Weekly StockWatch: Nike Pinched by Strong Dollar, Netflix Opens Gaming Studio, Amazon Announces New Prime Sale Event & More

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  • XPEV.us
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China EV Tax Break

Chinese authorities announced on Monday the extension of current tax exemptions on the purchase of new energy vehicles (NEVs) until the end of 2023 [1]. Those cuts were originally scheduled to expire by the end of the year. Apart from pure electric vehicles, NEVs include plug-in hybrids and fuel-cell vehicles.

This helped US stocks of Chinese Xpeng Auto, but still head towards a losing month and quarter, even though the EV maker seems to be on a roll recently. Its new flagship SUV - the G9 – launched last week, with first deliveries expected in October. The new model will include the firm's semi-autonomous driving system, which was unveiled a few days earlier. [2]

Li Auto (LI.us) also benefited from the break extension, despite the fact that the start-up downgraded its Q3 delivery outlook on the same day. Li Auto now anticipates to have handed over approximately 25,500 vehicles during the third quarter, from the previously projected 27,000-29,000 range. [3]

EV king Tesla Motors Inc on the other hand, anticipates the delivery of "a very high volume of vehicles" during the last days of the current quarter, according to Electrek's reporting. [4]

In any case will know in a few days, since electric vehicle makers typically announce their delivery figures during the first few days of each quarter.

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Despite the positive start to the week, thing quickly turned negative for both XPEV.us and LI.us.

Amazon 2nd Prime Event

The e-commerce giant announced a second Prime sale event for 2022, the "Prime Early Access Sale", scheduled for October 11-12, covering fifteen countries [5]. Prime events are forty-eight hour periods, during which members of its Prime service can shop a wide range of products in discounted prices.

Amazon.com typically holds one such event every year, with July's traditional "Prime Day", having been the biggest in its history, with savings of over $1.7 billion for Prime subscribers. [6]

A couple of days later, the firm also announced a series of new products, such as the third generation Fire TV cube, a new version of its Kindle e-book reader that supports writing, four new echo devices and more. [7]

Online shopping and consumer electronics aside, Amazon operates in many and diverse sectors, with its healthcare activities being particularly interesting. Earlier in the quarter and not long after the agreement to buy primary care provider One Medical [8], news broke that the firm plans to end its in-house Amazon Care-service [9]. One of the two apparently had to give, but remains to be seen what are its plans.

AMZN.us is having a bad year, as does the broader tech sector, but tries for a profitable third quarter, thanks to the July rally.

Nike Pinched by Strong Dollar

The American multination sportswear and equipment giant reported its financial results for the first quarter of fiscal year 2023 (period ended August 31), on Thursday after Wall Street closed. [10]

Revenues increased 4% year-over-year to $12.7 billion, but Net Income slumped 22% compared to a year ago to $1.5 billion, albeit being marginally higher over the previous quarter ($1.4 billion). Furthermore, Gross Margins were squeezed to 44.3%, from 46.5% a year ago and 45% in the previous quarter.

Nike's (KE.us) margins were negatively impacted by high inventories - especially in North America which saw a 65% expansion y/y according to CFO Matt Friend – and the discounts and other actions taken to clear excess inventory. [11]

The strong US Dollar was another key factor for the lower profit margins, along with high freight and logistics costs. Mr Friend noted that "Headwinds from foreign exchange have also shifted significantly in the last 90 days as the trend of U.S. has accelerated" during the earnings call.

Based on his comments, the company now expects this to have negative impact on Revenues for the full fiscal year, to the tune of $4 billion.

German Rival Adidas releases its results for the three-month ended in September, in early November. For the second quarter of the year, it had reported Revenue of €5.596 billion, up 10% year over year and Gross Margin of 50.1%. [12]

Markets reacted negatively to the results, as the stocks sheds around 10% in today's pre-market, at the time of writing. NKE.us dropped more than 3%, to 2+ year lows on Thursday, heading towards another losing month.

