Netflix whiffed big on earnings, and the stock is crashing

• Nathan McAlone
 

• 17h
• 19,164
 
• 10

CEO Reed Hastings.JD Lasica/Socialmedia.biz

Netflix missed huge on domestic and international subscriber additions in its Q2 earnings on Monday.

"We are growing, but not as fast as we would like or have been,"Netflix said in a letter to shareholders.

The stock plunged over 15% immediately following the news.

Netflix also gave guidance for Q3 that was well below what Wall Street was hoping for in domestic and international additions.

Here are the numbers:

• Q2 EPS (GAAP): $0.09 versus Wall Street forecasts of $0.02, and Netflix guidance of $0.02.
• Q2 Revenue: $2.1 billion, up 31% year-over-year, and in line with Wall Street forecasts of $2.11 billion.
• Q2 US subscriber growth (net additions): 160,000 versus Wall Street forecasts of 509,000, and Netflix guidance of 500,000.
• Q2 international subscriber growth (net additions): 1.52 million versus Wall Street forecasts of 2.15 million, and Netflix guidance of 2 million.
• Q3 subscriber growth guidance (domestic): Guidance of 300,000, versus Wall Street forecasts of 695,000.
• Q3 subscriber growth guidance (international): Guidance of 2 million, versus Wall Street forecasts 2.54 million.

Cancellations

Netflix blamed some of the trouble on people canceling at a higher rate than expected.

"Gross additions were on target, but churn ticked up slightly and unexpectedly," the company wrote.

The company said that competition from the likes of Hulu and Amazon did not contribute to the miss.

Netflix also said that it did not believe that the market in the US was saturated, even though its domestic subscriber growth continued to slow.

Netflix's international plan

There has been concern from Wall Street analysts that Netflix hasn't been faring well in international markets, where much of the population doesn't speak English.

While Netflix doesn't comment on this particular point in the letter, the company said that it will "localize Netflix in Poland and Turkey with the addition of local language in the user interface, subtitles and dubbing. Localization in other markets will take place over time as economically prudent."

Netflix also put a damper on any hope for investors on an imminent entry into China.

The company wrote:

"Unfortunately, this year the regulatory climate in China for our service has become more challenging. Disney's streaming service, launched in conjunction with Alibaba, was closed down, as was Apple's movie offering. We continue to explore options and, in the meantime, have plenty of work to do in our newly opened markets."

SEE ALSO: Even Hollywood stars were impressed by Jeff Bezos' entourage when he came to film a cameo in the new 'Star Trek' movie

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One of Yahoo's most important businesses stopped growing and could face a lot of questions on Monday

• Eugene Kim
 

• Jul. 17, 2016, 8:30 AM
• 14,881
 
• 6
 

Yahoo CEO Marissa Mayer.AP Photo/Eric Risberg, File

Yahoo  $37.84

YHOO

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Disclaimer

Yahoo CEO Marissa Mayer has long touted Mavens, short for mobile, video, native, and social revenue, as the company's new growth driver. 

Indeed, Mavens business has grown into a $1.6 billion revenue business last year, after being almost nonexistent before Mayer arrived in 2012.

But Mavens growth came to a screeching halt last quarter, when it saw only a 7% year-on-year revenue increase in the first three months of the year.

That's a serious slowdown compared to previous quarters: Mavens grew 58% in the same quarter of last year, and 26% in the three months preceding last quarter.

Mavens will once again be under the spotlight come Monday, when Yahoo reports its second-quarter earnings. Another slowdown will be a serious blow to Yahoo and Mayer's legacy as CEO, as Mavens has been one of the few bright spots during her three-year tenure. It could also send Yahoo stock down as the company's other legacy businesses have already been in decline for years now.

"We will be looking closely at the performance of the Mavens segment to determine if Yahoo can offset the declines seen in its traditional advertising segments," RBC Capital Markets writes in a recent note.

Yahoo expects to see more than $1.8 billion in Mavens revenue this year, but RBC says that implies "relatively limited growth." On top of that, RBC forecasts further declines in Yahoo's traditional search and display revenues, which is why it expects revenue, excluding traffic-acquisition costs, to come in below consensus.

Here's what analysts are expecting, according to Yahoo Finance:

• Q2 adjusted earnings per share (EPS): $0.10, down from $0.16 in Q2 2015.
• Q2 Revenue: $1.08 billion, down about 13.4% from $1.24 billion in the year-ago period.

But all this could end up just being a mere sideshow on Monday, which is also reported to be the final deadline for making bids on Yahoo's core business. Companies like Verizon, AT&T, and a bunch of private-equity firms are reported to be in the race for Yahoo's internet business.

