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Netflix shares spike despite earnings miss

 

Friday, January 20, 2023, 8.45am GMT

The news shaping the markets today

UK’s Defence Secretary Ben Wallace said that the country is looking to send 600 Brimstone missiles to Ukraine for its ongoing war with Russia. The US dollar index traded slightly lower this morning.


UK’s GfK Consumer Confidence indicator declined to -45 in January, from -42 in the previous month, exerting slight pressure on the GBP/USD forex pair.


The People’s Bank of China maintained its key lending rates for the fifth month in a row during its January fixing, sending the CNY/USD pair slightly lower in forex trading this morning.


Japan’s annual inflation rate increased to 4.0 % in December, from 3.8% in the previous month. The reading being the highest since January 1991 exerted pressure on the JPY/USD forex pair.


New Zealand’s BusinessNZ Performance of Manufacturing Index fell to 47.2 in December, from 47.4 in November. However, the NZD/USD pair rose in forex trading this morning.

 

What’s happening: Shares of Netflix jumped in after-hours trading on Thursday, following the release of fourth-quarter results.

What happened: The streaming platform company reported downbeat earnings for its latest quarter on Thursday.

However, investor sentiment was lifted by better-than-expected growth in one of Netflix’ most important metrics.

How were the results: Netflix reported some growth in sales for the three months ending in December, although the growth rate was the slowest since the Los Gatos, California-based company went public in 2002.

  • Revenues grew 1.8% year-over-year to $7.85 billion, slightly above the Wall Street expectations of $7.84 billion.
  • Profits fell sharply to $0.12 per share, from $1.33 per share in the year-ago period, and missed the consensus estimates of 44 cents per share.

Why it matters: Netflix has been under pressure after it lost customers during the first half of last year. The company’s shares had tumbled around 38% in 2022.

Although Netflix returned to growth in the latter half of the year, new additions were down from the pace in recent years. To boost this, the company announced an ad-supported option for its customers in November in 12 countries.

Netflix added 7.66 million paid subscribers during the latest quarter, up from its previous guidance of 4.5 million and almost double of the consensus estimates. The figure was driven by North American gains due to hits including Wednesday, Dahmer and Harry & Meghan.

The company ended the quarter with 230.75 million paid subscribers, up from 223.9 million in the previous quarter and 221.84 million in the year-ago period.

Although management did not issue any specific forecast for subscriber gains, they said there is likely to be “modest” growth in the first quarter.

Netflix projected revenues of around $8.172 billion in the first quarter, compared to expectations of $8.15 billion, which represents 4% year-over-year growth. The company also guided to earnings of $2.82 per share, compared to the consensus estimates of $2.97 per share.

Management also reported that Reed Hastings, who has been with the group since the company was founded in 1997, has transitioned to the role of executive chairman, and that COO Greg Peters will become co-CEO with Ted Sarandos.

How shares responded: Shares of Netflix climbed 7.1% to $338.27 in extended trading on Thursday, after declining around 3.2% during the regular trading session.

What to watch: Investors will keep an eye on Netflix’s subscriber growth ahead and any major releases that could attract more viewers.

The markets today

The Canadian dollar will be in focus ahead of the country’s retail sales report

Context: The CAD/USD forex pair edged higher on Thursday, rebounding from around a two-week low.

Details: The loonie rebounded slightly on Thursday, but the gains were limited as equity markets around the world remained under pressure. The global stock markets have remained cautious this week, with US economic reports reignited concerns over slowdown in economy.

Domestic data released on Thursday showed disappointing growth in wholesale trade in November, which also limited gains for the Canadian currency. Statistics Canada reported that wholesale sales rose by 0.5% to C$83.8 billion in November, following 1.9% growth in the previous month, driven by sales in motor vehicles and auto parts and accessories. The figure was significantly short of analyst expectations of 1.9% growth.

Another data showed home prices dropping 1.1% in December. Home prices have been on a downturn following Bank of Canada’s aggressive rate hikes to combat inflation. The Canadian central bank raised rates by 50bps to a 15-year high of 4.25% in December, with markets expecting policymakers to announce another hike of 25bps next Wednesday.

A rise in the price of crude oil, one of Canada’s major exports, provided support to the loonie on Thursday. Benchmark US crude oil for February delivery added 85 cents to settle at $80.33 per barrel.

The CAD/USD forex pair gained around 0.2% to 1.3469 on Thursday, after falling to its lowest intraday level since January 6 at 1.3520. The S&P/TSX Composite index also declined by 0.17% to 20,341.44, after recording losses in the previous session.

What are expectations: Traders await retail sales data from Canada today, with analysts expecting a 0.5% decline in sales for November, compared to 1.4% growth in the previous month. Retail sales in Canada might rise 5.3% year-over-year in November, following 6.4% growth in October.

Other Markets: US trading indices closed lower on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.76%, 0.76% and 1%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 128.65 and 128.97 Positive
EUR/JPY – 139.48 and 139.72 Negative
Silver – 23.986 and 24.124 Negative
WTI Crude Oil  – 81.16 and 81.27 Positive
FTSE 100 – 7747.16 and 7774.03 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0841, 0.07%) Dow ($33,179, 0.12%) Brent ($86.62, 0.5%)
GBP/USD (1.2389, -0.02%) S&P500 ($3,924, 0.22%) WTI ($80.82, 0.6%)
USD/JPY (128.79, 0.28%) Nasdaq ($11,399, 0.38%) Gold ($1,933, 0.5%)

What else to watch today

Germany’s producer price inflation, UK’s retail sales, Turkey’s tourist arrivals and government debt, Italy’s construction output, India’s foreign exchange reserves, Mexico’s retail sales, US existing home sales and Baker Hughes crude oil rigs, as well as Argentina’s leading economic indicator.

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