Today's big stories

Netflix reported worse-than-expected second-quarter results
Tracking top colleges’ investment strategies could help you spot the next big thing – Read Now
Bank of America and Morgan Stanley wrapped up big US banks’ quarterly updates

1/3

What The Flix?

What’s Going On Here?

Investors had a few choice words for Netflix after the streaming giant announced weaker-than-expected second-quarter results late on Thursday, and its stock initially fell 12%.

What Does This Mean?

Netflix has been one of the biggest winners from worldwide stay-at-home orders, with its stock rising 75% since they came into force. That much was clear from the company’s quarterly revenue, which was 25% higher than the same time last year thanks to the 10 million new subscribers it added even as lockdowns loosened (a big jump from the 7.5 million it’d previously promised). But Netflix’s forecast for this quarter fell well short: the streaming giant’s expecting to add just 2.5 million new subscribers rather than the 5 million analysts had forecast (tweet this). And that number matters: the more subscribers Netflix has, the more regular income it’s able to generate – which might make an otherwise risky tech stock seem like a safer, more “defensive” bet.

Why Should I Care?

For markets: Nothing good’s on.
Swiss investment bank UBS downgraded its recommendation on Netflix from “buy” to “neutral” this week. It argued that with 180 million users in nearly 200 countries already, growth is only going to get harder to deliver – and tough competition from the likes of Disney+ won’t help. Goldman Sachs, on the other hand, reckons Netflix still has plenty of wiggle room in Europe, Asia, and Latin America, and recommends going all in.

The bigger picture: Stranger Things won’t film itself.
With more competition comes added pressure for Netflix to release new shows, which is only going to become more difficult what with the recent halt to film production. But the announcement on Thursday that the company’s head of content would become co-CEO suggests solving that problem might happen sooner rather than later – which is more than can be said for rival services that depend on sports and live events…

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2/3 Premium

School’s Out

What’s going on here?

College endowments’ growing preference for “alternative” investments may be backfiring, but studying their most innovative strategies could pay off.

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3/3

Double Trouble

What’s Going On Here?

Positive earnings updates from Bank of America and Morgan Stanley on Thursday showed that while the two investment banks have very distinct approaches, they’re not so different after all.

What Does This Mean?

The second quarter worked out great for the banks’ trading businesses, but not so much for their savings and loans segments. Bank of America drove that home by reporting a big boost to its trading segment – one that led to a better-than-expected quarterly profit, and more than offset the $5 billion worth of new provisions it set aside for future loan losses. The bank also revealed record income from its advisory business, which helps firms sell new debt and takes special-purpose acquisition companies public.

Those trends benefited Morgan Stanley too, but most of its money comes from investment management. And as luck would have it, that business also did better than analysts expected, enabling the company to beat quarterly profit expectations overall.

Why Should I Care?

For markets: Nothing to see here.
By Thursday, investors had largely adjusted their expectations for Bank of America and Morgan Stanley based on other big banks’ performances, so neither’s stock rose dramatically. In fact, some investors had already moved onto the next big question for banks: where will future growth come from? One mooted answer is mergers and acquisitions: most big banks won’t buy one of their competitors, but those with spare cash may be eyeing up tech companies.

The bigger picture: Goldman struck gold.
In other banking news, JPMorgan’s better-than-expected Tuesday update was one-upped the very next day when Goldman Sachs announced a way higher quarterly profit than investors were expecting – thanks in no small part to one of the best ever quarters in its trading business. Goldman also has one of the smallest consumer banking segments of the big US banks, which kept it relatively safe from the rising risk of loan defaults.

Take action: How trading currencies could earn you a profit.

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💬 Quote of the day

“I choose to make the rest of my life the best of my life.”

– Louise Hay (an American motivational author and the founder of Hay House)

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🌍 Finimize Community

👻 If it’s good enough for Beetlejuice…

There’s an old wives’ tale that if you say Netflix’s name three times, it appears in the form of a Finimize event. But that’s silly: we’ve definitely said it three times in this newsletter, and – wait, what do you mean we have an event coming up called “What’s Next for Streaming?” Spooky…

🇺🇸 USA: What’s Next For Streaming? – 12pm New York Time, July 20th
🇬🇧 UK: Global Economic Outlook – 5pm UK Time, July 21st
🇦🇺 Australia: Women & Money (in-person) – 5.30pm Perth Time, July 22nd
🇬🇧 UK: How the Pros Pick Stocks – 6.00pm UK Time, July 27th
🌎 Global: Finimize Live AMA – 1.30pm UK Time, July 28th
🇨🇦 Canada: Searching For Financial Stability – 1.30pm Pacific Time, July 28th
🇬🇧 UK: What’s Next For The Global Economy? – 6pm UK Time, July 29th
🇬🇧 UK: The Bright Future for Renewable Energy – 12pm UK Time, July 30th

😭 In case you missed it

Here’s some of the most popular Finimize Premium content this week…

Premium Insights:
😬 The world’s oldest hedge fund strategy may be a bust
🌱 Goldman’s picked 20 stocks that could benefit from a sustainable future
🚀 Introducing a group of markets that offer safety and good returns

Packs:
💪 Ad giant Martin Sorrell talks the post-COVID media landscape
🇨🇳 How you can profit from China’s recovery
🇬🇧 How you Brits can pay less tax

📚 What we're reading

No to bigotry, yes to boybands (Jezebel)
Sweatpants are the future (Slate)
This look… may not be (Houston Chronicle)

Finimize - 📉 Netflix drops 12%

Today's big stories

What The Flix?

What’s Going On Here?

What Does This Mean?

Why Should I Care?

School’s Out

🔒 Trading you can trust

Double Trouble

What’s Going On Here?

What Does This Mean?

Why Should I Care?

👻 If it’s good enough for Beetlejuice…

😭 In case you missed it

Older messages

🥤 Pepsi crushes Coke

🎟 New events: IP risk, streaming's future, and how to be anti-racist

🏦 JPMorgan is the best bank ever

📉 China tanks stock market

🧐 Goldman predicts the US election

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