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Amidst Low Revenue, Wedbush Upgrades Netflix

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Netflix

A United States brokerage firm, Wedbush says it has upgraded a popular online streaming platform,  Netflix from Neutral to Outperform, despite the challenges of revenue and decline in subscribers facing the company.

Wedbush wrote on Monday that the streaming company “is positioned to grow,” citing the staggered releases of “Ozark” and “Stranger Things.”

Wedbush provides clients with a wide range of securities brokerage, wealth management, and investment banking services. 

Equity research analyst at Wedbush, Michael Pachter, doubled down on the streaming giant during an interview with Yahoo Finance Live.

“The stock was overvalued,” the analyst said, relating to its November 2021 peak of $690 a share. 

“This is not a dumb management team. They’re very smart, they have a ton of content, and they’ve made tens of billions of dollars of investment in content,” he further said.

Investors King gathered that Netflix lost 636,000 customers in the U.S. and Canada following a roughly 10 per cent price increase. That reflects a miss of around 750,000 subscribers (compared to the consensus forecast for a gain of 150,000.)

“I think the Street thinks they’re going to zero subscribers. They are not. “Netflix is going to always be the anchor subscription.”  Pachter stated.

According to Wedbush: “In our view, Netflix’s losses are primarily a result of its deep saturation in the U.S. and Canada, with other options being more attractive to new subscribers once it decided to raise price.”

However, new content rollouts could underscore the platform’s “commitment to reducing churn,” thus increasing subscriber growth and investor confidence.

Patcher said: “In our view, this experiment will be a resounding success if expanded to all Netflix originals, and we believe the company will ultimately move in that direction.”

Overall, Wedbush describes Netflix as an “immensely profitable, slow-growth company.” The firm suggested that it should raise prices in its more mature markets (U.S, Canada) in order to increase profitability to reinvest in newer markets like Latin America and Asia. 

Meanwhile, the online streaming platform has laid off 150 of its employees as its subscriber base and revenue slows down. This is coming less than a month after it disengaged at least 10 full-time staff and contractors in its editorial and marketing divisions.

On Tuesday, Netflix confirmed to Yahoo Finance that it will be laying off about 150 positions of the streamer’s 11,000 workforce in an effort to reduce spending and offset slowing revenue growth.

The sacked workers represent two percent of its workforce, largely in the U.S. The company is also eliminating 70 roles from its animation unit, as well as roles for social media and publishing contractors. 

“As we explained on earnings, our slowing revenue growth means we are also having to slow our cost growth as a company. So sadly, we are letting around 150 employees go today, mostly US-based,” a Netflix spokesperson said in a statement.

“These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues. We’re working hard to support them through this very difficult transition”, he added.

Investors King reports that Netflix’s unexpected decline in Q1 subscribers led to a stock plummet of 35 per cent and wiped more than $50bn off its market cap.

Since then, the stock has struggled to rebound, down more than 68 per cent year-to-date as investors question the longevity of the Netflix business model amid high inflation and increased competition.

To mitigate the impact of the low revenue, number of subscribers, Netflix will introduce an ad-supported subscription option and cut down on spending.

Coupled with layoffs, Netflix’s upcoming ad-supported offering, in addition to its crackdown on password sharing, should also help alleviate monetary pressures, with “great potential to drive significant revenue,” according to Wedbush.

“On balance, we think ad-supported subscriptions is a good idea, particularly as a disincentive to churn,” the note read.

As competition in the space intensifies, Patcher said it’s important to remember Netflix’s identity within the streaming wars.

Patcher noted that Netflix consumption is something north of 30 hours a month, adding that “quantity is important”.

“Nobody goes into Walmart expecting to buy premium brands and spend a ton of money. They go in for quantity. That’s what Netflix is. They’re the Walmart of streaming video, and they’ve got everything,” he said.

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Persistent Service Disruptions In Banks Paralyze Activities At Ports, Many Cargoes Trapped 

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Lekki Deep Seaport

Activities at the Apapa and Tin-Can Ports in Lagos State have been paralyzed as cargoes have remained uncleared following persistent disruption to some online services of some commercial banks in Nigeria.

It was gathered that the banks suffer network problems due to the upgrade of their electronic banking portals.

To this end, business moguls have been unable to pay the Customs duty necessary for the clearance of their cargoes at the ports.

A visit to the ports showed that many import units of containers have not been cleared because their clearance documents are still trapped in some banks due to ongoing network migration issues.

If the banking disruptions persist and cargoes continue to lie fallow at the ports, experts have said that prices of goods at Nigerian markets may soar.

Many persons who have been working at the ports have also been rendered jobless as activities at the ports remain in limbo.

Confirming the situation at the ports, the National President of the Africa Association of Professional Freight Forwarders and Logistics of Nigeria (APFFLON), Mr. Frank Ogunojemite said many jobs are stuck because agents have been battling to settle payment part of their clearance schedules.

