With everyone and their dog staying at home these days, streaming TV and its reigning champion Netflix are now bigger than ever —and so is Netflix the stock, which last week hit a new high and hasn’t looked back since.
And as the days of COVID-19 keep dragging on, investors may be wondering whether now’s the time to climb on board the Netflix express. No, says portfolio manager Darren Sissons, who argues that the stock is too just expensive.
Netflix kept up its torrid pace on Monday, once again reaching above $330 per share as the market continues to favour tech names benefiting from the stay-at-home culture imposed by COVID-19 restrictions.
And while ‘Will they or won’t they?’ could apply to Netflix’s reality TV hits like Love is Blind, it’s equally apt for Tuesday’s quarterly report from NFLX, which is expected to smash management’s guidance for the period but whether analysts’ expectations will be matched or surpassed is another question.
Impressing on guidance would be a bonus for Netflix, which has underwhelmed in a number of quarters of late. Last year’s first quarter results, for example, were both an earnings and revenue beat but management’s call for second quarter EPS of $0.55 per share was well under the $0.99 per share expected by analysts.
Netflix had previously called for first quarter 2020 earnings of $1.66 per share on revenue of $5.73 billion.
But while the company is assuredly firing on all cylinders at the moment, having successfully emerged from a storm of concern surrounding the debut of competitor platforms like Disney+, Sissons says there’s little to justify the sky-high valuation.
“Virtually every house at the moment has got Netflix, to the extent that they have a smart TV. The kids are on it, everybody’s using it,” said Sissons of Campbell Lee & Ross Investment Management, speaking on BNN Bloomberg on Monday.
“So I do think there’s some upside but I’ve always found it a very, very rich valuation of the company, its shares. I think there are different formats that people are starting to consume content on. But for me, ultimately I just find Netflix a little rich,” he said. “I would look perhaps at a Disney story although obviously the jury’s a little bit out there, and there are other streaming opportunities so from a valuation perspective.”
“I’m on the sidelines, but I do recognize how pervasive the product offering is, and so on a net balance basis I would say don’t confuse a good product or a good company with a good investment,” Sissons said. For Netflix’s first quarter, analysts are calling for EPS of $1.64 per share on sales of $5.7 billion, with subscription additions expected to come in at about seven million.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
