Netflix stock explodes over 20% on big earnings beat

• Nathan McAlone
 

• Oct. 17, 2016, 3:47 PM
• 9,853
 
• 6

Netflix CEO Reed HastingsEthan Miller/Staff/Getty Images

Netflix  $118.79

NFLX

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Disclaimer

Netflix's stock surged 20% after hours on Monday as original hit shows like "Stranger Things" and "Narcos" helped the streaming video company crush Wall Street expectations.

Netflix beat on both international and domestic subscriber additions by a hefty margin, as well as on EPS. Netflix's revenue was roughly in line with Wall Street forecasts.

Here are the key numbers:

• Q3 EPS (GAAP): $0.12 versus Wall Street forecasts of $0.06, and Netflix's guidance of $0.05.
• Q3 Revenue: $2.29 billion, up 36% year-over-year, versus Wall Street forecasts of $2.28 billion.
• Q3 US subscriber growth (net additions): 370,000 versus Wall Street forecasts 304,000 compared to Netflix guidance of 300,000.
• Q3 international subscriber growth (net additions): 3.2 million versus Wall Street forecasts 2.0 million, in line with Netflix's guidance.
• Q4 subscriber growth guidance (domestic): 1.45 versus Wall Street forecasts of 1.0 million.
• Q4 subscriber growth guidance (international): 3.75 million versus Wall Street forecasts of 3.1 million.

Netflix credited its huge beat on subscriber additions to "excitement around Netflix original content." The company particularly mentioned cult hit "Stranger Things" and the second season of "Narcos."

One Wall Street concern going into Netflix's earnings was its US price hike, termed "un-grandfathering," which started in May and continued to roll out this quarter. "By the end of Q3’16, we had un-grandfathered 75% of the members that are being un-grandfathered this year and the impact has been consistent with our expectations," the company wrote.

Internationally, Netflix mentioned its localization efforts in both Poland and Turkey, which Wall Street analysts suggested was spurring interest in the service over the last few weeks.

"We began accepting payment in local currency and added a local language user interface, subtitles and dubbing as well as some local content. We have seen nice gains in viewing and retention and we’ll undertake other localization efforts in the coming months and years," Netflix said.

As for China, Netflix said it has no immediate plans to enter the country.

"The regulatory environment for foreign digital content services in China has become challenging," the company said. "We now plan to license content to existing online service providers in China rather than operate our own service in China in the near term. We expect revenue from this licensing will be modest."

Netflix said it would release a whopping 1,000 hours of original shows and movies in 2017, up from over 600 hours in 2016.

SEE ALSO: Ashton Kutcher explains why Netflix was the only place he pitched his new sitcom

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IBM reports earnings: a beat all the way around

• Julie Bort
 
•   

• Oct. 17, 2016, 4:15 PM
• 3,866
 

IBM CEO Ginni Rometty IBM

IBM just released its third-quarter earnings.

It reported:

• EPS of $3.29 versus of estimates $3.24. So that's a beat.
• And revenues of $19.2 billion versus estimates of $19 billion. That's a beat, too.

In the year-ago quarter, its sales were $19.28 billion. For those keeping track this might have marked the 18th consecutive quarter of declining year-over-year revenues. Though it came in kind of flat, and that's good news for investors.

The stock is still dropping slightly in after-hours trading.

Here's the press release.

IBM Reports 2016 Third-Quarter Earnings

Continued Strong Growth in Strategic Imperatives Led by IBM Cloud, Analytics

Highlights

Diluted EPS: GAAP of $2.98; Operating (non-GAAP) of $3.29
Revenue from continuing operations of $19.2 billion
Strategic imperatives revenue of $31.8 billion over the last 12 months represents 40 percent of IBM revenue

- Strategic imperatives revenue of $8.0 billion in the quarter, up 16 percent year to year (up 15 percent adjusting for currency)
Cloud revenue of $12.7 billion over the last 12 months

- Cloud as-a-Service annual run rate of $7.5 billion in the quarter, up 66 percent year to year (up 65 percent adjusting for currency)

ARMONK, N.Y.--(BUSINESS WIRE)-- IBM (NYSE:IBM) today announced third-quarter 2016 earnings results.