Ogunojemite revealed that the clearance of cargoes at the ports usually goes through Form M and the Pre Arrival Assessment Report (PAAR), said agents have to go through a commercial bank to pay their Customs duty before any clearance process can be done.

He said if the banking system or network is down, it will be impossible for Customs duty to be paid and that container will remain in the port accumulating rent which comes with storage and demurrage payments.

According to him, prices of goods may soar if the situation persists as cargo owners spend more for clearance if their containers spend longer time in the ports.

Preferring solutions, he called on government to introduce ‘compensatory law’ where importers are given waivers when delays to their cargoes inside the ports is not from them.

Also, haulage operators bemoaned the effect of the various banking migrations on picking of containers inside the ports.Persistent Service Disruptions In Banks Paralyze Activities At Ports, Many Cargoes Trapped

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Nigerian Businesses Face Tougher Times as PMI Drops to 19 Months Low of 46.9

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Business metrics - investors king

Nigerian businesses continued to face headwinds as the Purchasing Managers Index published by Stanbic IBTC shows a 19-month low. 

According to the report released on Friday, business conditions took a hit and PMI dipped from 49.8 points in September to 46.9 points, the steepest decline since March 2023.

For context, a PMI reading above 50 points indicates growth in business activity. Conversely, a reading below 50 points indicates contraction, suggesting deterioration consequent to an economic downturn.

According to the report, businesses faced pressures from the local currency weakening, higher fuel prices and increasing cost of transportation.

This has also forced the hands of businesses to increase prices to sustain operations, which the report stated has led to a reduction in new orders and business activity.

Most importantly, confidence in the business sector plummeted to the worst ever since the organisation started documenting PMI in 2014.

“Overall input costs rose at one of the sharpest rates on record, with selling prices increased accordingly. This resulted in marked reductions in new orders and business activity, while business sentiment was the lowest in the survey’s history,” the report read in part.

A positive light in the report was that some companies managed to add a few new hires, extending a six-month trend of job creation. The downside to this was that the companies employed these staff on a short-term basis.

The report also stated that companies are making efforts, now more than ever, to help their staff stay afloat in the current economic situation.

“Meanwhile, efforts to help workers with rising living costs meant that staff pay was increased to the greatest extent in seven months,” the report added.

Metrics like the private sector output, volume of orders, and quantities of purchases made by customers all recorded steeper values than they did in September.

Trends showed that prices, cost of staff maintenance and input prices, on the other hand, recorded very sharp increases, with some metrics posting record hikes since March 2023.

Inflation in the general Nigerian macro environment is telling in every quarter and businesses are not exempt.

Analysts told Investors King that special interventions will help ease the pressure on companies, but warned that risky conditions attached to these measures may scare off firms from accepting them.

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Dangote Refinery Sells Petrol At N990 Per Litre to Trucks

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Dangote Refinery

Dangote refinery has finally announced the price of premium motor spirit (PMS), popularly known as Petrol, following months of back and forth.

The company said it sells to domestic marketers at N971 per litre into ships and N990 into trucks, according to a statement signed by Anthony Chiejina, Group Chief Branding and Communications Officer and released on Sunday evening.

“Post deregulation, NNPC set the pace by selling PMS to domestic marketers at N971 per litre for sale into ships and at N990 for sale into trucks. This set the benchmark for our pricing, and we have even gone lower to sell at N960 per litre for sale into ships while maintaining N990 per litre for sale into trucks”, the company said in the statement released on its X page.

On a series of accusations and counter-accusations from IPMAN, PETROAN, and other associations, Dangote refinery said it is impossible to land petrol at a lower price than Dangote refinery’s current price, except they are importing substandard products.

“Both organisations claim that they can import PMS at lower prices than what is being sold by the Dangote Refinery. We benchmark our prices against international prices, and we believe our prices are competitive relative to the price of imports.

“If anyone claims they can land PMS at a price cheaper than what we are selling, then they are importing substandard products and conniving with international traders to dump low quality products into the country, without concern for the health of Nigerians or the longevity of their vehicles. Unfortunately, the regulator (NMDPRA) does not even have laboratory facilities which can be used to detect substandard products when imported into the country.”

The company claimed it started selling at the stated rates without knowing the exchange rate that would be used to pay for the crude purchased.

Meanwhile, the company has said an international trading company rented a depot facility close to its refinery with plans to start blending substandard products and dump them into the Nigerian market to compete with Dangote refinery’s better quality.

“This is detrimental to the growth of domestic refining in Nigeria. We should point out that it is not unusual for countries to protect their domestic industries in order to provide jobs and grow the economy. For example, the US and Europe have had to impose high tariffs on EVs and microchips in order to protect their domestic industries.”

“While we continue with our determination to provide affordable, good quality, domestically refined petroleum product in Nigeria, we call on the public to disregard the deliberate disinformation being circulated by agents of people who prefer for us to continue to export jobs and import poverty.”

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