Markets Defused aims to give an easy-to-understand and straightforward recap of the week’s most engaging business and stock market news.
- Netflix has the right formula to keep growing – analyst
- Frasers share rose as Sports Direct leads profit growth
- Royal Mail owner nudged up by trading update
- Netflix financials beat expectations
- Adidas outperformed market forecasts
- Novo Nordisk and Eli Lilly face new weight loss rival
- Tinder owner boosted by activist stakebuilding
- Hugo Boss shares plummeted on profit warning
- UK continued NatWest stake divestment
- Burberry CEO exited on fresh profit warning
Netflix has right formula to keep growing
Netflix Inc (NASDAQ:NFLX, ETR:NFC) has landed on the right formula to continue growing its business despite challenges, that’s the view of analysts at American stockbroker Wedbush.
The streamer, which last night released expectation-beating financials for its second-quarter in which it reported revenue, earnings and subscriber numbers all ahead of Wall Street expectations.
Its outlook for the next quarter was slightly softer than the market anticipated, which dampened overnight interest in the stock.
Nonetheless, market commentators including those at Wedbush focused in particular on the evident popularity of Netflix’s ad-supported subscription tier – which is cheaper for users who are prepared to watch ads whilst streaming.
“The most significant benefit of the ad tier so far is that it limits churn. Netflix is positioning to accelerate ad tier revenue contribution into 2025 as it improves its advertising solutions and targeting, expands partnerships, and adds more live events,” Wedbush analyst Alicia Reese said in a note.
“With this set-up, the ad tier should become the primary growth driver in 2026. We think Netflix has reached the right formula with global content creation, balancing costs, and increasing profitability.”
Wedbush has an ‘outperform’ rating for Netflix, with a 12-month price target of $725 (vs a current price of c$643).
Frasers share rose as Sports Direct leads profit growth
Shares in Frasers Group PLC (LSE:FRAS) advanced nearly 10% on Thursday after its Sports Direct business helped drive improved profits for the retailer’s full year.
Whilst Mike Ashley’s retail conglomerate saw a 0.9% decline in revenue, to £5.54 billion, amidst a slowdown in the luxury end of its market, adjusted profit for the year increased to £544.8 million from £481.8 million.
Looking into the new financial year, Frasers sees its profits improving substantially with a new guidance range of £575 million to £625 million for the 2025 financial year.
“We invested in group-wide operational efficiencies in warehouse automation and digital infrastructure, which we expect to yield a tangible impact as early as FY25,” chief executive Michael Murray said.
Royal Mail owner nudged up by trading update
Royal Mail owner International Distributions Services PLC (LSE:IDS) shares nudged higher, closing Thursday’s session up 1.8% priced at 342p, after a trading update delivered a strong showing.
First quarter revenue was up just over 8%, totaling £3.3 billion, with the postal company pointing to higher stamp prices, strong demand for parcels and election post.
It comes as the company is on the receiving end of takeover interest from Czech billionaire Daniel Křetínský, who has offered £3.6 billion to buy the company.
The Royal Mail business contributed £2 billion to group revenue, up 10.6%, whilst the GLS parcels business generated £1.3 billion, up 4.8%.
British first-class stamp prices increased in April, by 10p to £1.35, whilst second-class stamps increased to 85p from 75p.
Netflix financials beat expectations
Netflix Inc (NASDAQ:NFLX, ETR:NFC) stock was on the back foot in Thursday night’s ‘afterhours’ dealing, despite revealing expectation-beating financials for its second-quarter.
Revenue, earnings and subscriber numbers all surpassed Wall Street expectations.
At $9.56 billion, revenue was up nearly 17% year-over-year and was slightly better than the $9.53 billion consensus, whilst earnings per share was reported at $4.88 versus $3.29 a year ago and an analyst estimate of $4.74.
Subscribers increased by around 8 million, versus a forecast of 4.7 million, with the streamer highlighting the popularity of its ads-included subscription tier.
