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Research Market strategy
by Swissquote Analysts
Morning News

Netflix's Earnings Beat Forecasts but U.S. Subscriber Growth Fell Short

Topic of the day

Netflix's growth driver continued to be its international user base in the last quarter of 2019, its latest quarterly report showed. The streaming company's earnings, released on Tuesday evening, far exceeded Wall Street's expectations, but slower-than-anticipated growth in the U.S. user base underscored fears about competition in the streaming market. Netflix stock (ticker: NFLX) fell about 1% in after-hours trading. As Netflix's U.S. subscriber base has surpassed 60 million and as the domestic streaming market has become saturated, the company's growth has decelerated. News that the domestic user base declined for the first time in years in the second quarter sent the stock plummeting. Conditions remained tough domestically in the fourth quarter. Netflix said it added 8.3 million net new international subscribers and 420,000 U.S. users, while Wall Street had been expecting 618,000 domestic and 7.2 million international additions. On Oct. 17, Netflix told investors to expect a total of 7.6 million new subscribers.

Swiss stocks

The SMI closed 0.4 percent firmer on 10,885 points Tuesday, a new record high. Initially, fears that the outbreak of the new coronavirus in China could turn into an epidemic weighed on the market. However, positive news from reporting companies pushed these fears into the background. Heavyweight Nestle buoyed the SMI, rising 1.4 percent. UBS bucked the upbeat trend, slumping 4.5 percent after releasing strong financials, but markedly lowering mid-term targets. However, analysts reacted positively, saying the new targets were “more reliable” and “realistic”. Credit Suisse slid 1.3 percent in UBS’ wake. Lonza climbed 7.5 percent on well received financials. Logitech’s quarterly figures also had a favourable reception, and its confirmation of its outlook helped it climb 4.6 percent. Luxury goods stocks Richemont fell 1.9 percent and Swatch 0.5 percent, weighed down by fears that the coronavirus would cause a decline in tourism and also in sales of luxury goods on the key Chinese market.

International markets

Europe

European shares traded mostly lower as markets remained cautious about a viral outbreak in China. The Stoxx Europe 600 dropped 0.1% to 423.38 and the FTSE 100 and CAC-40 were off 0.5% apiece, but the DAX edged 0.05% higher. "It's unclear at this point whether fears surrounding the coronavirus in China are already beginning to dissipate, or if it will remain one of the market's underlying concerns over the coming weeks," Connor Campbell at Spreadex said. The FTSE ended down 40.74 points at 7610.70 while the German DAX ended up 6.93 points, or 0.05% to 13555.87. The French CAC was down 32.55 points, or 0.54% to 6045.99. BP PLC (BP.LN) said Tuesday that Chief Financial Officer Brian Gilvary will retire from the company on June 30, and he will be succeeded by Murray Auchincloss. The oil major said that Mr. Auchincloss is currently the CFO of BP’s upstream segment and will take over the role of CFO on July 1, 2020. Until then, both Mr. Auchincloss and Mr. Gilvary will work together to ensure an orderly transition. Mr. Gilvary has been with BP since 1986, becoming the company’s CFO in January 2012. Budget airline easyJet PLC (+4,6%) on Tuesday said revenue per seat for the first quarter of fiscal 2020 rose, and that capacity growth in the first half would be slower than previously expected. The airline (EZJ.LN) said first-half capacity is expected to grow 1.5%, primarily dragged by French air-traffic control strikes. The airline had previously expected growth of around 1.7%.

United States

U.S. stocks declined intraday after the first reported case in the U.S. of a dangerous pneumonialike virus that originated in central China. The Dow Jones Industrial Average dropped 0.6%, poised for its first decline in six sessions. The S&P 500 and Nasdaq Composite fell 0.3%. All three indexes have hit a series of repeated highs in the weeks since the U.S. and China indicated progress on a trade deal. The Dow was weighed down by a 5.5% drop in shares of Boeing. The aerospace giant said it expects its 737 MAX jet will be grounded through mid-2020, following last year's fatal crashes. The stock, which was halted for news, remains the second most expensive stock in the price-weighted index, which means moves in its share price can have a disproportionately large effect on the Dow's overall change. International Business Machines Corp. reported a slight increase in quarterly revenue, ending a streak of falling sales and providing a first indication Chief Executive Ginni Rometty's roughly $33 billion acquisition of open-source software giant Red Hat may help turn around Big Blue's fortunes. The company on Tuesday said fourth-quarter revenue rose 0.1% to $21.78 billion in the quarter after five straight quarters of year-over-year declines.

Asia

In Asia, stocks were trading mostly higher despite investor worry over the impact the health emergency may have on travel and tourism ahead of the Lunar New Year that starts Saturday. Stocks in China were mixed early Wednesday while Hong Kong stocks, which took a hit Tuesday, were rebounding by about 0.8% on Wednesday.

Bonds

U.S. government bonds strengthened intraday, pushing yields toward the bottom of their recent range and highlighting a search for safer assets amid worries about a deadly virus outbreak in China. In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 1.769%, according to Tradeweb, compared with 1.834% Friday.

Analysis

IR rises Bayer to Hold (Sell) – Target 81 (61) EUR
Citi rises RELX to Buy (Neutral) – Target 23 GBP
H&A rises the Flatex target to 43 (39) EUR – Buy


Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.

 
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