Netflix stock falls as revenue forecast disappoints investors — Morning Bid

[00:00:00] Speaker 1: today spacex beats earnings estimates and elon musk hints at a merger with tesla plus wild swings [00:00:08] Speaker 2: on wall street on tuesday riff off volatile oil and ai anxiety and streaming giant netflix [00:00:13] Speaker 1: disappoints sending its stock down five percent out of ours this is reuters morning bid bringing you unfiltered market news and analysis straight from the reuters newsroom i'm mike dolan in london [00:00:24] Speaker 2: and i'm anna chemansky it's wednesday october 21st well mike yesterday we got one of our first big headlines out of this earnings season and unsurprisingly it was from elon musk when he hinted that there could be a merger between tesla and spacex calling it a good idea and saying that they were going to be in discussions about this so you know markets certainly seem to think that this was also potentially a very good idea what's the logic behind this tie-up well this has been [00:00:55] Speaker 1: speculated about for some time now i think certainly since the ipo of spacex in june um you know there's been the the two companies intersect quite considerably in areas around ai and that whole um uh robotics and all of those areas that are uh are in both buckets now you know even though you might kind of consider tesla uh as as an automaker the the the rocket side of of of the equation is is are just the two extremes in the middle is all of the other ground about clouds and chips and and and uh infrastructure build out um so there are link-ups that are obvious um what it means for shareholders is of course another question um clearly it's an uh an incentive for uh musk himself it's one of his targets um now he says that it's a good idea but he's not involved uh for um conflicts of interest reasons he's not involved in the decision making so he says uh so there are committees on in in both companies set up to examine this now you know was that the reason for the big jump in the spacex yesterday well its earnings beforehand were actually uh well above forecast so so from that point of view um it didn't need much [00:02:15] Speaker 2: of a lift they weren't just about forecast they were also positive which was a big deal of course [00:02:19] Speaker 1: so uh only a second earnings since since uh listing uh and um it looks like things are going okay um so we have to watch that we have to obviously watch uh tesla's report later this week as well um which um clearly will have musk back on the back on the analyst calls and back on the um on the front pages presumably talking more about what uh what that merger could mean now this uh merger would if you just crudely combine the two um companies would be a market cap of 3.5 trillion so that would put it right back up there in the uh in the very top uh most valuable wall street companies um and you know whether that changes with the terms of a merger that would have to be we'd have to see the details of how that's [00:03:09] Speaker 2: worked out and so the news yesterday from musk came after a pretty volatile day of trading across markets and one of the big drivers was obviously oil at one point we saw brent hit a five month high but then it actually ended up down on the day it's now up a little bit this morning so what were some of the other forces moving things around yesterday yeah it was a really peculiar day actually we ended [00:03:30] Speaker 1: up little changed as as as as is often the case but but there was a wild swing in the crude price it went uh there was a full top to bottom swing of six dollars per barrel from 112 all the way down to one uh 106 and and you know we're just to show where we are we're back above 110 again this morning so so the the the market pointed at reports that there were uh mediation efforts in the iran war and uh that perhaps the pakistanis and the qataris were trying to get tehran back to the table um there were comments from the iranian side later that kind of threw cold water on that more or less saying that it's that it's red lines in any negotiation hadn't changed and that the idea that there were talks already underway uh were false so that's partly why we're back where we started but there's one eye on uh the other big conflict of the moment which is uh the ukraine conflict where uh steve vitkoff uh the us diplomat is in moscow today to meet vladimir putin so um where that goes in terms of possibly ending that war um we we have to wait and and see but but clearly it will make a difference for energy markets as well um in the meantime we had of course the not only just the earnings but we had all the speculation that's been running through the whole data center part of the ai uh story uh which again has been a roller coaster one of the disturbances yesterday morning was as as we as we talked about that ipo from uh a korean data center um at least uh which bombed about 30 percent now today that's back up about 30 percent so you can see the levels of volatility um and nervousness that are are hard to map from [00:05:18] Speaker 2: hour to hour and every day today and there's also news that open ai is trying to really ramp up its financing efforts in advance of the anthropic ipo next month yeah well this is a big question i think with that level of volatility that we just talked about it's certainly intraday volatility um [00:05:30] Speaker 1: you do have to worry a little bit about whether any of the big ipos can get away in this sort of environment you know if people are that uncertain about what happens next uh we just still don't know if we get the anthropic ipo but the reuters report yesterday shows that open ai is pushing ahead with a new financing round probably uh trying to um um again competing with its big rival for for the capital that's out there and that valuation according to our reports uh would put it up around 1.4 trillion uh of of evaluation whenever it decides to come to market now it already is guiding into 2027 uh anthropic still says it might come later this year but again that's a wait and see but that would put both companies almost on par because as you remember from last week a reuters also reported that the two trillion anthropic valuation had been downgraded by insiders to roughly around 1.5 and so then finally one of the [00:06:32] Speaker 2: other big names that reported yesterday was netflix and the share price of netflix has really been struggling all year and that continued it was the slowest revenue growth in three years there was also a disappointing advertising outlook why has netflix been struggling so much well netflix as [00:06:49] Speaker 1: you remember once upon a time uh people cast their minds back used to be part of this fangs grouping remember before we got the magnificent seven it used to be you know facebook uh apple netflix and google right there so so that was one of the leading camps um uh it didn't quite make the magnificent seven and it's kind of drifted away and still uh as a you know as a certainly a market leader it has fallen away and and share prices down quite sharply this year and down five percent overnight after those earnings um there are lots of problems in in the streaming space uh advertising is a problem for netflix they also laid off a lot of workers recently and there's been boardroom reshuffles as well uh so lots of sort out there um and um you know clearly it's it's now in a different position to any of the of the leading ai stocks um and today is not a good moment for it to um [00:07:47] Speaker 2: to to try and recover that for today's recommended read check out mike's column on how smoldering debt risk haunts the french market the link is in the show notes and for more of any of today's stories [00:08:04] Speaker 1: head to reuters.com or the reuters app follow us on your favorite podcast player and if you're on smart speaker just ask for the latest market news from reuters we'll be back tomorrow