"IBM's third-quarter performance, led by continued double-digit growth in our strategic imperatives, is a testament to our leadership in cognitive solutions and cloud," said Ginni Rometty, IBM chairman, president and chief executive officer. "Our ability to apply deep expertise and breakthrough technology, led by Watson and the IBM Cloud, to massive amounts of data is enabling us to build new markets and transform industries. Whether it is banks implementing IBM blockchain solutions, hospitals leveraging Watson to fight cancer, or retailers using cognitive apps built on the IBM Cloud to transform the customer experience, clients across all industries are tapping into a new kind of innovation value from IBM."

		THIRD QUARTER 2016
						Gross Profit
		Diluted EPS		Net Income		Margin
GAAP from Continuing Operations		$2.98		$2.9B		46.9%
Year/Year		-1%		-4%		-2.1Pts
Operating (Non-GAAP)		$3.29		$3.1B		48.0%
Year/Year		-1%		-4%		-2.1Pts
				Strategic
REVENUE		Total IBM		Imperatives		Cloud
As reported (US$)		$19.2B		$8.0B		$3.4B
Year/Year		0%		16%		44%
Year/Year adjusting for currency		-1%		15%		42%

"Throughout the year, we have continued to invest where we see the greatest opportunities to create new markets and strengthen our enterprise IT leadership position," said Martin Schroeter, IBM senior vice president and chief financial officer. "This has included more than $12 billion across capital expenditures, R&D and acquisitions so far this year. At the same time, we have returned more than $6 billion to shareholders through dividends and share repurchases."

Strategic Imperatives

Third-quarter revenues from the company’s strategic imperatives --- cloud, analytics, mobility and security --- increased 16 percent year to year (up 15 percent adjusting for currency). Cloud revenues (public, private and hybrid) for the quarter increased 44 percent (up 42 percent adjusting for currency). Cloud revenue over the trailing 12 months was $12.7 billion. The annual run rate for cloud as-a-Service revenue --- a subset of total cloud revenue --- increased to $7.5 billion from $4.5 billion in the third quarter of 2015. Revenues from analytics increased 15 percent (up 14 percent adjusting for currency). Revenues from mobile increased 19 percent and revenues from security increased 11 percent.

Full-Year 2016 Expectations

The company continues to expect operating (non-GAAP) diluted earnings per share of at least $13.50 and GAAP diluted earnings per share of at least $12.23. Operating (non-GAAP) diluted earnings per share exclude $1.27 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges. There is no change to IBM's previously-provided free cash flow guidance.

Cash Flow and Balance Sheet

The company generated net cash from operating activities of $4.2 billion; or $3.3 billion excluding Global Financing receivables. IBM’s free cash flow was $2.4 billion in the third quarter. IBM returned $1.3 billion in dividends and $0.9 billion of gross share repurchases to shareholders. At the end of September 2016, IBM had $3.0 billion remaining in the current share repurchase authorization.

IBM ended the third-quarter 2016 with $10.0 billion of cash on hand. Debt, including Global Financing debt of $26.1 billion, totaled $42.5 billion. Core (non-Global Financing) debt totaled $16.4 billion. The balance sheet remains strong and is well positioned to support the business over the long term.

Segment Results

• Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $4.2 billion, up 4.5 percent. Cloud revenue within the segment grew 74 percent (up 75 percent adjusting for currency), and Solutions Software grew 8 percent.
• Global Business Services (includes consulting, global process services, application management) -- revenues of $4.2 billion, down 0.4 percent (down 1.6 percent adjusting for currency). Strategic imperatives revenue within the segment was up 13 percent (up 12 percent adjusting for currency).
• Technology Services & Cloud Platforms (includes infrastructure services, technical support services, integration software) --revenues of $8.7 billion, up 2.4 percent (up 1.4 percent adjusting for currency). Growth of 45 percent (up 42 percent adjusting for currency) in strategic imperatives revenue within the segment was driven by strong hybrid cloud services performance.
• Systems (includes systems hardware and operating systems software) -- revenues of $1.6 billion, down 21.0 percent (down 21.5 percent adjusting for currency). Revenue reflects z Systems product cycle dynamics.
• Global Financing (includes financing and used equipment sales) --revenues of $412 million, down 7.9 percent (down 9.2 percent adjusting for currency).

