← The Rundown
The Rundown
Netflix Tanks After Weak Earnings Guidance, SpaceX Cancels Starship Rocket Launch
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Public.com presents the rundown, your daily market update in 10 minutes. My name is Zaydad Mani and Today is Friday, July 17th. In today's episode, we'll break down why the chip stock sell off is turning into a full on bear market. We'll also recap earnings from Netflix and tell you why the stock is hitting a two year low. We'll also get into some bad news coming out of SpaceX and Google, then stick around to the end of the show to find out why a private equity firm and is investing $3 billion in the new York Yankees. We got a great show for you today. Let's go. Well, guys, the tech selloff is getting worse. Stocks fell again on Thursday with the S&P 500 dropping half a percent. And the Nasdaq got hit much harder, falling nearly 1 1/2 percent. The biggest source of pain here was chip stocks. The semiconductor index fell over 4% yesterday and is now down 19% from its June peak, putting it right on the edge of a bear market. And what's weird here is that this sell off in chip stocks is happening despite strong earnings. And we covered TSMC and ASML earlier in the week. Both these companies are projecting strong growth, but yet the stock and the overall chip sector is selling off. So what this indicates is that this isn't necessarily about bad business fundamentals. It could just be that investors are taking profit after an insane run up in the stock price this year. In fact, Goldman Sachs now says that hedge funds have cut back their exposure to their AI backed basket to the lowest level of the year. So it looks like some of the big money on Wall street is selling off and the bleeding continues. Today I'm seeing a lot of red in the markets, especially in tech and chip stocks. But you know, if you look beyond tech and AI, the market is doing fine. Eight of the 11s P500 sectors were actually in the green yesterday. Now, financial stocks at a record high earlier this week. The healthcare sector has been the strongest over the past month. And transportation stocks are off to their best start to a year since 1991. What we're seeing is a continued rot out of tech and AI and into the rest of the market. The question though is if this rotation will continue or rotate back. And if it does rotate back, when will that happen? We could get some answers over the next two weeks because Google and Tesla report earnings next week and then Meta Microsoft, Apple and Amazon report earnings the following week. Not to mention there's a Fed meeting in a couple of weeks as well, so we have a stacked calendar coming up. We're going to be staying on top of everything happening in the markets. So if you're new here, if you, it's a great time to get subscribed to the podcast and tune in every day to stay in the loop. Also, I am recording today's podcast in a hotel room in Dallas, so it looks a little different and might sound a little different too. But I will be back in Houston in my normal recording studio next week. Let's run through some headlines and we're talking Netflix. Netflix reported earnings last night, and despite decent numbers, the stock is getting hit hard today. Revenues for the company in Q2 came in at 12.56 billion billion, which was up 13% from a year ago that barely missed estimates. But profits came in at $3.4 billion last quarter, which was up 10% year over year and did beat estimates. So it wasn't like a disaster quarter or anything. Yet the stock is down around 10% this morning for two main reasons. For one, the company's guidance was kind of weak. Remember, investors care about how a business will do in the future. And Netflix is flashing some red flags. The company expects their revenue to grow about 12% next quarter, which would be the slowest growth in over a year. And for a stock that's been priced as a growth story, that's a problem. Now, the second reason Netflix's stock might be tanking today is the concern around their engagement metric. You know, there's been a ton of reporting that Netflix's engagement on the platform is falling. And that used to be Netflix's strength, you know, keeping viewers on the platform and coming back. But there's new data showing that hit Netflix shows are losing about half their audience by season two, which we talked about this in the show a couple weeks ago. Now, Netflix pushed back on that narrative on the earnings call, saying that season two fall off actually improves slightly this year. But then in the same breath, Netflix announced that they're cutting back on their engagement reporting. Moving forward, the company's what we watch engagement report will only come out once a year instead of twice a year like it currently does. And typically investors don't like it when a company gives less information, especially when that exact metric is already under pressure. And here's the thing. Netflix has a history of doing this. A few years ago, when subscriber growth was slowing down, the Netflix stopped reporting their subscriber numbers. And now they're doing the same with this engagement number. I feel like if engagement was actually healthy, then Netflix probably wouldn't be doing this. So, yeah, I think that's why investors are starting to get nervous about the business. Netflix stock has been a terrible performer this year. It's down 20% heading into the earnings report, and it's lost over 40% of its value in the last 12 months. And as of right now, the stock is trading at its lowest level in two years. You know, I think a big sentiment shift happened with Netflix when they tried to buy Warner Brothers discovery for $83 billion, even though Netfl lost the bidding war to Paramount. That entire saga made investors question whether Netflix management thought that their organic growth was tapped out. And Netflix hasn't been able to address those concerns. Now, to be fair, the company is showing strong growth in advertising. The ad revenue is expected to roughly double this year to $3 billion. And live programming has also been a hit. It's