Welcome to Sparks, your weekly breakdown of some of the most interesting market news. Here’s what sparked our interest this week:

• Netflix reverses a trend
• Kroger acquires rival Albertsons
• Amazon & Apple union drama

After losing subscribers for two consecutive calendar quarters, Netflix (NASDAQ: NFLX) appears to have turned its fortunes around. The streaming giant added 2.41 million customers in the third quarter of 2022, exceeding Wall Street expectations and more than doubling the added subscriptions projected by the company at the end of Q2 2022. Netflix expects growth to continue, forecasting it would add 4.5 million subscribers in Q4 2022. However, the company has said that, starting next quarter, it will no longer provide subscriber forecasts.

A solid line-up of new programming in Q3 2022 may have helped subscription numbers bounce back. Netflix touted in its earnings release that hits such as Monster: The Jeffrey Dahmer Story, Stranger Things S4, Extraordinary Attorney Woo, The Gray Man and Purple Hearts were some of the streaming platform’s most watched series and films of all time. The date night favourite is also fresh off a pretty successful run at the Emmys in which Korean drama Squid Game made history by becoming the first foreign language title to win an Emmy – walking away with six awards in total. The majority of Netflix’s net subscriber growth during the quarter came from the Asia-Pacific region. The US-Canada region had the smallest growth of Netflix’s regions.

Shares in Netflix have sunk significantly this year, prompting the firm to slash jobs and reconsider core tenets of its business. After announcing in April 2022 that it would introduce a new lower priced ad-supported subscription plan, last week Netflix announced that it will launch this new service in November 2022. ‘Basic With Ads’ will complement Netflix's existing ad-free tiers, and be available in 12 countries, including the US, the UK, Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, and Spain. Netflix estimates that between 5% and 10% of titles won’t be available on Basic With Ads and you can expect to see adverts of between 15 to 30 seconds long for four to five minutes, every hour. The tier will roll out in stages with Canada and Mexico being the first two countries to access the new offering on 1 November 2022. All other eligible countries will launch on 3 November except Spain which finishes up the rollout on 10 November.

The numbers

• 223.09 million - The number of paying customers currently subscribed to Netflix
• 1.43 million - The number of subscribers Netflix gained in the Asia-Pacific region, where the majority of this growth comes from. The US-Canada region gained 100,000 subscribers
• $6.99 - The monthly price tag of Basic With Ads in the US, it will cost £4.99 in the UK and $7 in Australia

Supermarket sweep 🛒

Grocery company Kroger (NYSE: KR) has agreed to acquire rival Albertsons (NYSE: ACI) in a deal valued at $24.6 billion. Combining the two largest grocery-store chains in the US could be an attempt to create a supermarket giant more capable of competing with market leader Walmart (NYSE: WMT). The mega-merger, one of the biggest deals in US retail in recent years, would bring under one roof nearly 5,000 stores, including Albertsons’ Safeway and Kroger-owned Ralphs and Fred Meyer.

US senators who scrutinise antitrust issues have expressed ‘serious concerns’ about the merger, expected to be completed in 2024, and have scheduled a hearing on the deal to take place in November 2022. The US Federal Trade Commission (FTC) is expected to challenge the deal but the two companies have said they plan to divest some stores by placing them in a new company owned by Albertsons shareholders to give themselves a stronger hand at the negotiation table. The spun-off company could have between 100 and 375 stores. Critics of the deal have pointed to Albertsons' 2015 purchase of Safeway. The FTC ordered the sale of more than 150 stores at the time, but eventually allowed Albertsons to repurchase many of them to prevent them from closing down.

Antitrust scrutiny has increased under the Biden administration and, with inflation at decades-high levels, there are concerns that a merger like this could lead to less competition and higher prices, further exacerbating the financial strain currently felt by millions of US consumers. Six mergers have been challenged in court by the FTC in the last year, occasionally with success. Under Chair Lina Khan, it forced chipmaker Nvidia Corp. (NASDAQ: NVDA) to back out of its purchase of SoftBank Group Corp.'s Arm Ltd., as well as forcing American arms manufacturer Lockheed Martin Corp. (NYSE: LMT) to give up its acquisition of rocket engine maker Aerojet Rocketdyne Holdings Inc (NYSE: AJRD).