Year-To-Date 2016 Results

Diluted earnings per share from continuing operations were $7.67, down 15 percent compared to the 2015 period. Net income from continuing operations for the nine months ended September 30, 2016 was $7.4 billion compared with $8.9 billion in the year-ago period, a decrease of 17 percent.

Consolidated net income was $7.4 billion compared to $8.7 billion in the year-ago period. Consolidated diluted earnings per share were $7.67 compared to $8.85, down 13 percent year to year. Revenues from continuing operations for the nine-month period totaled $58.1 billion, a decrease of 3 percent year to year (down 2 percent adjusting for currency) compared with $59.7 billion for the first nine months of 2015.

Operating (non-GAAP) diluted earnings per share from continuing operations were $8.59 compared with $10.09 per diluted share for the 2015 period, a decrease of 15 percent. Operating (non-GAAP) net income from continuing operations for the nine months ended September 30, 2016 was $8.3 billion compared with $10.0 billion in the year-ago period, a decrease of 17 percent.

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Visa's CEO is resigning and says he can no longer spend the time in San Francisco to do the job well

• Reuters and Akin Oyedele

• Oct. 17, 2016, 4:29 PM
• 35,263
 
• 5
 

Charles Scharf (center) ringing the NYSE bell.REUTERS/Brendan McDermid

Visa Inc said Chief Executive Charlie Scharf has decided to resign, effective Dec. 1.

The company named Alfred Kelly Jr, a former president of American Express Co and a current Visa board member, as CEO.

Visa said Scharf had informed the board that he decided to resign because he could no longer spend the time in San Francisco necessary to do the job effectively.

Scharf told Bloomberg he needs to be closer to family on the East Coast. 

Here's the full press release:

Visa Inc. (NYSE:V) today announced that Charlie Scharf is resigning as chief executive officer effective December 1, 2016, and the board of directors has unanimously voted to appoint Alfred F. Kelly, Jr. as CEO. Mr. Kelly, a current Visa board member, is the president and chief executive officer of Intersection Co. and the former president of American Express Co.

Mr. Scharf informed the board of directors that he decided to resign his position as CEO and board member because he could no longer spend the time in San Francisco necessary to do the job effectively. The board of directors did a rigorous review of a diverse set of internal and external candidates and is extremely gratified that Mr. Kelly has accepted the position. Mr. Kelly will join the company on October 31, 2016 as CEO designate. As part of the transition, Mr. Scharf will serve as an advisor to Mr. Kelly beginning December 1, 2016 for several months.

“Charlie has been a visionary CEO, highly successful by any set of metrics. He has helped transform Visa, the leading global payments technology company, into a technology-driven digital commerce company and has led a strategy that will benefit this company for years to come,” said Robert W. Matschullat, the company’s independent chairman. “The board of directors is extremely grateful for Charlie’s leadership and wishes to thank him for his outstanding four-year tenure, which saw total shareholder return increase by more than 130%, outperforming both the overall stock market and our peer group.”

“We are thrilled to have found someone with Al’s expertise and knowledge to take Visa to even greater heights. Al is a veteran payments industry executive who knows Visa well, having served as a board member for the past two-and-a-half years,” said Mr. Matschullat. “The board unanimously agrees that Al is the right leader for the company, and we expect a seamless transition given Al’s deep knowledge of the industry, demonstrated leadership capabilities, and his strong relationships with the talented management team currently in place.”

In his 23 years at American Express, Mr. Kelly held a variety of leadership positions. In addition to being president of American Express, he was head of the Global Consumer and Consumer Card Services groups. He currently serves on the board of directors of MetLife Inc.

