Sasfin : Netflix subscriber numbers beat expectations

MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

On the Johannesburg Stock Exchange (JSE) yesterday, the Top-40 index ended 0.58% lower and the broader All-Share index dropped 0.45% to close at 79,505 points. Recent economic data in Africa's most industrialised nation have been mixed, with weak November mining numbers released this week, followed by in-line December inflation figures and better-than-expected November retail sales. In company news, Woolworths was up almost 5% after South African food and fashion retailer raised its profit growth forecast, saying it now expected half-year earnings to jump as much as 80% on strong Black Friday sales and festive demand.

EUROPEAN MARKET COMMENTARY

European markets retreated yesterday, tracking weaker global sentiment as investors gauge the economic outlook, a topic high on the agenda at the World Economic Forum in Davos this week. The pan-European Stoxx 600 closed down 1.6%, with Tech stocks shedding 2.9% to lead losses as all sectors and major bourses finished in the red. In company news, Norwegian Cruise Line stocks sunk more than 5% after the company said it will report a net loss for the fourth quarter and full year of 2022, as well as the first quarter of 2023.

US MARKET COMMENTARY

US stocks fell yesterday as investors grew increasingly concerned the Federal Reserve will keep raising rates despite signs of slowing inflation. All of the major averages are on pace for their first negative week in three. On the data front, initial filings for unemployment insurance fell to their lowest level since September, the Labour Department reported, signalling to investors that the labour market is resilient amid a slowing economy. Elsewhere, investors are watching key quarterly reports to see if there is an earnings recession brewing.

ASIA MARKET COMMENTARY

Markets in the Asia-Pacific traded mostly higher today as investors digested Japan's inflation data. The nationwide core consumer price index rose 4% in December on an annualized basis, the fastest pace since 1981. On a monthly basis, consumer prices rose 0.2% in December, remaining flat from the previous month. Meanwhile, the People's Bank of China left the loan prime rates for 1-year and 5-year unchanged, widely in line with expectations. The 1-year LPR stayed at 3.65% while the 5-year LPR remained at 4.3%, both unchanged since August, 2022.

COMMODITY MARKET COMMENTARY

Gold prices held steady this morning but were on track for a fifth straight weekly gain, as a weaker dollar and hopes of slower U.S. interest rate hikes boosted safe-haven bullion's appeal. Meanwhile, oil prices rose today on optimism that the U.S. Federal Reserve will ends its tightening cycle, buoying the economy and boosting fuel demand. Chinese oil demand climbed by nearly 1 million barrels per day (bpd) from the previous month to 15.41 million bpd in November, the highest level since February.

CURRENCY MARKET COMMENTARY

The rand weakened yesterday, as data hinted that the central bank would deliver another interest rate hike next week. The rand traded at R17.28 against the U.S. dollar, 1.11% softer than its previous close. Meanwhile, the U.S. dollar struggled for direction today as fears of an economic slowdown dented risk sentiment, while the yen slipped as speculation continue to swirl that the Bank of Japan will eventually move away from its ultra-easy policy. Meanwhile, the euro was up 0.11%, while sterling was last up 0.01% on the day and the Japanese yen weakened versus the dollar.

LOCAL COMPANIES

WOOLWORTHS HOLDINGS LIMITED (WHL) +4.8%

The Fashion Beauty Home ('FBH') turnaround strategy continues to gain traction. Turnover and concession sales grew by 11.2%, and by 11.0% on a comparable store basis, and strengthened to 12.0% in the last six weeks of the period. Price movement of 10.8% remained positively impacted by the ongoing focus on full-price sales and the continued reduction in markdowns. Trading space was further reduced by 2.2% over the prior period. Online sales grew by 4.5% and contributed 4.2% of South African sales. The Food business grew turnover and concession sales by 7.6% and by 5.4% on a comparable store basis, with sales growth accelerating to 8.6% in the last six weeks of the period. The Woolworths Financial Services book reflects a year-on-year increase of 17.2% to the end of December 2022. The company expects earnings per share (EPS) to rise 70.0% to 80.0% from 167.9 cents per share to between 285.4 and 302.2 cents per share. Headline earnings per share (HEPS) are expected to increase from 168.2 cents per share, to between 285.9 and 302.8 cents per share, representing an increase of between 70.0% and 80.0%. Finally, adjusted earnings per share (AdHEPS) went from 162.2 cents per share to between 275.7 and 292.0 cents per share, representing a 70.0% to 80.0% increase.

BHP GROUP LIMITED (BHG) +0.5%

The company remained fatality free at their operated assets for the fourth consecutive year and continued to deliver reliable operational performance during the quarter. Western Australia Iron Ore (WAIO) achieved record production of 146 Mt (100% basis) for the half year. Production guidance for the 2023 financial year remains unchanged, with Escondida and BHP Mitsubishi Alliance (BMA) trending to the low end of their respective guidance ranges. Full year unit cost guidance for Escondida and WAIO remains unchanged. Unit cost guidance for BMA and New South Wales Energy Coal (NSWEC) has been increased, largely reflecting production impacts from significant wet weather and inflationary pressures. BHP entered a Scheme Implementation Deed with OZ Minerals Ltd (OZL) to acquire 100% of OZL by way of a scheme arrangement for a cash price of A$28.25 per OZL share.

INTERNATIONAL COMPANIES

Netflix (NFLX) -3.20%

The internet streaming service added 7.66 million paid subscribers, which beat the 4.57 million subscribers expected. Earnings per share on the other hand, came in at 12 cents versus 45 cents expected, according to Refinitiv. The subscriber numbers sent the share price higher after the bell, despite the EPS (Earnings per share) miss. While a loss related to euro-denominated debt was mostly responsible for the EPS miss, margins were still reported at 7%, which topped expectations. A cheaper ad-supported service was launched in November last year and was included in the earnings results. However, the company did not disclose how many of the new subscribers opted for this service. Finally, Netflix also said that the co-CEO Reed Hastings would be stepping down and into an executive chairman role.

Nordstrom (JWN) -0.7%

Nordstrom traded lower yesterday as it said that net sales had dropped 3.5% during the holiday period, compared with a year ago. The retailer cut its earnings and margin outlooks for the financial year, which ends in late January. The company now expects its adjusted earnings per share, which excludes the impact of potential share buybacks, to range between $1.50 and $1.70. The previous outlook was $2.30 to $2.60. Nordstrom also said that it expected revenue growth to come in at the low end of its 5% to 7% range, which it previously announced. Nordstrom is the latest retailer to show warning signs of a tougher year ahead.

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