Netflix exceeds expectations

LOCAL MARKET COMMENTARY

On the stock market, both the Top 40 index and the All Share index slipped by 0.15%, ending the day at 73,352 and 80,334 points, respectively. The South African Reserve Bank kept its main interest rate unchanged at 8.25% for the seventh consecutive meeting, but the decision was not unanimous, with four members in favour of maintaining the rate and two supporting a 25-basis-point cut. The SARB also lowered its headline inflation forecast for 2024 from 5.1% to 4.9%. Additionally, the African Development Bank (AfDB) approved a $1 billion loan for South Africa's Transnet to support the logistics firm's recovery plan.

EUROPEAN MARKET COMMENTARY

European shares ended lower on Thursday as a selloff in chip stocks offset gains from positive corporate updates. Investors also reacted to the European Central Bank's decision to keep lending rates steady. The STOXX 600 index declined, marking its fourth consecutive session of losses. The ECB's decision to leave interest rates unchanged was anticipated, but the central bank indicated that the outcome of September's meeting was uncertain, given its downgraded outlook for the euro zone's economy and its expectation that inflation would continue to decline.

US MARKET COMMENTARY

U.S. stocks tumbled on Thursday, reversing early gains as investors shifted away from expensive megacap growth stocks amid the intensifying second-quarter earnings season. All three major U.S. stock indexes fell, with the Dow Jones Industrial Average experiencing the largest drop, ending a streak of record closing highs. This sell-off followed the Nasdaq's biggest one-day drop since December 2022 and the chip sector's steepest daily percentage decline since the March 2020 pandemic panic. Additionally, higher-than-expected initial jobless claims indicated a weakening labour market.

ASIA MARKET COMMENTARY

Asia-Pacific markets fell this morning as traders anticipated further rotation out of tech stocks following Thursday's plunge in chip-related stocks across Taiwan, Japan, and South Korea. Japan's inflation rate for June remained steady at 2.8%, with core inflation (excluding fresh food) rising slightly to 2.6% from 2.5%, although this was below the 2.7% expected by economists. In China, investors were disappointed by the lack of detailed implementation steps for achieving the country's economic policy goals announced at a closely watched plenum on Thursday.

CURRENCY MARKET COMMENTARY

South Africa's rand remained stable on Thursday after the South African Reserve Bank decided to keep its main interest rate unchanged for the seventh consecutive meeting. The dollar remained steady this morning and was set to break a two-week losing streak. This stability came as U.S. labour and manufacturing data left traders speculating about the timing and extent of potential Federal Reserve rate cuts this year.

COMMODITY MARKET COMMENTARY

Gold prices slipped this morning but remained on track for a fourth consecutive weekly gain, driven by expectations that the Federal Reserve will cut interest rates in September, enhancing bullion's appeal. Meanwhile, oil prices also fell this morning, heading for a second weekly decline, as mixed economic signals weighed on investor sentiment and strengthened the dollar.

Anglo American Platinum Limited (AMS) +1.47%

Anglo American Platinum will release its results for the six months ended June 30, 2024, on July 22, 2024. Shareholders are advised that headline earnings and headline earnings per share (HEPS) are expected to decrease by 15% to 25% compared to the same period in 2023. Headline earnings are anticipated to be between R5.9 billion and R6.7 billion, down from R7.9 billion, with HEPS between 2,242 cents and 2,546 cents per share, compared to 2,984 cents per share in 2023. Basic earnings and earnings per share (EPS) are also expected to drop by 15% to 25%, with basic earnings between R5.8 billion and R6.6 billion, down from R7.7 billion, and EPS between 2,204 cents and 2,508 cents per share, compared to 2,940 cents per share in 2023. The decline in earnings is primarily due to a 24% lower realised ZAR PGM basket price, driven by significant decreases in palladium and rhodium prices, which fell by 34% and 49%, respectively. However, this was partially offset by a 9% increase in PGM sales volumes and cost savings from the company's cost-out program.

Kumba Iron Ore Limited (KIO) -1.90%

Kumba Iron Ore's performance for the second quarter of 2024 showed mixed results. Iron ore waste decreased by 26% year-over-year but increased by 2% quarter-over-quarter, totalling 88,457 kt for the first half of 2024, down 20% from the same period in 2023. Iron ore production was stable, with a slight 1% decrease year-over-year and quarter-over-quarter, reaching 18,459 kt for H1 2024, a 2% decline from H1 2023. Iron ore sales saw a modest 1% increase year-over-year and a 12% rise quarter-over-quarter, totalling 18,089 kt for H1 2024, a 5% drop from H1 2023. Kumba's headline earnings for H1 2024 are expected to be between R6,848 million and R7,348 million, a decrease of 24% to 29% from the previous period. Headline earnings per share (HEPS) are anticipated to be between R21.34 and R22.89, down from R30.04 in the previous period. Basic earnings are projected to be between R6,847 million and R7,347 million, with earnings per share (EPS) between R21.33 and R22.89, both reflecting a 24% to 29% decline from the comparative period. Full financial results for the six months ended June 30, 2024, will be released on July 23, 2024.

Netflix Inc. (NFLX) -0.68%

Netflix reported strong second-quarter earnings on Thursday, highlighting its leading position in the streaming market by adding more global subscribers and seeing significant growth in its advertising business. The ad-supported memberships grew by 34% compared to the same quarter last year. For the quarter ending June 30, Netflix's earnings per share were $4.88, exceeding the $4.74 expected, and revenue was $9.56 billion, slightly above the $9.53 billion expected. Total global paid memberships reached 277.65 million, surpassing the expected 274.4 million. The revenue of $9.6 billion marked a 17% increase from the previous year, driven by higher average paid memberships. Netflix now anticipates full-year revenue growth of 14% to 15%, up from its previous guidance of 13% to 15%. The company reported a net income of $2.15 billion, or $4.88 per share, up from $1.49 billion, or $3.29 per share, in the second quarter of 2023.

Domino's Pizza Inc. (DPZ) -13.57%

Domino's Pizza announced a forecast of slower third-quarter comparable sales growth and reduced its target for new international store openings, leading to a 13% drop in its shares. The company now expects to open about 650 international outlets this year, falling short of its target of over 925, due to closures in Japan and France by its Australia-based master franchisee. In the U.S. market, Domino's anticipates comparable sales to rise by 3% or more in the third and fourth quarters, down from the 4.8% increase reported in the second quarter. Despite slightly missing expectations for same-store sales, the company posted a profit of $4.03 per share, exceeding the $3.68 estimated by LSEG, aided by lower supply-chain costs.

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