Retailers are looking at a potential record-setting back-to-school shopping season. Here’s how you can get stocked up for less.
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Netflix (NFLX) stock is having a tough year. After its share price peaked at $691.69 on November 17, 2021, the company’s valuation has tumbled, bouncing along at levels below $200 a share since early May.
The streaming pioneer faces increasing competition. While numerous alternative platforms, big and small, have eroded its subscriber base, it still holds the top spot in terms of customers on its platform. Now, similar to entertainment giant Disney (DIS), the company is evaluating how to introduce an ad-supported tier.
The move is intended to address the leaks of its subscriber base by providing a low-cost option to price-sensitive viewers. However, the new revenue structure will require amendments to programming contracts so that the company can include content on the new ad-supported tier. This is likely to result in rising costs for the rights to stream these shows, which market observers estimate will be a markup of 15-30%. Time will tell how the seesaw effect of the strategic shift will impact the company’s bottom line.
Netflix is currently negotiating contracts with Warner Brothers Discovery (WBD), creator of You; Universal (CMCSA), which makes Russian Doll; and Sony (SONY) producer of “The Crown.”
The streaming giant wants to launch the new ad-supported tier by the fourth quarter of this year. It has yet to elaborate on the details, such as how the ads will be displayed, the difference in content between the commercial-free and less expensive tier, or the pricing structure.
Historically, studio executives have been dissatisfied regarding the lack of transparency Netflix has provided about viewership. The value to marketers could potentially be diminished if subscriber data remains limited.
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The US Labor Department reported June’s CPI checked in at 9.1% over the previous 12-month period. Prices are rising at their fastest pace since November 1981. For the better part of this year, the Consumer Price Index has been at or above a 40-year high.
Meanwhile, core CPI, which strips out food and energy prices, rose 5.9% year-over-year in June. May’s number advanced 6.0% for the 12-month period. Still, consumers continue to face price increases on a broad number of items. Shelter, food, and gasoline are seeing the most significant jumps. Gas rose 11.2% in June, month-over-month.
Some publicly traded companies are perceived to be more or less sensitive to rising prices. This is reflected in the performance of their stock, particularly as reports on inflation are published. After June’s CPI came in hotter than expected, a number of companies saw their share prices affected.
Large banks such as JPMorgan Chase & Co. (JPM), Bank of America (BAC), and Wells Fargo (WFC) all traded lower following the CPI report. One potential reason is investors know banks are typically tied to the broader economy’s performance. With inflation still running hot, the Federal Reserve will likely keep hiking rates, potentially tipping the economy into a recession, which could negatively impact bank stocks.
After May’s CPI came in at 8.6%, the Federal Reserve enacted a 75-basis-point hike at its June meeting. This latest report is likely to keep the central bank on track to raise its target rate by another 0.75 percentage point at the end of the month. Fed Chair Jerome Powell has indicated rate hikes won’t be suspended or even slowed down unless there’s clear evidence prices have started to cool off.
Consumers have seen price breaks as a result of inflation in some cases. For example, Target (TGT) is offering discounts in a bid to move inventory. That said, the price of home goods and clothing rose last month. On the flipside, the growth in prices for both used and new cars eased up a bit. The Federal Reserve wants to execute a “soft landing” while fighting inflation if possible, meaning any downward pressure on prices is likely to take a while.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
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Bob Uecker, also known as “Mr. Baseball,” yells out his signature phrase whenever a player hits a home run, and that phrase is: “Get up, get up, get outta here, gone!” Yesterday, when the headline CPI print came in at +9.1% for June, that’s the phrase that played in my head.
Many have made the point that there are multiple ways to look at inflation data, and that the month-over-month numbers are actually more indicative of the trend. I agree. In fact, I think the Fed will be satisfied with their “front-loading” of hikes when they see three consecutive months of month-over-month declines in CPI, and will feel comfortable reducing the size of each hike.
Unfortunately for now, the monthly numbers are still hot, too. At this point, the earliest we will find out about a three month cooling in the data is October. That’s a long time for markets to wait-and-see. But I don’t think we have to wait that long as investors.
No matter what, base runners have to cross home plate in order. In this situation, the market is on third base, followed by earnings on second base, and the economy on first.
The difference is, home plate is when they bottom, not score. In any event, the market bottoms first and we’ve already made a decent amount of progress in that direction. What I believe we’ll see now is a hit to earnings and the message from business leaders to take a decidedly cautious and less optimistic tone.
You could even argue that inflation data coming out right before the kick-off of earnings season gives companies air cover to be even more negative. And there is definitely a relationship between business confidence and CPI — they generally move in opposite directions.
Inflation has taken a bite out of stock and bond markets — and the bite may not be over quite yet. As we await the Q2 earnings data, we also await the Fed’s next move on July 28th, which could be a big one. I view these next two Fed meetings as the ones that will convince markets once and for all whether or not we could see a classic recession in the next 12 months. I’m not including the current possibility of a “technical” recession in the first half of this year, because it hasn’t come with enough economic cooling to stop inflation. I’m talking about a recession where unemployment rises, manufacturing data contracts, the consumer stops spending, and inflation consequently falls. In this case, the Fed would probably have to consider cutting rates, but that’s a different note for a different week.
Here’s the bottom line: If markets are going to be convinced soon that a recession is coming in the next 12 months, that means the third base runner is getting closer to home plate. Before the end of the month we could get negative earnings guidance, a 75-100bp hike from the Fed, and a negative Q2 GDP print. This scenario could prove to be bad news for markets, but good news for buyers. Don’t swing for the fences, but I do think we have to start swinging the bat before summer is over.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Liz Young Thomas is a Registered Representative of SoFi Securities and Investment Advisor Representative of SoFi Wealth. Her ADV 2B is available at www.sofi.com/legal/adv.
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