But, the streamer’s revenue guidance for the third quarter disappointed compared to prior market consensus – with the company expecting $9.73 billion versus the $9.83 billion pencilled in by analysts.
Adidas outperformed market forecasts
adidas AG (OTCQX:ADDYY) shares added around 3% on Wednesday, thanks to upbeat financial results and an upgraded outlook for the rest of 2024.
It comes in stark contrast to American rival Nike, which recently issued a profit warning.
Today, the German sportswear firm told investors it now expected operating profit to reach €1 billion this year, after seeing a strong performance in its second quarter. That marked a significant upgrade from a prior forecast of €700 million.
It reported that second-quarter revenues increased around 11% on a constant currency basis – whilst in Euros, it was up 9% to € 5.822bn. Operating profit for the year was up at €346 million, from €176 million a year ago.
Novo Nordisk (NYSE:NVO) and Eli Lilly face new weight loss rival
Novo Nordisk (NYSE:NVO) and Eli Lilly and Co (NYSE:LLY) stock traded lower through Wednesday, under competitive pressure as rival Swiss drug-maker Roche (ROG:SWX) announced early-stage trial results for its experimental oral weight-loss drug, CT-996.
Participants taking the drug lost an average of 7.3% of their body weight over four weeks, Roch announced.
Whilst early stage, it presents a potential additional disruptor in the weight loss market and notably through oral delivery rather than injectable like Novo Nordisk’s Ozempic and Wegovy, or Eli Lilly’s Mounjaro.
It will now continue its trials, with further studies involving participants with both obesity and type 2 diabetes slated for later this year.
Tinder owner boosted by activist stakebuilding
Tinder and Hinge owner Match Group Inc (NASDAQ:MTCH) stock climbed this week on the news that activist investor Starboard Value had acquired a 6.5% stake in the company.
Starboard is reportedly pushing for operational changes including product innovation and margin improvement.
The activist, alternatively, calls for Match to be put up for sale if a business transformation can’t be successfully executed.
Match is said to be engaged in ongoing discussions with Starboard and other investors – with other activist investors like Elliott Management and Anson Funds also undersood to also have shareholdings in the company.
Hugo Boss shares plummeted on profit warning
Hugo Boss (ETR:BOSS) shares plummeted, falling 7.5%, as the German designer became the latest in the luxury retail segment to issue a profit warning.
On Tuesday, in a trading update, Hugo Boss downgraded its full-year sales outlook whilst warning about slowing consumer spending on luxury goods. It said sales had fallen 1% to €1.02 billion in its second quarter.
Hugo Boss said it now expects full-year sales between €4.2 billion and €4.35 billion, down from previous expectations of €4.3 billion to €4.45 billion. Earnings are projected to be between €350 million and €430 million, down from €430 million to €475 million.
The company blamed macroeconomic and political challenges among the reasons for its gloomier outlook.
UK continued NatWest stake divestment
A change of government has evidently not altered plans for the UK government’s divestment of its stake in NatWest Group PLC (LSE:NWG).
The latest round of share sales has seen the government’s stake drop beneath 20%.
NatWest bought back the shares held by the government to bring its holding to 19.97%, which means the government interest has now nearly halved since December.
The divestment process paused during the UK general election.
Burberry CEO exited on fresh profit warning
Burberry Group PLC (LSE:BRBY) share price plummeted on Monday after the British fashion house replaced its chief executive and spooked investors with a profit warning.
Joshua Schulman replaced Jonathan Akeroyd as the brand’s new chief executive.
The company is grappling with a significant sales decline, according to the fresh profit warning issued on Monday. Burberry reported a 23% drop in sales in both the Americas and Asia Pacific regions and a 16% decrease in Europe, the Middle East, India, and Africa.
The company has decided to suspend dividend payouts to shareholders. And it revealed it plans to cut jobs, mainly in its UK corporate office.