Market Munch 🍪| July 20 2022
India's darling PharmEasy may get it's valuation hammered, Netflix beats all expectations, and Apple says that job cuts are to come soon. 🍎
Good morning Munchers!
Here is your daily dose of the news that matters, from Wall Street to Dalal Street - in 5 minutes and 40 seconds.
Let’s dive in.
What’s hot, what’s no
Market Commentary
Wall Street was pleased yesterday - with the SP500 up 2.5% and the Nasdaq up by almost 3%. This comes because of optimism over earnings and a potentially weaker dollar (DXY down 3%).
D-Street made some minor gains, but stayed relatively flat. Not much news to rock markets either way.
Oil rose slightly, as a tighter supply outweighed the demand slowdown and economic worries that heckled the price of commodities recently.
Story Roundup
1 - One of India’s crown jewel startups may take a 25% valuation cut. 💊
PharmEasy - India’s largest online pharmacy - is set to take a valuation cut of up to 25% to raise money.
It’ll be India’s first high-profile ‘down round’ in recent times. A down round is when a startup cuts it’s valuation to receive a check from investors.
They seek to bag about $200m of outside money.
It comes at a time where India’s startup scene is slowly coasting, as investors weigh risk assets versus cash-flow rich companies.
But a 25% haircut? That’s definitely a hard pill to swallow.
2 - Netflix loses subs yet beats all expectations. 📺
Netflix stock is up about 8% after-hours after announcing that they lost 1m subscribers - half the size of the loss that analysts expected.
Along with this, they reported earnings of $3.2/share - coming in higher than expectations of $2.96/share.
While defending their status as “the leader of streaming”, they outlined plans to kick-start their slowing growth engine.
This includes a plan to crack down on password sharing - as an estimated 100m households use Netflix without paying for it.
They acknowledged that this would be “a big challenge” - but are still optimistic about growth.
This looks like it’s one to watch.
3 - Equity allocations cut to the lowest since Lehman imploded. 📉
The largest investors on the Street have cut their allocations to equities to the lowest level since Lehman Brothers collapsed in 2008.
According to the Bank of America, investors have reached “a dire level of pessimism” - worrying that global economic tightening could spark a recession.
About 80% of PMs expect corporate profits to fall apart - more than during the 2008 crisis, and more than during the 2020 COVID crash.
Most US fund managers also are sitting on their largest cash holdings in 21 years.
There’s a lot of money on the sidelines, that’ll re-enter the markets when things get better.
As the saying goes, bull markets make people rich, but bear markets make people wealthy.
4 - Home builder confidence up in smoke and Cali home sales plunge 21%. 🏘️
Builder's’ confidence across the US is looking increasingly gloomy.
The index that tracks builder confidence declined from 67 to 55 - one of the largest declines in the history of the index.
Yesterday’s reading is the lowest since March 2020 - reflecting quite some softening in the demand for housing.
Average purchase loan size fell from $460,000 to $415,000 - something that a lot of analysts have called an “accident waiting to happen”.
Mortgage applications have tumbled over a quarter since the start of the year, with no end to the decline in sight.
Looks like anyone who’s bought a home of late will be looking at a decent loss. 😬
5 - Apple says that job cuts are coming soon. 🍎
Apple has some big changes for 2023.
In wake of a slowing economic environment, the company wants to slow hiring, cut spending, and get a little more resilient.
The supply chain side of things has been pretty harmful too - with prices of input commodities like copper, nickel and cobalt soaring.
In addition, Apple had to halt sales in Europe after the war broke out.
About 2/3rds of Apple’s revenue is generated from outside the US - which hurts their profits since the Dollar has been slowly strengthening throughout the year as the Fed hikes rates.
Sign of the times.
Aaaand that’s a wrap.
Thanks a ton for reading. Any feedback is open - positive or negative. Hit my line at aryaansh.rathore@gmail.com or https://www.linkedin.com/in/aryaansh/.