Mr. Scharf commented: “I love working and running this great global company and I am sad to have reached the conclusion that I should step down, but running a San Francisco based company just doesn’t work for me personally right now and wouldn’t be fair to Visa. It has been an incredible privilege and honor to work with my many colleagues who have contributed so significantly to our success and transformation, and have strengthened our position as the leading global payments provider. I feel confident that the clarity of our strategic goals and our decisive actions will ensure that we continue to thrive in this quickly evolving industry.”

“Visa is lucky to have Al Kelly as the next CEO. I and our senior management team have had the opportunity to work closely with Al – and those relationships, along with his depth and breadth of payment knowledge – will enable him to step in quickly without missing a beat. I, of course, will do everything I can to help make the transition as easy as possible for everyone. Al is the right person to lead Visa to continued success.”

Under Mr. Scharf’s leadership, Visa has strengthened its position in global electronic payments and has been a leader in bringing innovation to the industry. Visa has transformed its technology platform by opening access to its network and capabilities through the Visa Developer Center, partnered with the world’s leading technology companies to drive new payment experiences, introduced new technologies to improve payment system security, and built a world class management team.

In addition, the company successfully completed the acquisition of Visa Europe in June 2016, and delivered strong financial results, with operating income climbing to $9.1 billion in FY 2015. Visa’s stock was added to the Dow Jones Industrial Average in 2013.

Mr. Kelly said: “I am extremely excited and honored to take on this role and build on Charlie’s work and that of all of the employees at Visa. Visa is incredibly well positioned for continued success, and I look forward to joining this preeminent global organization. I have had the pleasure of getting to know many of the Visa executives during my time on the board, and they are a talented group of business leaders who have been relentlessly focused on driving Visa’s global strategy. I look forward to working with them, including Ryan McInerney, Visa’s President, in serving our clients. Charlie has positioned Visa for great success, and I thank him for his leadership.”

The succession will be effective December 1, 2016, when Mr. Scharf will step down and Mr. Kelly will assume the CEO position.

SEE ALSO: Bank of America: Investors are getting worried that a bond market crash is coming

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Twitter's abuse problem is reportedly part of the reason Disney chose not to buy it

• Rob Price
 

• 13h
• 7,868
 
• 16

Jack Dorsey, Twitter CEO.Bill Pugliano/Getty Images

Twitter  $16.83

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Disclaimer

Twitter's reputation as a hotbed for harassment and abuse may have helped lose it two potential buyers.

Bloomberg is reporting that Disney chose not to pursue an acquisition of Twitter in part because it thought the bullying and behaviour of some of the ailing social network's users might damage the entertainment company's image.

That news came shortly after a report by CNBC's Jim Cramer that Salesforce was also put off by Twitter's endemic troll problem.

The enterprise company's CEO, Marc Benioff, said Twitter was "not the right fit," but Cramer was more damning. "What's happened is, a lot of the bidders are looking at people with lots of followers and seeing the hatred," he said. "I know that the haters reduce the value of the company ... I know that Salesforce was very concerned about this notion."

Twitter has grappled with the problem of abusive behaviour on its platform for years. In a leaked memo from February 2015, then-CEO Dick Costolo said "we suck at dealing with abuse and trolls on the platform and we've sucked at it for years." And it's a problem that hasn't gone away.During Twitter's July 2016 earnings call, the company's current CEO, cofounder Jack Dorsey, told analysts the company hadn't "been good enough" at dealing with abuse "and we must do better."

The social network has been working on technical solutions to tackle the issue, but it has been accused of responding less vigorously to complaints of abuse and harassment than to other problematic content like copyright infringement.

View image on Twitter

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Dana Liebelson 

✔@dliebelson

.@twitter says this does not violate Twitter rules. Neither did a more specific gender-based threat I reported. Yay.

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Leslie Jones has been a particularly high-profile target of abuse — but she is far from the only one.Alberto E. Rodriguez/Getty Images

It now looks as if the abuse problem is no longer just a nightmare for its direct targets — it's also causing headaches for Twitter's financial prospects.

