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Netflix: Recession May Lead to Incremental Churn, BofA Securities Slashes PT

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© Reuters. Netflix (NFLX): Recession May Lead to Incremental Churn, BofA Securities Slashes PT

By Vlad Schepkov

Nat Schindler of BofA Securities slashed his price target on Netflix (NASDAQ:NFLX) to $196 from $240 Thursday while reiterating an “Underperform” rating on the stock, citing “worsening macro outlook and churn.”

While the analyst attributes most of the company’s current misfortunes to one of two key factors:

  1. The “domestic subscription run up for Netflix seems to be at or very near its peak” – meaning NFLX is simply running out of organic growth capacity.
  2. Competition has been growing, getting more creative and aggressive with “more compelling competitor value propositions” – creating pricing and consequential margin pressures.

… he believes Netflix is yet to fully realize the third consequence of the above trends – customer churn.

Recent customer surveys by BofA Securities show that as the competition has grown over the past few years, customers have generally “subscribed to more services on the whole while still keeping Netflix.”

In the analyst’s view, that may all be about to change: “If a recession were to take hold, however, it wouldn’t be surprising to see incremental churn” – with consumers electing to cut down on the number of services they have.

Worse yet, he believes if customers were to pick and choose, the shift would not be in Netflix’s favor: “ad-tiering could serve as a way for consumers across all income brackets to extend their streaming budget by trading down to subscribe to an additional service, benefiting Netflix’s competitors much more than Netflix itself” – posing an additional threat for the beleaguered company.

Overall, BofA Securities cites “current market conditions, rising costs of content production, in addition to several potential costly initiatives,” as key reasons for the price target slash.

Netflix, once Wall Street’s biggest darling and one of the best-performing stocks in history, has had it rough in 2022 – the loss of 200K subscribers in Q1, the company’s first negative subscriber count reading in 10 years, has sent the shares down 70% YTD.

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Morgan Stanley will cover U.S. employees’ travel for abortion services -source

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© Reuters. The logo for Morgan Stanley is seen on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 3, 2021. REUTERS/Andrew Kelly

NEW YORK (Reuters) – Morgan Stanley (NYSE:MS) joined other large U.S. banks expanding its healthcare coverage to include travel costs for employees seeking abortion services if they are not locally available, according to a source familiar with the matter.

It is the latest financial company to expand healthcare policies to cover these costs following the Supreme Court’s decision Friday to overturn the 1973 Roe v. Wade precedent that had legalized abortion in the United States. [L1N2YB1AQ]

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Morgan Stanley Has Continued Conviction on Rockwell Automation’s Capex Cycle

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© Reuters. Morgan Stanley Has Continued Conviction On Rockwell Automation’s (ROK) Capex Cycle

By Sam Boughedda

Speaking about Rockwell Automation (NYSE:ROK) after a meeting with its management, Morgan Stanley analyst Joshua Pokrzywinski said in a note to clients that they came away with “continued conviction in a generational capex cycle” that they expect to remain resilient despite a slowing macro environment and choppy supply chain.

“We expect orders to remain healthy as other verticals, both consumer and other short-cycle industrial markets, contend with demand destruction from rising rates and persistent inflation,” wrote Pokrzywinski.

The analyst, who has an Overweight rating and trimmed his price target to $260 (from $277) on the stock, added that at the same time, the pace of improvement on supply chains, particularly for semiconductors appears to be “at best a game of inches for ROK.”

As a result, Morgan Stanley is “reducing FY22 estimates, particularly the seasonal ramp in F4Q22 due to supply constraints.”

“Given the magnitude of the sell-off and persistent strength over the next 2-3 years, we see ROK risk/reward as favorable acknowledging consensus is high for the next 2 quarters.”

Rockwell Automation closed Monday’s session just 0.12% higher.

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U.S. stocks lower at close of trade; Dow Jones Industrial Average down 0.20%

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© Reuters U.S. stocks lower at close of trade; Dow Jones Industrial Average down 0.20%

Investing.com – U.S. stocks were lower after the close on Monday, as losses in the Consumer Services, Technology and Basic Materials sectors led shares lower.

At the close in NYSE, the Dow Jones Industrial Average declined 0.20%, while the S&P 500 index declined 0.30%, and the NASDAQ Composite index lost 0.72%.

The best performers of the session on the Dow Jones Industrial Average were UnitedHealth Group Incorporated (NYSE:UNH), which rose 2.02% or 10.02 points to trade at 505.66 at the close. Meanwhile, Chevron Corp (NYSE:CVX) added 1.93% or 2.80 points to end at 147.57 and Merck & Company Inc (NYSE:MRK) was up 1.37% or 1.28 points to 94.41 in late trade.

The worst performers of the session were Salesforce.com Inc (NYSE:CRM), which fell 2.48% or 4.61 points to trade at 181.31 at the close. Nike Inc (NYSE:NKE) declined 2.13% or 2.41 points to end at 110.50 and Boeing Co (NYSE:BA) was down 1.99% or 2.81 points to 138.72.

The top performers on the S&P 500 were Valero Energy Corporation (NYSE:VLO) which rose 8.00% to 112.24, Devon Energy Corporation (NYSE:DVN) which was up 7.48% to settle at 57.79 and Hess Corporation (NYSE:HES) which gained 5.18% to close at 106.96.

The worst performers were Etsy Inc (NASDAQ:ETSY) which was down 3.55% to 80.65 in late trade, Electronic Arts Inc (NASDAQ:EA) which lost 3.53% to settle at 125.60 and Autodesk Inc (NASDAQ:ADSK) which was down 3.43% to 185.87 at the close.

The top performers on the NASDAQ Composite were Evofem Biosciences Inc (NASDAQ:EVFM) which rose 187.71% to 1.07, Acutus Medical Inc (NASDAQ:AFIB) which was up 87.59% to settle at 1.01 and Epizyme Inc (NASDAQ:EPZM) which gained 55.14% to close at 1.48.

The worst performers were Powerbridge Technologies Co Ltd (NASDAQ:PBTS) which was down 34.95% to 0.67 in late trade, Borqs Technologies Inc (NASDAQ:BRQS) which lost 24.38% to settle at 2.15 and Enochian Biosciences Inc (NASDAQ:ENOB) which was down 21.92% to 2.60 at the close.

Rising stocks outnumbered declining ones on the New York Stock Exchange by 1738 to 1413 and 116 ended unchanged; on the Nasdaq Stock Exchange, 1948 rose and 1867 declined, while 175 ended unchanged.

Shares in Borqs Technologies Inc (NASDAQ:BRQS) fell to 52-week lows; down 24.38% or 0.69 to 2.15. Shares in Enochian Biosciences Inc (NASDAQ:ENOB) fell to 52-week lows; losing 21.92% or 0.73 to 2.60.

The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 1.03% to 26.95.

Gold Futures for August delivery was down 0.38% or 6.95 to $1,823.35 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in August rose 1.92% or 2.07 to hit $109.69 a barrel, while the September Brent oil contract rose 1.80% or 1.96 to trade at $111.06 a barrel.

EUR/USD was unchanged 0.27% to 1.06, while USD/JPY rose 0.22% to 135.46.

The US Dollar Index Futures was down 0.26% at 103.69.

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