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Could Netflix Move Into Music? The Daily Rundown
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF nFLX AND TSLA
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Netflix
I thought Netflix may have broken out early in the day but was unable to hold the gains. It has a solid uptrend in place, and the RSI certainly looks like it too is ready to breakout.
Into Music
I have been thinking a little bit about Netflix and wondering if it makes sense for them to get into a music service. They have 125 million subscribers, and maybe for an extra $5 a month they can bundle in a streaming music service. The Netflix app is already on my phone, making it easy to likely get conversions.
Yes, the streaming music space is getting crowded, but how many people would gladly pay $20 a month for music and content. I’m sure a lot.
Doing some back of the envelope math, even if you consider the 55 million US subscribers, and a conversion rate of 30 percent, it could easily add about $250 million in extra revenue a quarter, and just further solidify the company’s dominance, in streaming media.
Broader Market
It was a pretty quiet day all around, stocks couldn’t build any positive momentum all day long, and the sellers just came in at the end of the day. When it comes down to it, the S&P 500 was only down about 30 bps, certainly nothing to fret over, and refilling some of the gap created yesterday.
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Industrials
Industrials had a great day yesterday, and today we gave back a portion of that significant gain. Again, some investors blame trade tension; I blame the Algo’s playing a game of fill the gap.
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Boeing
The same thing happened with Boeing.
Chips
The setup in the chip stocks still looks strong.
Micron
Micron has a lot to do with the chips being strong; the stock jumped by about 6.5 percent today. But, be mindful of that gap, just like the other charts above show us. A fall back to $56 or even $54 is entirely possible.
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Tesla
Tesla certainly has an unusual setup, with the stock sitting at support around $272, while the RSI continues to trend lower. It is the stock that everyone loves to hate. It needs to find a bounce off this support level. Otherwise, things might get difficult for the longs. The short interest as of April 30 was at the highest level ever in the stock’s history at 39 million.
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Now on to some boring, but very important stuff
Dollar Index
The dollar index has stopped rising for now, and where the dollar goes can have ramification on other parts of the market. For now, it struggles around $94, and should it break above $94, then is going to be a significant problem for commodities and multinational stocks. Should it managed to reverse and head lower, that is going to help fuel Oil rise even higher.
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Eurodollar Rates
The Eurodollar deposit rate is perhaps telling us that demand for dollars abroad may be easing, and that may be a sign that the recent rise in the dollar is nearing an end. Back on March 20, I speculated that the rising Eurodollar rates were a sign the US dollar would begin to surge, and indeed since that time, the dollar index has climbed from 90.50 to a high of 94 yesterday, a climb of about 3.8 percent. So indeed, we should pay attention to the cost to borrow dollars aboard.
Libor
Additionally, 3-month libor rates are stalling out, and perhaps that is a sign that expectations for future Fed rate hikes are cooling. It would surely be nice if that were the case.
For the most to think we are in a low inflation environment with strong earnings growth and a robust economy. Hard for me to bearish in this type of situation, I continue to see more and more signs of sectors breaking out, and individual stocks as well. Outside of some unforeseen geopolitical event, I think the most significant risk to the economy and the markets is an over aggressive Fed. Nothing would make me happier than the Fed to leave things alone at this point.
That is it for today.
-Mike
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Tags: #netflix #music #tesla #sp500 #industrials #boeing #dollar #eurodollar #libor
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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