Wednesday's Headlines: Netflix Surprises Us All
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Lemonade (LMND) +9.4%
Stitch Fix (SFIX) +7.7%
Upstart Holdings (UPST) +7.6%
Farfetch (FTCH) +5.5%
Bill.com (BILL) +5.3%
Moving Down ⬇️
Hasbro (HAS) -2.9%
Lovesac (LOVE) -1.9%
Netflix (NFLX) -1.7%
Atlassian (TEAM) -1.6%
Netflix User Numbers Blow Past Expectations 📺
Shares of Netflix (NFLX) are up 12% in pre-market trading off the back of last night’s earnings report. The pioneer of on-demand streaming added 2.41 million net new subscribers for the third quarter of the year, more than doubling its own guidance of 1 million additions. The boost in streamers bucks the trend of 2022, with Netflix having lost subscribers in the first two quarters of the year. Management also expects to add 4.5 million new subscribers in the final quarter.
Aside from subscribers, Netflix grew revenues by 6% year-over-year to $7.9 billion while taking in operating income of $1.5 billion. Both figures are negatively impacted by foreign exchange fluctuations on account of the strong U.S. dollar.
Management was sure to flex on its competitors, boasting of its superior profitability:
“Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard — we estimate they are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflix's $5 to $6 billion annual operating profit.”
The O.G. streamer also noted that it is garnering 2.6 times the U.S. viewership of Amazon and 1.4 times that of Disney and Hulu. With the rollout of its ad-supported offering coming in November, things are finally looking up for Netflix after an awful year in which it more than halved in value:
“After a challenging first half, we believe we’re on a path to reaccelerate growth.”
A Challenging Holiday Season Ahead for Hasbro 🪀
The specters of high inflation and high inventory levels have claimed Hasbro (HAS) as their latest victim, with the toymaker’s stock falling yesterday thanks to a tough quarter.
Reporting its third-quarter earnings yesterday morning, the company behind famous brands like Monopoly and Play-Doh posted earnings of $1.42 per share on revenues of $1.68 billion. Though this matched expectations on the top line, analysts had expected earnings of $1.52 per share.
For a company like Hasbro, inflation has a big impact on its performance as customers become more price sensitive to discretionary goods. While matching expectations, revenue was actually down 15% compared to the same period last year, while the company expects sales to remain flat at best in the fourth quarter, which is traditionally its most lucrative.
Like so many other retailers at the moment, Hasbro is also suffering from high inventory levels — a knock-on effect from constricted supply chain routes and lower consumer purchasing. As part of the earnings release, CEO Chris Cocks acknowledged the pressures these excess inventories put on profitability, but said that promotions would be key to shifting this stock throughout the holiday season and could help to make sure that Hasbro continues to meet demand.
In the release, Cocks also said, “As expected, the third quarter is our most difficult comparison and was further impacted by increasing price sensitivity for the average consumer.”
It’s been a tough few years for Hasbro. Excluding the COVID flash-crash in March/April 2020, company stock is currently at its lowest level since 2015.
Adobe Expects Foreign-Exchange Headwinds Next Year 💨
Adobe (ADBE) shares are up in pre-market trading this morning, despite the company issuing guidance for the next fiscal year that fell below expectations.
At Adobe’s 2022 Financial Analyst Day yesterday, management gave us a glimpse into its growth strategy for the remainder of this year and next, which was especially interesting considering the wider economic climate.
For the current quarter, Adobe maintained its outlook. However, for fiscal 2023, the company is forecasting $15.15 to $15.45 in adjusted earnings per share on $19.1 billion to $19.3 billion in revenue. Although this is excluding the $20 billion planned acquisition of Figma, it still fell below consensus analyst estimates on the bottom line.
The poorer-than-expected outlook was blamed primarily on “the macroeconomic environment”, along with “headwinds resulting from the U.S. dollar having strengthened against foreign currencies.” Indeed, the effects of foreign exchange rates are expected to hamper the company’s revenue growth by as much as 4 percentage-points in the coming year.
However, investors seem buoyed by some bright spots for the company, including record customer retention for its Creative Cloud subscriptions, which make up 59% of total revenues.
Adobe is a software company and market leader in tools for the creation and publication of a wide range of content, including graphics, photography, illustration, animation, and video. After expansion in 2021, it also became a global leader in Customer Experience Management.