Next week on the stock market

Netflix has been enjoying a great run in 2024, with first quarter subscriber growth shooting the lights out. Continued growth in the ad-supported plan is key, it’s been a major success story so far and is allowing Netflix to attract more price sensitive customers. Management guided to 16% growth in second quarter revenue with operating income of $2.5bn, that as slightly ahead of consensus at the time so it’s important that figure is reached.

One thing to watch for is the number of new paid subscribers in the second quarter. Management has already warned it’ll be lower quarter-on-quarter due to the normal seasonal demand patterns. These have been a little skewed in recent years, but if we look at 2018/19 numbers net adds were down 34% and 70% respectively across the first and second quarters – so don’t be surprised to see something in that range.

Best in class content is one of the reasons Netflix has been able to consistently deliver sector leading churn rates. It’s expensive, but Netflix remains the only company set to increase content spend, giving a comparative advantage versus legacy media and its challengers.

Frasers’ recent growth has largely been fuelled by acquisitions of other brands. Despite this, Sports Direct remains the main event, accounting for more than half of the group’s £2.8bn revenue over the first six months of the year.

The group’s working hard to elevate its brand status in consumers’ minds by building new flagship stores and displaying products in a more flattering environment. We’ve been impressed by early signs at these new stores, but a lot more need upgrading if the new format is to contribute meaningfully.

Increased automation at warehouses is set to improve efficiencies, cash flows and profitability moving forward. As a result, underlying pre-tax profit guidance of £500-550mn looks achievable to us when full-year results are announced next week.

ASML has had a sluggish start to the year, with first-quarter sales of semiconductor manufacturing equipment and related services down 22%. Analysts are forecasting second-quarter sales of $6.1bn, a smaller drop of 12%. But that still requires a step change in performance in the second half to meet full-year guidance of broadly flat sales. Any hint that this target is no longer achievable is likely to be met with disappointment by the market.

ASML is considerably more optimistic about the following year. A key driver of future growth is adoption rates of the company’s next-generation high-NA technology, which promises to pack incredible processing power into even smaller chips. Anecdotal reports suggest that demand is outstripping supply currently, and we’ll be keen to hear about any plans to increase production capacity. The complexity of the machines however means that’s unlikely to be a cheap or quick process.