>>> Europe : Brokers Upgrades & Downgrades - 20th April 2022

>>> Up
* Akastor Raised to Buy at ABG; PT 12 kroner
* Avis Budget Raised to Equal-Weight at Barclays; PT $245
* DNB Bank Raised to Equal-Weight at Morgan Stanley; PT 225 kroner
* Intercos Raised to Buy at Jefferies; PT 16 euros
* Leonardo Raised to Overweight at Morgan Stanley; PT 11.80 euros
* Randstad Raised to Neutral at JPMorgan; PT 55 euros
* Roche Raised to Hold at Intron Health; PT 350 Swiss francs
* SSE PT Raised to 2,200 pence from 1,900 pence at Morgan Stanley

>>> Down
* Dassault Aviation Cut to Equal-Weight at Morgan Stanley
* Leifheit Cut to Hold at Berenberg; PT 26.20 euros
* Netflix Cut to Neutral at Piper Sandler; PT $293
* Netflix Cut to Sell at Pivotal; PT $235
* Novo Nordisk Cut to Hold at Intron Health
* PRS REIT Cut to Hold at Berenberg; PT 115 pence
* Rheinmetall Cut to Equal-Weight at Morgan Stanley; PT 211 euros
* Synthomer Cut to Hold at HSBC; PT 310 pence
* Thales Cut to Equal-Weight at Morgan Stanley; PT 110 euros

>>> Initiation
* Amazon Assumed Buy at Citi; PT $4,100
* Cint Rated New Hold at Handelsbanken
* DoorDash Rated New Buy at Citi; PT $155
* Expedia Assumed Neutral at Citi; PT $200
* Meta Platforms Assumed Buy at Citi; PT $300
* Snap Assumed Buy at Citi; PT $50
* Vitesco Rated New Neutral at Oddo BHF; PT 40 euros
* Xilam Animation Rated New Outperform at Oddo BHF; PT 53 euros

>>> Call
* JPMorgan’s Kolanovic Says Time Is Right to Buy Growth and Value
* L’Oreal’s 1Q Beat May Be Not Enough to Move the Shares, RBC Says
* Teleperformance Beat on Solid Growth, Covid Boost: Deutsche Bank

>>> US After Hours Summary: NFLX -26% falls big on earnings as net subs fel for

After Hours Summary: NFLX -26% falls big on earnings as net subs fel for first time in a decade; dragging down many streaming names; IBM +1.8% up bit on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: FULT +4.8%, WTFC +3.7%, OMC +3.6%, IBM +1.8%, MATX +0.9%, FHN +0.4%, REXR +0.4%, LRN +0.1%

Companies trading higher in after hours in reaction to news: GTE +5% (announces corporate update), RGTI +1.7% (COO departs), BODY +1.1% (CFO to depart), RKLB +0.9% (selected by HawkEye 360 to launch three Electron missions), SLCA +0.7% (to increase some prices), FTI +0.2% (awarded significant integrated EPCI contract by Wintershall Dea)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: NFLX -26%, HLLY -9.8% (guides Q1 net revs above consensus; also 6.5 mln share offering by selling stockholder), PACW -2.9%, IBKR -2.1%, MRTN -0.1%

Companies trading lower in after hours in reaction to news: ROKU -5.9% (in sympathy with weak NFLX earnings), PARA -5.6% (in sympathy with weak NFLX earnings), DIS -4.8% (in sympathy with weak NFLX earnings), TEVA -4.3% (FDA issues response letter for for TV-46000/mdc-IRM), FUBO -3.8% (in sympathy with weak NFLX earnings), WBD -3.8% (in sympathy with weak NFLX earnings), AMZN -1.3% (in sympathy with weak NFLX earnings), FISV -1.3% (FISV and EFX announce data partnership), TBK -0.4% (announces executive mgmt reorganization), LMT -0.3% (awarded $400 mln Navy contract), EFX -0.1% (FISV and EFX announce data partnership)

>>> US Close Dow +1,45% S&P +1,61% Nasdaq +2,15% Russell +2,04%

Closing Stock Market Summary

The S&P 500 rose 1.6% on Tuesday in a relatively broad-based advance. The Dow Jones Industrial Average (+1.5%) kept pace with the benchmark index while the Nasdaq Composite (+2.2%) and Russell 2000 (+2.0%) outperformed with roughly 2% gains.

