Netflix CFO Comments Alarm Investors

The Bank of America media conference was held today. And for those unaware it was happening, comments from Netflix’s chief financial officer (CFO) Spencer Neumann certainly put it on their radars. 👀

At the core of his message was that the Hollywood strikes are bad for business, and the company’s primary focus is getting back to work. For now, it’s managing through the headwind, but the strikes need to move forward for Netflix’s (and the entire media industry’s) business to move forward. 👎

Despite those obvious and lackluster comments about the state of the industry, his view on margins and Netflix’s ad-supported tier threw investors for a major loop.

His operating margin forecast of 18%-20% differed significantly from the consensus view of 22.1%. And although he tried to soften the blow by saying Netflix’s margins are nowhere near their peak, the damage was already done. 😵

As for what’s driving the weakness? Apparently, building an advertising business from scratch is not as easy as the company (and investors) anticipated. Neumann said a ‘healthy proportion’ of accounts moved into their ad-supported tier but that the ad business ‘is not that material yet’ for the company.

This was one of the company’s first times commenting on how that new business was going, and it disappointed, to say the least. As a password-sharing crackdown and price increases push more users to the ad-supported tier, investors had hoped for more optimistic commentary on its revenue impact. But they’ll have to wait. 😟

$NFLX shares fell 5% and closed at their lows. The stock has been stuck below $450 since its pre-earnings release pump failed to hold in mid-July. 👎

Rite Aid Throws In The Towel

Two months after we last spoke about it, pharmacy retailer Rite Aid is back in the news again. Unfortunately, for a similar reason as last time. 👎

In August, the drugstore chain warned it was preparing for bankruptcy as it buckled under mounting debts and lawsuits over its role in the opioid epidemic. Today, the company officially filed for Chapter 11 bankruptcy protection in New Jersey, appointing a new CEO to lead the restructuring plan. 📝

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Lululemon Gets The “Passive” Pop

With Microsoft’s acquisition of Activision Blizzard officially complete, the S&P 500 needs to replace it with another stock. And this time, that stock is Lululemon. 🤩

The athleisure retailer saw shares jump more than 10% today, reacting to Friday’s after-hours news that it would be added to the index before the market opens on October 18, 2023.

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Several Corporate Shakeups

There were several high-profile management changes announced today. We’ve got you covered with a summary below. 📝

First up, the founder and CEO of dating app Bumble, Whitney Wolfe Herd, is planning to step down early next year as she transitions to a new role as executive chair. She’ll be replaced by Lidiane Jones, the current CEO of Salesforce’s cloud-based messaging platform Slack. The announcement came ahead of Bumble’s earnings results, which will be released Tuesday after the bell. Like other pandemic-era companies that came public during the bull market, Bumble’s share price has struggled since day one and is currently sitting at all-time lows. 📉

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“Meme Stock” Trend Misses $SDC

Investors hoping that SmileDirectClub would receive the same “meme stock” treatment as Yellow Corporation, Bed Bath & Beyond, and other bankruptcy filers were left severely disappointed. 😢

Friday after the bell, the dental aligner company announced that it filed for bankruptcy four years after raising $1.35 billion in its initial public offering (IPO). Its Chapter 11 filing and a loan of at least $20 million from the company’s founders will allow it to operate as it tries to reorganize. 

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