Netflix Opens Game Studio

The streaming giant announced the opening of its own gaming studio in Finland, further advancing its gaming vision [13]. Netflix made it entry into videogames almost a year ago, with five mobile games available to all subscribers at no extra cost [14]. Since then, the company has bought three gaming studios, in order to boost its developing capabilities.

Although videogames availability does not look like a compelling reason to subscribe to Netflix, it is definitely a promising diversification effort, in light of increasing competition and the firm's poor performance this year.

Netflix has lost a whipping 1,170,000 users during the first two quarter of the year and expects to lose one million more in the third quarter, the results of which are expect in the second-half of October [15].

Its user base has dropped to 220.67 million worldwide as of the end of Q2, allowing Disney to dethrone it, with the with the 221.1 million subscribers it reported as of July 2 for its Disney+, ESPN+ and Hulu platforms. [16]

The streaming giant hosted its annual TUDUM event a few days ago, showcasing its upcoming shows, including a teaser for the award winning "The Crown", season five of which will launch in November. [17]

NFLX.us erased an eye-watering 71% of its value during the first half of the year, but stabilized over the recent months, and heads toward a profitable Q3.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 30 Sep 2022 http://english.www.gov.cn/statecouncil/ministries/202209/27/content_WS6332335bc6d0a757729e08d2.html

2

Retrieved 30 Sep 2022 https://ir.xiaopeng.com/news-releases/news-release-details/xpeng-launches-g9-flagship-suv

3

Retrieved 30 Sep 2022 https://ir.lixiang.com/news-releases/news-release-details/li-auto-inc-updates-third-quarter-delivery-outlook-0

4

Retrieved 30 Sep 2022 https://electrek.co/2022/09/27/tesla-very-high-volume-deliveries-end-of-quarter-asks-workers-help/

5

Retrieved 30 Sep 2022 https://press.aboutamazon.com/2022/9/introducing-amazons-prime-early-access-sale-a-new-holiday-shopping-event-for-members-to-save-big-october-11-and-october-12

6

Retrieved 30 Sep 2022 https://press.aboutamazon.com/2022/7/prime-day-2022-was-the-biggest-prime-day-event-ever

7

Retrieved 30 Sep 2022 https://www.aboutamazon.com/news/devices/devices-and-services-news-2022

8

Retrieved 30 Sep 2022 https://press.aboutamazon.com/2022/7/amazon-and-one-medical-sign-an-agreement-for-amazon-to-acquire-one-medical

9

Retrieved 30 Sep 2022 https://www.fiercehealthcare.com/health-tech/amazon-care-shutting-down-end-2022-tech-giant-said-virtual-primary-care-business-wasnt

10

Retrieved 30 Sep 2022 https://s1.q4cdn.com/806093406/files/doc_financials/2023/q1/FY23-Q1-Combined-NIKE-Press-Release-Schedules-FINAL.pdf

11

Retrieved 30 Sep 2022 https://investors.nike.com/investors/news-events-and-reports/

12

Retrieved 30 Sep 2022 https://www.adidas-group.com/media/filer_public/59/c1/59c14dd1-c8fe-4841-aeab-0e302fc36dcb/adidasag_q2_2022_results_en_final.pdf

13

Retrieved 30 Sep 2022 https://about.netflix.com/en/news/building-our-internal-games-studios

14

Retrieved 30 Sep 2022 https://about.netflix.com/en/news/let-the-games-begin-a-new-way-to-experience-entertainment-on-mobile

15

Retrieved 30 Sep 2022 https://ir.netflix.net/financials/quarterly-earnings/default.aspx

16

Retrieved 30 Sep 2022 https://thewaltdisneycompany.com/app/uploads/2022/08/q3-fy22-earnings.pdf

17

Retrieved 30 Nov 2022 https://about.netflix.com/en/news/tudum-recap-united-states-and-europe-2022

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