Ten of the 11 S&P 500 sectors closed higher with gains ranging from 0.6% (utilities) to 2.9% (consumer discretionary). The exception was the energy sector (-1.0%) amid pronounced weakness in oil ($102.07/bbl, -6.11, -5.7%) and natural gas ($7.17/MMBtu, -0.63, -8.0%) prices. 

The broader gains helped the benchmark index close back above its 50-day moving average (4416) after a flat open. 

The muted start transpired amid another increase in interest rates, lackluster reactions to earnings reports, and a view from St. Louis Fed President Bullard (FOMC voter) that the fed funds rate should be at 3.50% by the end of the year.

The fed-funds-sensitive 2-yr yield rose 11 basis points to 2.58% while the 10-yr yield rose five basis points to 2.91% after flirting with 1.93% in the wake of better-than-expected housing starts and building permits data for March. The U.S. Dollar Index increased 0.2% to 101.00. 

The stock market had plenty of reasons to stay cautious, but the counterintuitive price action suggested the rally keyed off a contrarian mindset. To be fair, the lower oil prices likely helped, as did less-hawkish commentary from Chicago Fed President Evans and Atlanta Fed President Bostic, both of whom are not FOMC voters this year. 

Shares of Johnson & Johnson (JNJ 183.08, +5.42, +3.1%) hit a fresh all-time high, putting the focus on the company's EPS beat instead of its below-consensus FY22 EPS guidance. Fellow Dow component Travelers (TRV 176.16, -9.06, -4.9%) fell 5% despite beating top and bottom-line estimates. 

Separately, airline stocks extended their recent outperformance following the removal of the mask mandate for airline travel and public transportation. The U.S. Global Jets ETF (JETS 22.11, +0.60) rose 2.8% today. 

Reviewing Tuesday's economic data:

  • Housing starts increased 0.3% month-over-month in March to a seasonally adjusted annual rate of 1.793 million units (consensus 1.750 million) while permits increased 0.4% month-over-month to a seasonally adjusted annual rate of 1.873 million.
    • The key takeaway from the report is that the upside was driven entirely by multi-unit activity. Starts for single-family homes and permits for single-family homes were down 1.7% and 4.8% month-over-month, respectively, reflecting the challenges builders are facing with supply chain issues, rising costs for land and labor, and the dent in homebuyer confidence and affordability that has stemmed from rising mortgage rates.

Looking ahead, investors will receive Existing Home Sales for March, the April Beige Book, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Dow Jones Industrial Average -3.9% YTD
  • S&P 500 -6.4% YTD
  • Russell 2000 -9.6% YTD
  • Nasdaq Composite -13.0% YTD

WSJ : Goldman’s CEO Is Paying Himself Like a Private-Equity Chief

Goldman’s CEO Is Paying Himself Like a Private-Equity Chief
David Solomon and his top deputies will get a slice of profits from the bank’s private-investment funds

David Solomon is giving himself a raise.

The Goldman Sachs Group Inc. chief executive and a tight circle of lieutenants are taking a cut of profits from the firm’s private investment funds, according to people familiar with the plans. The perk could be worth hundreds of millions of dollars over the next several years to those executives, the people said, multiples of their annual pay depending on how those funds do.

The perk risks angering both shareholders and the Goldman fund managers out of whose pockets the money will come.

Wall Street executives are enormously wealthy by almost any measure. Mr. Solomon made $35 million last year, in line with the CEOs of other big U.S. banks. But when new fortunes are being minted in technology, cryptocurrencies and NFTs, their paydays are starting to pale in comparison.

