since the recent peak on July 3. At last look, crude was little changed at US$68.01 per barrel, but it’s been a choppy couple of weeks, with a four per cent drop yesterday and a five per cent fall last Wednesday.
AMAZON PRIME DAY WOES
Bit of an odd response by Amazon yesterday to the customers who vented frustration over a technical snafu that marred the start of Prime Day. Rather than a mea culpa, the company quickly pivoted to promoting the “hundreds of thousands of deals” on offer. Suppose the question is whether the “difficulty” that some customers experienced was a sign that Jeff Bezos has his company’s users wrapped even more tightly around his finger than we imagined, or that the company failed to build in the necessary safeguards to ensure Prime users get their money’s worth. Or maybe a bit of both.
OTHER NOTABLE STORIES
-Airbus announced today it has lined up a commitment from David Neeleman to buy 60 A220s for his yet-to-be-named upstart U.S. carrier. Neeleman is a WestJet co-founder.
-Aphria is planting its flag in Latin America and the Caribbean, announcing today it’s paying $193 million for a subsidiary of Scythian with medical marijuana assets in Argentina, Colombia, Jamaica and Brazil.
-The International Energy Agency says global investment in the energy sector slipped two per cent last year to US$1.8 trillion. It’s the composition of the spending that’s noteworthy, including a proportional uptick in fossil fuels.
NOTABLE RELEASES/EVENTS
-Notable earnings: Goldman Sachs, CSX, Johnson & Johnson
-Notable data: Canadian manufacturing sales, U.S. industrial production
-4:00 a.m. ET: Bank of England Governor Mark Carney testifies before U.K. Treasury Committee
-9:00 a.m. ET: Prime Minister Justin Trudeau makes announcement and holds avail alongside Nova Scotia Premier Stephen McNeil in Sutherlands River, NS
-10:00 a.m. ET: Senior Facebook, Google and Twitter officials testify before U.S. House Judiciary Committee re. “Content Filtering Practices of Social Media Giants”
-10:00 a.m. ET: U.S. Federal Reserve Chair Jerome Powell testifies before U.S. Senate Banking Committee
-Farnborough International Airshow (runs to July 22)
Every morning BNN's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
