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May 25, 2018

Netflix Is Now as Big as Disney - May 25, 2018.MoneyBeat | The Wall Street Journal.

The Wall Street Journal
MoneyBeat

Netflix Is Now as Big as Disney

By Amrith Ramkumar
Morning MoneyBeat is the Journal’s pre-market primer. To receive the newsletter via email, click here.
Market Snap at 05/25/2018 07:47:19 AM ET
S&P 500 Futures -0.02%
2727
DJIA Futures 0.03%
24810
U.S. 10 Year 5/32
2.961%
WSJ Dollar Index 0.15%
87.14
Crude Oil -2.08%
$69.24
Gold 0.05%
$1310.40
Europe
Asia
FTSE 100 0.13%
Nikkei 225 0.06%
DAX 0.82%
Hang Seng -0.56%
CAC 40 0.33%
Shanghai -0.42%

Overnight Developments

  • Stocks mostly pushed higher Friday, soothed by North Korea’s measured response to the U.S. cancellation of a landmark summit. S&P 500 futures pointed to a 0.2% rise at the open.
  • Meanwhile, the Stoxx Europe 600 advanced 0.4%.
  • In Asia, Chinese and South Korean indexes edged down, and Japan’s Nikkei gained 0.1%.
  • The Breakfast Briefing

    Netflix has become as valuable as Walt Disney and Comcast, the latest sign that investors remain faithful to the handful of technology and internet firms that have long powered the broader market.
    The streaming company on Thursday closed with a market value of $151.8 billion, after earlier in the session passing Disney for the first time a day after it eclipsed Comcast. Disney is valued at $152.2 billion and Comcast $145.5 billion. The milestone for Netflix highlights investors’ interest in shares of rapidly growing firms they think will disrupt industries, a trend also seen with Amazon.com and the retail sector.
    Worries about the high concentration of gains—namely in the popular FAANG stocks of Facebook, Amazon, Apple, Netflix and Google parent Alphabet—have continued, with some analysts hoping for returns to be spread more evenly as the nine-year old bull market matures. Some are encouraged by the recent surge in small-cap stocks, but for the most part, the S&P 500’s leaders remain the same.
    “It’s just evidence of way too much popularity in concentrated bets being made by the masses, which historically has always been an indication of risk,” said Jim Paulsen, chief investment strategist at Leuthold Group.
    Netflix has a price-to-earnings ratio of roughly 97 based on projections for profits in the next 12 months, according to FactSet, compared with 14 for Disney and 12 for Comcast. The S&P 500 trades at a multiple of 16.
    Netflix shares have added 7.8% this week after the firm signed former U.S. President Barack Obama and former first lady Michelle Obama to a multiyear deal to produce content. The stock is now up 82% in 2018, making it by far the best performer in the S&P 500. The next best performer, XL Group, has added 58%.
    Meanwhile, shares of Disney and Comcast have fallen this week with Comcast escalating its threat to disrupt Disney’s megadeal to buy the bulk of 21st Century Fox’s entertainment assets.
    Despite worries about higher regulation and lofty valuations, the market’s favorite names have recovered from a recent period of turbulence. Even with Facebook dealing with fake-news and privacy scandals, shares have added 16% in the past month. Apple is up 15% and Amazon has climbed 9.8%.
    “It’s like they’ve been given a warning shot but no one cares,” Mr. Paulsen said. “It really hasn’t dented the tendency of investors to continue to plow into them.”
    Are you worried about gains being concentrated in a few tech and internet stocks? Let the author know your thoughts at amrith.ramkumar@wsj.com.

    Daily Factoid

    On this day in 1977, the first of George Lucas’ blockbuster Star Wars movies hit American theaters.

    Key Events

    U.S. durable goods orders for April, out at 8:30 a.m. ET, are expected to fall 1.5% from the prior month. The headline figures rise and fall with Boeing’s order book. New orders for nondefense capital goods excluding aircraft offer a clearer view of underlying investment trends.
    Fed Chairman Jerome Powell and Bank of England governor Mark Carney speak at a central banking conference in Stockholm, Sweden, at 9:20 a.m.
    The University of Michigan’s consumer sentiment index for May is expected to hold steady at 98.8, reflecting a broadly upbeat assessment of the economy. The data are released at 10 a.m.
    The Dallas Fed is holding a conference on technology-enabled disruption. Speakers include the Dallas Fed’s Robert Kaplan, Atlanta Fed’s Raphael Bostic and Chicago Fed’s Charles Evans at 11:45 a.m., and Mr. Kaplan again at 2:30 p.m.
    The Baker-Hughes Rig Count is released at 1 p.m.

    Stocks to Watch

    Zoe's Kitchen—Down 28.8%: The fast-casual restaurant chain said it was starting to take "strategic actions" to improve operations and financial performance, including slowing new unit growth and evaluating underperforming restaurants.
    Gap—Down 8.4%: Gap posted a smaller-than-expected increase in quarterly same-store sales, and the parent of brands including Old Navy also reported weaker-than-expected earnings.
    Autodesk—Down 4.6%: Autodesk affirmed its full-year profit and revenue forecasts but lowered its billings guidance after the software firm topped expectations in the first quarter.
    Nutanix—Down 1.7%: The cloud computing firm posted a larger-than-expected loss in the most recent quarter, though it beat on revenue.

    Number of the Day

    88%
    The share of corporate bond issuers in China that have a domestic credit rating of AA or higher—grades that big rating agencies typically reserve for only the safest and most financially-sound companies. S&P Global, which is set to start a ratings business in China, will have to adjust to a market where most issuers are used to lofty grades.

    Must Reads

    What’s the best-paying industry? It’s not banking. More than 100 companies in the S&P 500—many in biotech and energy— routinely paid employees $100,000 or more last year. 
    A U.S. short seller has intensified its attack on Samsonite International after the luggage maker’s chief executive admitted he never graduated with a Ph.D. even though some corporate filings and regulatory documents included the ‘‘Dr.’’ designation. 
    The EU’s new privacy law takes effect today, and is forcing hundreds of thousands of companies to change how they gather and handle information. The law, called GDPR, adds to old EU privacy laws with new rights for individuals and responsibilities for companies. 
    President Trump’s legal team is in an intense phase of negotiations over an interview with special counsel Robert Mueller—just as they were in January, when the two sides nearly agreed on specifics for a date that month at Camp David.
    Ireland is voting today on whether to repeal an abortion ban from the nation’s constitution, a sweeping change that would further dilute church influence in a country steadily moving away from its Catholic roots.