Where can Netflix (NFLX) go from here after disappointing earnings results
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Netflix is under scrutiny by many investors owning the stock after listening to Tuesday’s earnings call. The most devastating miss for them was missing the expected 6 million new subscribers. They added 3.98 million new subscribers, but that was a miss of about 2 million. Our Sunday newsletter “The Week Ahead” pointed out that Netflix could expect to see a significant drop when comparing this quarter to last year’s first three months. This was obviously due to the stay-at-home orders, wherein a sharp contrast these same orders are the ones being lifted today. Analysts expected Netflix’s new subscribers to be significantly less than the 15.8 million added last year, but they didn’t expect it to be this bad.
This big miss for Netflix caused their stock to crash in the after-hours of Tuesday’s trading. Their stock fell nearly $41 a share or 7.4%. For some, this presents a buying opportunity if you are interested in the risk that growth stocks carry with them. On the other hand, many long-term investors are demanding the company to focus on increasing cash flow as the company has been in a building phase since the early days of the company. This event can lead to a bubble bursting, exposing the $225 billion evaluation, or it could create an event for new investors to get in. The community has yet to decide where this stock stands with them as they have yet to gain any of the losses from Tuesday’s dip, but they also haven’t fallen any further. NFLX is currently selling for $507.09.
Who could win the bidding war for Kansas City Southern ($KSU)?
Kcsouthern.com
The railway company, Kansas City Southern, has been trading for about $250 a share for the past month. That is until a bidding war sparked between two long-time railway rivals. Canadian Pacific Railway ($CP) originally put in a bid to acquire Kansas City Southern valuing the company at $25 billion. Rival railroad company Canadian National Railway ($CNI) offered to buy $KSU days later at a $33.7 billion evaluation.
Both companies have great interest in Kansas City Southern as they are the link that would connect trade from Canada down to Mexico. The acquisition of $KSU by either Canadian railroad would capitalize on the United States-Mexico-Canada Agreement entered into by former President Donald Trump. Kansas City Southern has been an interesting reopening play since they are the main form of hauling agriculture products, energy, chemicals, petroleum, and most importantly for reopening, consumer products. Market capitalization for $KSU is $23.4 billion creating an exciting narrative for the upcoming week as that still sits below both bids by $CP and $CNI.
Simon Biles leaves Nike ($NKE), igniting a fire as the company continues to struggle with female athletes
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Athleta announced Friday morning that they have partnered with the star olympian gymnast Simon Biles. Athleta is a subsidiary of Gap Inc. who also signed former Nike athlete Allyson Felix back in 2019. Biles didn’t criticize Nike, but she did say Athleta better highlighted her values, stating, “it’s what I stood for and how they were going to help me use my voice and also be a voice for females and kids,” according to the Wall Street Journal.
This situation brings back to light the controversy Nike was under in 2019 when Allyson Felix, Kara Goucher, and Alysia Montaño shared their pregnancy stories while being athletes for Nike. Since these stories, Nike has been proactive in changing their maternity policy to guarantee athlete pay and bonuses for 18 months. These stories that broke in 2019 also lead other athletic companies to follow Nike in their policies.
This story comes to light after Citigroup downgraded Nike. The downgrade was in response to the criticism Nike has received in China after they brought their concerns of forced labor in Xinjiang. The company is at an interesting point right now. While shares have yet to drop significantly they must battle through these reports to demonstrate to shareholders their values and how they plan on using them to grow the company.
President Biden sparks fear in the eyes of investors as he seeks a hike in capital gains tax
Carolyn Kaster | AP
As part of Biden’s campaign, he made it clear that he wanted to increase the tax rate on the wealthy. He plans to raise taxes for these households to create money for other social programs he outlines during his campaign. One of his plans includes raising money to help decrease student debt. While the three major indexes snake Thursday, Dow Jones Industrial Average (DIJA) fell 1%, while Standard and Poors 500 (S&P 500) and the NASDAQ Composite dropped 0.9%. Since that quick sell of these averages has gained back almost all or more of those losses. We expected to see dramatic sell-offs on the last day of the week, but that was not the case, but this was not the case for the cryptocurrency market.
After the reports that Biden was planning his tax hike, Bitcoin slide below $50,000, a price it hasn’t seen since early March. Other cryptos were down big such as yearn finance (18%), Ethereum (15%), Aave (20%), and many others. Today, the crypto space is looking to make up for those losses as the popular index of wall street did.
This story raises some important points to remember while investing. First off, we all should be doing our due diligence in regards to research. If we value a company at $50 a share, we should have no reason to be selling at $40 when no business fundamentals have changed. Secondly, it brings up the importance of having money and a watch list set aside ready to take advantage of buying opportunities. If the market declines in the face of fear and emotion, we must be prepared to buy. I hear people saying, “I wish I had money to buy the dip,” too often. While it’s not always a great strategy to buy a dip, if there is little to no change in the business and our valuation stands, we must be ready to take advantage of other’s fear and worry. If you haven’t heard of Warren Buffet’s Mr. Market, this may be a great time to study it because it goes over situations very similar to these. Lastly, if there are fears of a market decline and we are panicking, we must reanalyze the risks we place ourselves in and the risk we are willing to take. If we put ourselves in a position way over our risk tolerance, we must rethink our investing strategy. Each person is different, some can tolerate more risk and more loss than others, but one thing stays true to all, no amount of money is worth harming our mental health. Protect your health first, protect your money second.
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