helping the company attract new customers. In fact, live events accounted for six of the top 10 signup days in the last five years. But that doesn't seem to be enough to satisfy investors. I think for Netflix to get investors back side, they'll have to prove that their ad business can continue to grow and that live programming can help bring in more subscribers. And who knows, maybe they'll do a couple more price increases along the way. Let's talk about some stocks making moves today. And heads up. We couldn't find a winner today, so it's a double loser Friday. Let's start with SpaceX. Shares are down after the company aborted their latest test flight of their Starship rocket. This rocket was seconds away from launching on Thursday evening when several engines failed start, which triggered an automatic abort. Now, Elon Musk said that SpaceX plans to replace two Raptor engines. They could try a test again early next week. Now, normally, an aborted launch wouldn't be that big of a deal for SpaceX. It happens all the time. But now that SpaceX is a public company, one of the most valuable companies in the world, investors are watching these rocket tests much more closely. So every failed test or launch delay impacts the stock in real time. SpaceX stock fell 3% yesterday, and it's down another 4% this morning. The stock is now trading below its IPO price and has roughly lost $900 billion in market value from its peak last month. What I wonder, though, is with the poor performance of SpaceX now, will this impact the IPO market? You know, SpaceX was the most hyped IPO in history. If it can't hold its IPO price after a month are investors are going to become much more cautious about the next wave of listings, including a potential IPO from Anthropic and OpenAI. And does that mean that Anthropic and OpenAI delay their IPO until the next wind? I mean, I don't know. I wouldn't be surprised if both these companies don't IPO this year anymore. Moving on, let's talk about our second loser today, Google. Google shares are falling after Bloomberg reported the company's next flagship AI model is months behind schedule. Google's Gemini 3.5 Pro model was supposed to launch sometime this summer. In fact, some were expected to get launched back in May at Google's developer conference. But this model keeps falling short of internal goals, especially when it comes to coding. Meanwhile, you have OpenAI and anthropic launching new models that are absolutely crushing it. So it looks like Google is starting to fall behind again when it comes to AI. And the bigger concern for the company might be that some of their AI researchers are getting frustrated and reportedly leaving the company for rivals like anthropic and OpenAI. Google stock fell 4% yesterday after the Bloomberg report, and it's down another 2% this morning. Now, if you zoom out, Google Stock is up 10% on the year and it is outperforming most of the max 7 peers. But I feel like Google has lost all of its AI aura that it had last year. So I'm really curious to see what they have to say in their earnings report next week. It is pretty crazy how fast the vibe sh in the AI space. Let's wrap the show with a fun fact. The New York Yankees are in advanced talks to raise nearly $3 billion from the private equity giant Apollo. Now, this deal is mostly debt with some equity involved, and if it goes through, it would be Apollo's biggest investments in American sports ever. The Yankees say part of this money is going towards refinancing their existing debt and the rest would fund new growth opportunities. Now, I'm not really sure what growth opportunities means, but if the Yankees get a decent bullpen, Apollo might become the most popular private equity firm in New York. Now, all jokes aside here, this is part of a much bigger trend happening right now with private equity investing more in Sports. According to J.P. morgan, nearly one in five teams across the NFL, NBA, MLB, and NHL now have some level of private equity involvement. Now, one reason that's happening is because sports teams have gotten so expensive that not many people on the planet can actually afford to buy them. You know, I talk about this. On Monday, the Seattle Seahawks sold for a record $9.6 billion, which was 200 times more than what they were bought for in 1997. So teams have gotten so expensive that even billionaires need help buying them. And that's where private equity comes in. Now, for the most part, according to these league rules, private equity firms aren't allowed to have a controlling stake in the team, so they're not making day to day moves on personnel. But you can see why Wall street loves these sports teams as an investment. Because these teams generate a ton of cash flow from TV deals, sponsorships, tickets, and merch. And most importantly, these teams have ridiculously loyal fans. Name another business on the planet where customers stick around for decades no matter how bad the product performs. I mean, the Yankees are a perfect example of this. They haven't won a World Series since 2009, yet their stadium is packed every night and ticket prices keep going up. So, yeah, I wouldn't be surprised if we see more and more Wall street money flowing into sports. These franchises have become like a full blown institutional asset class. Now, as a big sports fan myself, I don't really feel great about it, but I might have to do a full deep dive on what's going on here. If you're a sports fan, let me know in the comments. Would you care if private equity owns a piece of your favorite team? Well, all right, guys, that's the rundown for today. That's the rundown for this week. Hope you guys enjoyed today's episode. If you did and you have like five extra seconds, consider giving us a five star rating on Apple, Spotify, YouTube, wherever you listen to your podcasts. All of that engagement really does help us out and it helps other people find the show. Thank you guys so much for listening, watching, and commenting. Shout out to Mike for all the work behind the scenes and we'll see you guys back here tomorrow for the deep dive.