Fast Money Blog- 12/16/22
On Tuesday, December 13th the Consumer Price Index (CPI) data was released.
The data showed that consumer prices rose less than expected in November, the second-straight month inflation pressures declined more than Wall Street expected.
The CPI for November showed a 7.1% increase in prices over last year and a 0.1% increase over the prior month, the Bureau of Labor Statistics said Tuesday.
This means that inflation is slowing down as November’s CPI reflects a decrease month-over-month from 7.7% to 7.1%.
I see retracement happening in several Dow and S&P components. I expect we'll see a major uptick coming in the overall market sometime within the next 15 weeks.
On Wednesday, Dec. 14th the Federal Reserve gave its final interest rate increase of 2022.
The central bank raised its benchmark rate by 50 basis points, slowing the pace of hikes from 75 basis points across the prior four meetings. The move brings the interest rate rate to a new range of 4.25% to 4.5%, the highest level since December 2007.
Even though inflation is declining month over month I expect that the Federal Reserve will continue to raise interest rates over the next 8 weeks.
What’s more surprising than the market’s reaction to the Fed, are the staggering losses that streaming services are reporting to Wall Street.
Why Streaming Services Don’t Make Money
If you are a share holder in any of these big-name streaming companies it's important that you understand the stories behind the streaming industry.
Let me break it down for you:
Netflix, Inc. (NFLX) is by far, the biggest name in the subscription based streaming industry. Netflix recently reported Q3 top-line revenue of $7.9 billion, up almost 6% year-over-year. They also ended the quarter with a total of 223.1 million subscribers. However, the most striking statistic is that Netflix had a profit of $1.5 billion for the quarter.
As the revenue results from the following major streaming services illustrate, battling Netflix for subscription dollars is a losing proposition. Creating the premium content that drives sign-ups costs billions of dollars a year. That, plus marketing expenses, is leading to a huge loss of money.
Back in November The Walt Disney Company (DIS) released their Q4 earnings report and touted that across Disney's streaming services, Disney+, Hulu and ESPN+ had a combined total of 235.7 million subscribers. This number put them ahead of the 223.1 million subscribers last tallied by Netflix in the same period.
However, this came with a loss of $1.5 billion for the quarter. Over the entire fiscal year 2022, Disney lost about $4 billion from its streaming service.
On October 27th, Peacock, the streaming service of Comcast’s (CMCSA) entertainment unit NBCUniversal, released its Q3 earnings report saying that they ended the quarter with a total of 15 million subscribers.
The company reported top-line revenue of $506 million, up from $230 million year-over-year. However, this came at a loss of of $614 million for the quarter.
On November 3rd, Warner Brothers Discovery, Inc. (WBD), the parent company of HBO, HBO Max and Discovery +, released its Q3 earnings report. Total subscribers across all 3 streaming subscriptions came to 95 million. However, revenue in the streaming segment fell 6%. Overall, Warner Bros posted a third-quarter loss of $2.3 billion.
With streaming services performing at quarterly losses, you can clearly understand why I recommend Home Depot (HD), Visa (V), Mastercard (MA) and Lowes (LOW) as long-term holds.
Be a smart Wealthy Investor and make wise decisions as we move into 2023.
Tyrone Jackson, The Wealthy Investor