The Rundown - Microsoft IT Outage Disrupts Global Businesses, Netflix Adds 8 Million New Subscribers

Episode Date: July 19, 2024

Stock market update for July 19, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zadadmani, and today is Friday, July 19. In today's episode, we'll recap Netflix's monster earnings and explain why Bridgetin might be partially responsible. Also, the biggest IT outage in history occurred this morning, and investors are taking it out on the company behind it. Then stick around to the end of the show to find out why Meta might be buying a sunglasses company.

All right, let's go. Well, guys, the stock market sell-off continued on Thursday. Tech stocks continued to slide, but it wasn't just tech that dropped on Thursday. The finance and health care sector saw sell-offs as well. And as a result, the S&P, NASDAQ, and Dow all finished in the red. Even small-capped stocks took a hit yesterday with the Russell 2000 dropping 1.8%. Small-caps have gotten a lot of love recently, but the rotation into small caps seems to be on hold for now. So yeah, the latter half of the week has been pretty brutal for the stock market.

And, you know, it stretches like these that remind you that stocks don't always go up and to appreciate the days that they do. I think we took the first couple weeks of July for granted. At least I did. Let's hope we end the week on a positive note. Let's run through some headlines. Let's start with Netflix earnings. They reported earnings last night after market close, and the numbers back up what we already knew. Netflix is the king of streaming, and they're not slowing down.

Netflix's revenues and profits came in higher than expected, and they added more subscribers than expected as well. The revenue was up 17% to $9.5 billion, and their subscriber count grew by 16%. They added 8 million new subs in the second quarter. And to tell you how impressive that is, Netflix added 5.9 million new subs in Q2 of last year. And Wall Street thought that Netflix was going to add 4.9 million new subs, well, they ended up adding 8, so they crushed these estimates. It was actually the strongest ever second quarter for Netflix, excluding COVID. Netflix now has just under 278 million global customers. which is more than any streaming company out there.

Now, Netflix had some pretty solid content in the second quarter like Bridgetin and Baby Reindeer that might have helped push those numbers up. And their content pipeline coming up has some potential bangers in it, like Squid Games 2, which is expected to come out in the back half of the year. That's going to be huge. And you guys remember how Netflix rolled out their ad tier a year and a half ago? Well, it's been growing, accounting for more than 45% of all signups in countries where it's offered.

And new users in that ad-supported tier grew by 34%. So pretty impressive growth numbers, right? That being said, Netflix said that it doesn't expect advertising to be the primary driver of revenue growth in 2024 or 2025. Now, I just spent the last 90 seconds gassing up Netflix, so you would think the stock would be up huge after these earnings, right? No, that's not what happened. The market reaction was kind of weird.

The stock actually dropped 3% right as the earnings came out, not really sure why, but it did recover some of that and essentially finished flat. I don't get it, but the stock market doesn't always have to make sense. And speaking of not making sense, business is. all over the world are dealing with the biggest IT outage in history. The outage was caused by the cybersecurity firm CrowdStrike, which issued an update last night that took down Microsoft operating systems all over the world. And this is a pretty big deal because businesses all over the world are being impacted. Airlines, trains, banks, media companies, government systems,

the London Stock Exchange, pretty much any business that uses Microsoft Windows and CrowdStrike are being impacted right now. And the impacts are pretty bad. Like trains aren't running, planes have been grounded, some 9-1-1-1-1. when services and states aren't working. TV broadcast stations have gone offline. Payment systems aren't working. I mean, it is mayhem out there. Now, the issue has been identified by Microsoft and CrowdStrike.

The CEO of CrowdStrike confirmed on Twitter that it's not a cyber attack. They just screwed up. I guess whatever update CrowdStrike pushed out last night was causing the blue screen of death on Windows computers. The fix is being implemented right now, and Microsoft says that their systems are starting to come back online. But, you know, who knows how long it'll take to get everything back to normal? It might take days.

Today would be a great day to just work from home. home and not go anywhere. This incident has investors selling CrowdStrike stock. Their shares are down more than 10% in the pre-market. It was actually down more than 20% earlier this morning, but the stock has recovered a bit. Microsoft is down 2% in the pre-market. It just goes to show you how fragile our systems can be and how reliant we are on computers. One update just took down businesses all over the world. Like, it's crazy. On a side note, I really wouldn't want to be the guy at CrowdStrike that pushed that update. That's got to be a tough day at the office. Also, shout out to the IT people all over the world that are scrambling to get this fix on a Friday. Let's talk about some stocks making

moves today. Starting with Arm holding, shares of the Semiconductor Giant are up after Morgan Stanley upgraded the stock with a price target of $190. Morgan Stanley thinks that Arm will benefit from Edge AI, which is the deployment of AI on mobile devices, cars, PCs, just to name a few. Morgan Stanley sees opportunities for new chip designs and products and believes Arm's offerings are fundamental to the emerging AI category success. Arm jumped 3% on this news this morning. Shares of Eli Lilly are also up this morning after their drug Terzepetide received approval in China for weight loss. This is the same drug that is sold under the brand name Manjaro for diabetes treatment and Zepbound for weight loss. The announcement comes about a month after the rival

drug Weigavi from Novo Nordus scored approvals in China. China is estimated to have the highest number of overweight people, so it's a pretty big market for these two drugs. Eli Lilly's stock is up more than 2% reaction to this news. On the flip side, American Express stock is down this morning after they just reported earnings and missed on revenue expectations. Sales were up 9% compared to a year ago to a record $16.3 billion, but Wall Street was expecting revenue to be around $16.6 billion. So missed it slightly. Overall, though, it was a positive tune for management which lifted its 2024 profit forecast due to strong spending by its wealthy cardholders. Profits for the second quarter was up 39% from a year ago and beat Wall Street estimates. Still, the stock is down more than 1% in the pre-market.

And finally, hydrogen company plug power shares are plummeting after the company announced the pricing of its new equity offering to shore up cash. They're essentially selling more stock to raise cash. Their deal is expected to raise around $200 million for plug power. The company's current cash levels in Q1 were near $173 million, which is down 64% from a year ago. So the company really needs some cash. The stock is down 14% on this news. Let's wrap the show with fun fact. Meta is thinking about buying a minority stake in RayBan's parent company, Esselor Laxotica. Honestly, I didn't expect to mention Esolora again this week, but here we are. Meta already works with Eselor on the Raybans' Meta smart glasses. I actually have a pair of those

and they're pretty sweet. Not going to lie. Meta could buy up to a 5% stake in the company according to the New York Times. Eselor is valued at around $96 billion. So this could be a bet by Zuck to further develop more lines of smart glasses, which honestly I'm all for it because, again, Those meta-smart glasses are pretty awesome, and I want them to get better. Well, all right, guys, that is the rundown for today. That's the rundown for this week. It was a pretty up-and-down week. Started off great, then took a dip.

We got a ton of earnings this week. It's only about to get busier as we enter into the thick of earning season. So make sure you guys are subscribed to the podcast. Make sure you guys are hitting that notification bell on Spotify's or you're notified as soon as a podcast episode goes up every morning. And if you have a couple seconds, don't forget to vote in today's Spotify poll. And hit us with a five-star rating. Thank you guys again for listening.

Shout out to Connor and Mike for all the help behind the scenes. We'll see you guys back here on Monday. This is the rundown, your real-time resource for news events and trends in the markets. All views presented in this show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell or hold that security. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult. Respective professionals. Learn more at public.com disclosures.

In partnership with Zaita Mani, brokerage services for U.S. listed, registered securities are offered by open to the Public Investing Incorporated, member FINRA and SIPC.