They are being outshone even in their own backyard by private-equity firms and hedge funds, whose executives have ridden hot markets over the past few years to huge pay packages. KKR’s co-CEOs were paid more than $500 million last year. Mr. Solomon’s 2021 pay was half of what his predecessor, Lloyd Blankfein, made at his pre-2008 peak.

Unique among banks, Goldman is a big player in private investing. The firm has $426 billion of its own money and that of clients invested in corporate buyouts, loans, real estate and stakes in other investment funds. It is in the middle of another big fundraising push.

In the past, the profits from those investments—known in the industry as carried interest—were split evenly between Goldman and the executives actually managing the funds, a common enough setup that ensures everyone has some skin in the game.

Going forward those executives will receive just 35%, the people said. Ten percent will be shared with Goldman’s roughly 400 partners, part of a push to restore the prestige of a title that once guaranteed stratospheric wealth but has dimmed. Five percent will go into a pool for Mr. Solomon and his closest deputies, the people said—fewer than a dozen people.

This isn’t the first time Mr. Solomon has gotten creative in efforts to juice his pay. Late last year he sought to secure a personal share of the profits from blank-check companies Goldman was planning to launch, according to people familiar with the matter. That attempt, earlier reported by Bloomberg, delayed the vehicles’ launch long enough that the SPAC market fizzled. They haven’t gone forward.

Goldman is already facing potential backlash on executive pay. Glass Lewis, which advises big shareholders on corporate-governance matters, is recommending a nonbinding vote against the bank’s pay policies at its annual meeting in two weeks. Glass Lewis took issue with one-time stock grants doled out last fall of as much as $30 million for Mr. Solomon and as much as $20 million for his deputy, John Waldron.

Another shareholder adviser, ISS, recommended a vote in favor.

WSJ : Netflix Loses Subscribers Amid Growing Competition, Account Sharing

Netflix Loses Subscribers Amid Growing Competition, Account Sharing
Streaming giant expects to lose two million subscribers in the spring quarter

Netflix Inc. NFLX 3.18% lost subscribers globally in the first quarter and expects to lose even more this spring, as the streaming giant grapples with growing competition from rival services and rampant account sharing among its customers.

The company ended the first quarter with 200,000 fewer subscribers than it had in the fourth, missing on its own projection of adding 2.5 million customers in the period. Netflix said it expected to lose two million global subscribers in the current quarter.

Netflix shares fell 17% in after-hours trading. Through Tuesday’s close, the stock had declined by more than 40% so far this year.

Netflix blamed password sharing among its members and increasing competition in the streaming space for creating what it called “revenue growth headwinds.” Netflix estimated that besides its almost 222 million paying households, the service is being shared with an additional 100 million homes including 30 million alone in the U.S. and Canada alone.

“It’s harder to grow membership in many markets,” the company said in its letter to investors. Netflix said it is testing password sharing subscription modes that it believes will allow it to monetize sharing and build revenue.

The streaming giant said revenue growth has “slowed considerably” and warned that the gains Netflix made during the Covid-19 pandemic hid the fault lines that have emerged in its business over the past few years.

“Covid clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the Covid pull forward.” the company said.

Besides competition and password sharing, the other reasons Netflix cited as causes for slowing growth include a slower-than-expected adoption of smart TVs, data costs and world events including increasing inflation, the effects of Russia’s invasion of the Ukraine and continuing disruption from the pandemic.

Netflix said shutting down its service in Russia also resulted in the loss of 700,000 subscribers.

Netflix isn’t the only streaming service facing challenges. Walt Disney Co. ’s Disney+ is adding a lower-priced advertising supported version of the platform later this year in an attempt to boost subscribers.

While Netflix has no plans to launch an advertiser-supported tier, at a recent investment conference its chief operating officer, Spencer Neumann, said, “never say never.”

With growth that has been the envy of the industry for more than a decade, Netflix is seen as a barometer for streaming. That it is now seeing growth slowing, there is concern that the direct-to-consumer streaming business is about to hit some speed bumps.