Twitter's stock jumped in recent weeks on reports it was in acquisition talks with multiple companies, but Google, Salesforce, and Twitter, the main suitors, have all reportedly backed out.

According to Bloomberg, trolling isn't the only reason Disney opted against trying to buy Twitter. There were also questions around its size and profitability, for example. But Disney is one of the most powerful and highly regarded brands on earth — being tied to a social network in which a black actress was hounded off the platform by racists for having the temerity to star in a remake of "Ghostbusters" might be a hard sell to investors.

Former engineering manager Leslie Miley told BuzzFeed News in August that the company did not follow up on potential solutions if they damaged the site's growth. "I did see a lot of decisions being made in terms of growth when it came to how to handle abuse, which I get," he said. "But on the other side, if there’s a trash fire burning in your front yard, saying you don't want to call the fire department because you don't want to get the house wet is not really a sensical thing."

This strategy might have made sense to Twitter executives during the company's boom years, but now that growth is flatlining the company isstruggling to turn a profit, and the decision not to be more proactive about abuse seems to be coming back to haunt it.

NOW WATCH: The story of Lisa Brennan-Jobs, the daughter Steve Jobs claimed wasn't his

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CHINESE DEBT GROWTH SURGES AGAIN

DAVID SCUTT 

OCT 19, 2016, 5:01 AM  

ChinaFotoPress/Getty Images

If the latest monetary growth figures are anything to go by, Chinese policymakers continued to favour supporting near-term economic growth in September, pushing aside mounting concerns about the nation’s mounting debt level.

According to figures released by the People’s Bank of China (PBOC) on Tuesday, total social financing — the broadest measure of credit which captures lending from both traditional and non-traditional sources within China’s financial system — rose by a further 1.72 trillion yuan last month, easily exceeding forecasts for an increase of 1.39 trillion yuan.

It was also well above the 1.47 trillion yuan level of August, and left total outstanding social financing at 151.51 trillion yuan, up 12.5% on the levels of a year earlier.

China Outstanding Social Financing. Source: Thomson Reuters

New bank lending also exceeded forecasts, coming in at 1.22 trillion yuan. That figure was above the 1 trillion yuan level expected and 948.7 billion figure of August.

Over the past year, outstanding bank loans grew by 13.0%. In the first nine months of the year total bank lending rose to 10.96 trillion yuan.

According to Reuters, the acceleration in lending was driven by a sharp jump in local government debt swaps, aimed at reducing their interest payments, along with strong mortgage demand.

Indeed, so far this year, household loans, largely used to finance property purchases, accounted for 46% of total loans, up from 39% in the first half of the year.

Hot, in other words, and helping to explain the continued recovery in Chinese economic data seen in recent months, along with recent measures introduced in some Chinese cities to quell bubbly property price growth.

The only figure to miss economist forecasts was M2, or broad money growth, and even then it wasn’t by much.

It grew by 11.5% year-on-year in September, up from 11.4% in August but below the 11.6% level expected.

M2 includes cash along with other liquid financial assets such as deposit accounts, money market securities and mutual funds.

M1 monetary growth — cash and demand-deposit accounts — grew by a larger 24.7% over the same period, although this was below the 25.3% level of August.

Despite concerns being expressed by a growing number of groups, including the Bank of International Settlements and the Reserve Bank of Australia, over the potential for heightened financial stability risks as a result of China’s rapid dent accumulation, those warnings, as yet, are seemingly taking a backseat when it comes to supporting near-term economic growth.

The monetary growth figures come a day before the release of Chinese retail sales, industrial output and urban fixed asset investment figures for September, along with quarterly GDP growth.

Economic growth is expected to have grown 6.7% compared to the same quarter in 2015, the same pace seen in the previous two GDP reports released earlier in the year.

The stabilisation in economic activity has been underpinned by state-backed infrastructure investment, property investment and, of course, debt — three factors that many would deem to be old growth drivers in China.

Recent strength in property prices is likely to have underpinned household consumption due to perceived wealth effects, although regulators in some cities have recently taken steps to cool their housing markets.

You can read more here.

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