It's unclear if Yahoo will announce the buyer, or will decide not to sell itself after all on Monday, but in any case, it could mark the end of Yahoo's long, tumultuous history, according to BGC Partners.

"While we understand investor concern that a transaction does not materialize, we place faith on the new board members to end the process and complete a sale," BGC Partners wrote in a note Friday. "Yahoo is over in our eyes."

SEE ALSO: A top Wall Street analyst believes there's a chance Yahoo won't even be sold

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ExxonMobil bids $2.2 billion for InterOil, may spark bidding war

• Reuters

• 16h
• 318
 

The logo of Exxon Mobil Corporation is shown on a monitor above the floor of the New York Stock Exchange in New York Thomson Reuters

MELBOURNE (Reuters) - ExxonMobil Corp has made a bid worth at least $2.2 billion for Papua New Guinea-focused InterOil Corp , winning the support of InterOil and topping an offer from Oil Search Ltd , Oil Search said on Monday.

ExxonMobil's move pits it against French giant Total SA , which is backing Oil Search's offer with an agreement to buy part of InterOil's stake in the potentially lucrative Elk-Antelope gas field.

Oil Search has at least until July 21 to submit a revised offer and said it was talking to Total about making a higher bid.

"The parties are in active dialogue and have the flexibility to submit a revised offer either during the three day notice period or after InterOil enters into an Arrangement Agreement with ExxonMobil," Oil Search said.

ExxonMobil has offered $45 worth of its own shares for each InterOil share plus a payment of $0.90 per million cubic feet equivalent (mcfe) for resources of more than 6.2 trillion cubic feet at the Elk-Antelope gas field.

That compares with Oil Search's offer of 8.05 of its own shares for every InterOil share, valuing InterOil's shares at $42.66 on Friday's close, plus $0.77 per mcfe for resources of more than 6.2 tcfe at Elk-Antelope.

(Reporting by Sonali Paul; Editing by Richard Pullin)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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SoftBank confirms £24 billion ARM acquisition

• Sam Shead
 

• 9h
• 3,093
 
• 1
 

SoftBank Group Corp. chairman and CEO Masayoshi Son with SoftBank's human-like robot named "Pepper" at the SoftBank World 2015 event in Tokyo on July 30.REUTERS/Yuya Shino

Arm Holdings  $22.05

Arm Holdings

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Disclaimer

Japan's SoftBank has confirmed that it intends to acquire the British chip maker ARM Holdings for £24.3 billion ($32 billion).

ARM said its board would recommend the all-cash deal to shareholders.

SoftBank will pay £17 a share for ARM — 43% more than ARM's closing share price on Friday and 41% more than ARM's all-time-high closing share price.

The deal, first reported by the Financial Times, is believed to be the largest-ever acquisition of a European technology business. It comes just weeks after the UK voted to leave the European Union and will be seen by many as a sign that the UK is still a good place to do business.

Founded in 1990, the Cambridge-based company designs microchips for a variety of smartphones including Apple's iPhone. But its chips also have the potential to be used in an increasing range of other devices that are starting to come online, from cars and kettles to TVs and fridges.

Shares in ARM jumped as much as 44% on Monday morning in the UK after the announcement.

While the multibillion-dollar acquisition deal sounds impressive, many will most likely see it as another UK tech champion taken out by overseas competition.

Investing.com

SoftBank said it intended to "preserve" the ARM organisation, including ARM's existing senior management team, brand, partnership-based business model, and culture.

It added that ARM would remain headquartered in Cambridge after the deal, saying it expected ARM's 3,000-strong workforce to at least double in size over the next five years.

Masayoshi Son, chairman and CEO of SoftBank, said in a statement:

"We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market-leader in its field. ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the 'Internet of Things.'

"This investment also marks our strong commitment to the UK and the competitive advantage provided by the deep pool of science and technology talent in Cambridge. As an integral part of the transaction, we intend to at least double the number of employees employed by ARM in the UK over the next five years.

"SoftBank intends to invest in ARM, support its management team, accelerate its strategy and allow it to fully realise its potential beyond what is possible as a publicly listed company. It is also intended that ARM will remain an independent business within SoftBank, and continue to be headquartered in Cambridge, UK.

"This is one of the most important acquisitions we have ever made, and I expect ARM to be a key pillar of SoftBank's growth strategy going forward."

Stuart Chambers, the chairman of ARM, said: "This is a compelling offer for ARM shareholders, which secures the delivery of future value today and in cash. The board of ARM is reassured that ARM will remain a very significant UK business and will continue to play a key role in the development of new technology."

