Today's stock market
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Bank stocks were weak today, with the SPDR S&P Bank ETF (KBE 2.63%) falling 0.4%. The dollar declined while gold and gold mining shares rose; the VanEck Vectors Gold Miners ETF (GDX 0.60%) gained 0.7%.
Now featuring on Netflix: Excellent Q2 earnings
Shares of Netflix soared over 13.5% to an all-time high after the company reported strong subscriber growth in the second quarter. Revenue was $2.79 billion, up 32% from the period a year earlier, with EPS of $0.15 compared to $0.09 last year. Both figures were close to the company's guidance, but the surprise was that the company added 5.2 million new subscribers in the quarter, compared with expectations of 3.2 million.
International subscriber growth was particularly strong, with 4.1 million new members being added, resulting in international subscribers outnumbering domestic ones for the first time in company history. U.S. subscriber numbers beat expectations, too, with net additions numbering 1.1 million, the highest number for a Q2 since 2011. "In Q2, we underestimated the popularity of our strong slate of content which led to higher-than-expected acquisition across all major territories," Netflix wrote in its quarterly letter to shareholders.
Despite significant investments in content, the company reported increasing profitability as well. Operating margin was 4.6%, compared with 3.3% a year earlier. Netflix expects that figure to increase to 6.9% in the third quarter, up from 4.6% last year, and EPS of $0.32 compared to $0.12 in Q3 2016.
Netflix reaffirmed its strategy of maintaining negative free cash flow in order to fuel expansion, continuing to put increasing sums into original content, including local productions that can be shown in non-English markets. Given the remarkable results investors are seeing from the twin strategies of international expansion and original productions, the market appears more than willing to tolerate the losses for a while to come.
Goldman Sachs beats earnings estimates -- in a disappointing way
Investment banker Goldman Sachs became the latest bank to report higher-than-expected earnings but see its stock take a tumble after analysts examined the details. The company reported Q2 revenue of $7.89 billion, compared with $7.93 billion the year before, and earnings of $3.95, up from $3.72 in 2016. Analysts were expecting EPS of $3.39 on revenue of $7.52 billion. Shares finished the day with a 2.6% loss.
The bright spot in Goldman's results was from investment gains in its investing and lending segment, which saw an increase of $465 million, or 42%. The gains were primarily from private equity investments, due to company-specific performance. On the other end of the spectrum was a 40% decline in the fixed income, currency, and commodities unit. Investment banking also declined 3% on lower merger and acquisition activity, while investment management revenue increased 13%.
"A mixed operating environment persisted into the second quarter as conditions continued to support underwriting and M&A, while constraining certain market-making activity," said Goldman Chairman and CEO Lloyd C. Blankfein in the press release.
Earnings may have beat expectations, but Wall Street evidently wasn't happy about the way that was achieved. The shortfall in fixed income, currency, and commodity trading was blamed on "challenging environment characterized by low levels of volatility, low client activity and generally difficult market-making conditions" -- which may continue -- and equity gains in the investing business are seen as unpredictable going forward. Goldman shares are down 6.7% since the beginning of the year.