Netflix said its plan to right itself will be heavily focused on improving the quality of its programming and the recommendations that platform provides to its customers to keep them engaged in the content and on the service. Netflix already spends more than any other entertainment provider with a programming budget that is expected to surpass more than $20 billion this year.

The decline brought Netflix’s paid global subscriber base to 221.6 million, down from 221.8 million in the prior quarter. Revenue rose roughly 10% to $7.87 billion, below analysts’ projections of $7.93 billion. The company’s quarterly profit was $1.6 billion, down from $1.71 billion a year earlier.

FT : Big buyout groups rule out writing equity cheque for Musk’s $43bn Twitter

Big buyout groups rule out writing equity cheque for Musk’s $43bn Twitter bid
Groups with financial firepower to finance takeover are concerned about profitability of social media service

Elon Musk’s $43bn bid to take Twitter private is struggling to draw interest from several large institutions with the financial firepower to pull off such a large leveraged buyout in part due to concerns over whether the social media group can become more profitable.

Blackstone Group, Vista Equity Partners and Brookfield Asset Management are among some of the biggest private equity industry groups who have decided against providing an equity cheque for a buyout, people familiar with their thinking told the Financial Times.

Musk or any other bidder wanting to take Twitter private would need well over $20bn of new equity to complete the deal, with the remainder of the financing coming from debt or the participation of existing investors who would swap their publicly traded stakes for an interest in the private company.

Musk’s gambit has tantalised many Wall Street groups with the possibility of participating in one of the most prominent tech buyouts of recent times. The potential for a mega-deal that would generate hundreds of millions of dollars in fees has meant that virtually every big bank and financier is closely studying the rationale for a transaction.

But the lukewarm reception to a Twitter buyout from some of the most influential private equity firms shows that the outlook for the social media group divides opinion. That is particularly true as private equity sponsors weigh working with billionaire Musk, the founder of Tesla who has built a stake of over 9 per cent in Twitter, and launched an unsolicited takeover bid.

The Wall Street Journal reported on Monday that Apollo Global was considering investing along with Musk in a potential take-private of Twitter.

However, according to multiple people briefed on the discussions, Apollo is only considering providing debt or preferred equity funding, rather than an equity cheque. The people said the chances of even that happening were slim given scarce details on how Musk plans to run the company more profitably.

Bank of America, Royal Bank of Canada and Deutsche Bank are also among the lenders studying whether it is feasible to provide debt financing for a deal, but no decision has yet been taken, according to people briefed on their thinking.

The main concern for groups interested in financing a Musk-led deal is that Twitter does not generate enough cash to service the massive amount of debt he would need to take on to the company’s balance sheet to complete a transaction.

Additionally, many potential lenders are concerned about Musk’s desire to promote greater freedom of expression on the platform, which risks hurting Twitter’s business by making it less attractive to advertisers, the company’s main source of revenue.

Blackstone Group, the world’s largest private equity firm, is not seriously considering providing debt funding for a bid until a financial sponsor steps forward with an offer, the people said.

Even if such a bid materialises, Blackstone is sceptical about the sheer size of a Twitter takeover and Musk’s participation, in particular. Blackstone would instead be more comfortable considering financing a deal led by a consortium of private equity firms.

Software buyout firm Thoma Bravo has also started scrutinising a bid for Twitter, believing that the San Francisco-based company has not reached its full potential and can still grow its revenues, according to people briefed on the matter. But it has not yet decided on its next move.

Silver Lake and Elliott Management, two of the technology industry’s most influential investors, acquired large stakes in Twitter in the spring of 2020 and have been supportive of Parag Agrawal, chief executive, who took over from co-founder Jack Dorsey in November.

Both firms have not commented on whether they would pursue a takeover or how they view Musk’s bid.

Last week, Twitter’s board of directors, which includes a Silver Lake representative, unanimously agreed to implement a so-called poison pill, a manoeuvre designed to block Musk from building a greater than 15 per cent stake in the open market.

Despite Twitter’s defensive move, the maverick entrepreneur is still considering tendering an offer to all shareholders in an effort to put pressure on the social media company’s board to accept his bid, according to one person advising him.