It was unclear whether the new government would endorse the deal or try to block it on Monday morning.

But Philip Hammond, the UK's new chancellor, welcomed the news, hailing it as the "largest ever investment from Asia into the UK."

"Just three weeks after the referendum decision, it shows that Britain has lost none of its allure to international investors," he said. "Britain is open for business — and open to foreign investment."

He added: "Softbank's decision confirms that Britain remains one of the most attractive destinations globally for investors to create jobs and wealth. And as ARM's founders will testify, this is the greatest place in the world to start and grow a technology business."

Dan Ridsdale, analyst at Edison Investment Research, said: "An increase in inbound M&A was one of the obvious consequences of Brexit and weakened sterling but few expected it to manifest itself so quickly or at so large a scale.

"ARM has always traded at a significant premium rating because it's competitive position in its core market is so secure and because growth is locked in as the company's IP penetrates new domains — such as Automotive and IOT. The company's dominant position and IP business model also mean that there is no obvious cap on how far margins can expand. However there is a psychological limit on how far the multiple can expand on the public markets. There may be some cost synergies, but In paying this multiple, SoftBank is, primarily pricing-in much more of the growth from these new applications that the markets have ever been prepared to do."

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Bank of America beats!

• Portia Crowe
 

• 6h
• 4,329
 
• 2
 

Bank of America Merrill Lynch CEO Brian Moynihan.Chris Keane/ Reuters

Bank of America  $14.17

BAC

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Disclaimer

Bank of America Merrill Lynch on Monday reported second-quarter earnings that beat expectations.

The firm reported earnings per share of $0.36 on revenues of $20.6 billion.

Analysts were expecting earnings per share of $0.33 on revenue of $20.4 billion, according to Bloomberg.

"We had another solid quarter in a challenging environment," CEO Brian Moynihan said in a statement. "We continued to invest in core growth areas and to manage expenses, which were down 3% year-over-year to a level not seen since 2008."

The firm beat expectations on total trading and total banking revenues:

• Total trading revenues, excluding a net debt valuation adjustment, came in at $3.70 billion in Q2 ($3.44 billion expected), up 12% and the high Q2 revenues in five years.
• Fixed income, currency, and commodities, or FICC, revenues were $2.62 billion ($2.34 billion expected) ex-DVA — up 22% from last year. That was driven by stronger global performance in rates and currencies trading, high secondary trading in loans and securitized products, and solid performance in municipal bonds from strong retail demand, according to the firm.
• Equities revenue came in at $1.09 billion ($1.10 billion expected) ex-DVA, down 8% from last year. That was driven by a decline in client activity in Asia.
• Total investment banking revenues were $1.41 billion ($1.34 billion expected), down 8% year-over-year, driven by lower equity issuance activity and partially offset by higher advisory fees.

In the same quarter last year, Bank of America reported earnings per share of $0.45 on revenue of $22.35 billion.

In the first quarter, the firm reported earnings per share of $0.21 on revenue of $19.51 billion.

The big story during the second quarter was the UK's decision in June to leave the European Union, which sent shockwaves through markets and could deter central banks from raising interest rates anytime soon.

In the short term, that could be good news for banks' trading revenues, but the long-term impacts are less rosy. Bank profitability is largely based on the rate at which they make loans. Lower global interest rates, in turn, negatively affect bank bottom lines.

JPMorgan, Citi, and Wells Fargo have already reported second-quarter earnings. Goldman Sachs is set to report Tuesday, and Morgan Stanley on Wednesday.

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Silver is getting smoked

• Oscar Williams-Grut
 

• 9h
• 4,522
 
• 2

Precious metal prices are sliding on Monday after the failure of Turkey's attempted military coup.

Silver and gold jumped on Friday after news that the army had moved against Turkey's President Recep Tayyip Erdogan. Silver and gold are seen as "safe haven" investments — when things are looking bad and you are not sure where to put your money, go for something that will always be valuable.

But the coup quickly fizzled out and, as a result, gold and silver are taking a hit. Silver is bearing the brunt of the fall, dropping to a 10-day low. The precious metal is down 1.16% to $19.93 after just over half an hour of trade in London:Investing.com

Gold is faring better, down just 0.04% to $1,326.85. However, that's close to 2-week lows for the metal. Here is how it looks:Investing.com

Accendo Markets' analyst Mike van Dulken says in an email to clients this morning: "Gold spiked higher amid the attempted coup in Turkey, and has subsequently settled back as it became clear the government was able to remain in control of the country."

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