The numbers

• Around $210 billion - The expected annual sales of Kroger and Albertsons combined, currently the top two standalone grocers in the US
• 25.2% - Walmart’s grocery market share for 2021. For comparison, Kroger and Albertsons shares are currently 8.1% and 4.8%, respectively
• $600 million - The amount Kroger will have to pay Albertsons if the deal is terminated

In other news 🤓

Some other sparks that have been flying this week:

• Walmart Creator - In a bid to cash in on Gen Z trends and social media, Walmart (NYSE: WMT) is starting a platform for social media influencers. As more customers look to celebrities and content creators for cues on what to buy, Walmart Creator will make it easier for influencers to recommend company products to their followers. Tens of thousands of goods will be available on the platform and influencers will be able to earn commission on sales they refer. Creators who are interested can already apply for beta access, with the beta phase expected to last until sometime in 2023
• GIF up - Meta Platforms (NASDAQ: META) has said that it will sell Giphy after the UK’s Competition and Markets Authority (CMA) affirmed an earlier order to undo the acquisition. Giphy, which allows users to search for, create and share GIFs, was bought by Meta (then still known simply as Facebook) in 2020. The CMA investigated the sale and in November 2021 it ordered Meta to dispose of Giphy, warning that the takeover could harm social-media and advertising. Meta was fined £50.5 million for refusing to comply with the CMA during the investigation. It is the first time the UK has blocked an acquisition by a tech giant such as Meta
• Union news - On 18 October 2022, New York employees of Amazon.com Inc (NASDAQ: AMZN) in upstate New York voted against unionisation, a setback for the Amazon Labor Union (ALU), which earlier this year won a historic vote at a warehouse in Staten Island, New York. Chris Smalls, president of ALU, said in a statement that the voting process ‘wasn’t free and fair’ and has suggested the union may seek to challenge the election results. On the same day, more than 100 Apple retail workers walked off the job for an hour in stores across Australia. Although the action is small, it is significant. Apple is facing a burgeoning unionisation movement in the United States, Europe and beyond

Top movers 📈

Selected stocks are the three best and three worst performing stocks for the last seven days prior to the creation of this newsletter based on the stocks available to trade via the Revolut app in the UK.

Gainers 💪

RETA - Shares in Reata Pharmaceuticals (NASDAQ: RETA) have gained around 48% in the period between 12 October 2022 and 19 October 2022. The FDA recently decided not to hold an advisory committee meeting to review the company’s new drug application. The company is seeking approval for omaveloxolone, a treatment for patients with Friedreich’s ataxia (FA), an inherited disorder that affects some of the body's nerves. A decision from the FDA on the potential approval of omaveloxolone is expected by February 28, 2023.

LFG - Archaea Energy Inc (NYSE: LFG) has gained around 43% in the period between 12 October 2022 and 19 October 2022. Oil and gas giant BP (NYSE: BP) recently confirmed that it would acquire Archaea for $3.3 billion.

WALD - Blank check company Waldencast (NASDAQ: WALD) gained around 20% in the period between 12 October 2022 and 19 October 2022. There was no discernible news behind this movement.

Losers 📉

NGM - Shares in NGM Biopharmaceuticals (NASDAQ: NGM) have fallen more than 68% in the period between 12 October 2022 and 19 October 2022. The Californian biotech’s stock dropped after it announced its phase 2 trial for its Merck & Co partnered macular degeneration treatment failed to reach its main goal of producing statistically significant reduction rates in lesion areas.

OLPX - Olaplex (NASDAQ: OLPX) shares have lost around 53% of their value in the period between 12 October 2022 and 19 October 2022. On 18 October 2022, the luxury hair care company cut its sales projections due to a ‘slowdown in sales momentum’.

CANO - Shares in Cano Health (NYSE: CANO) have fallen almost 48% in the period between 12 October 2022 and 19 October 2022. According to reports, CVS (NYSE: CVS) is no longer moving forward with plans to acquire the Florida-based primary care provider.

Next week 🗓

Earnings reports are expected from Apple Inc (NASDAQ: AAPL), Alphabet Inc (NASDAQ: GOOGL), Boeing Co (NYSE: BA), Spotify (NYSE: SPOT) and Amazon.com Inc (NASDAQ: AMZN).

That’s all for this week!

Thanks,

Team Revolut

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