Wall Street’s main stock indexes rallied as Joe Biden is sworn in as US President and investors were weighing the prospect for more Covid-19 relief.
The tech-heavy Nasdaq Composite Index climbed 1.7%. The S&P 500 Index advanced 1% and the Dow Jones Industrial Average added 0.5%.
In earning news, Netflix spiked 13% as the company reported better-than-expected fourth quarter results, driven by strong growth in paid subscriptions. About 8.5 million new subscribers signed up to the platform in the quarter, far exceeding the 2.5 million originally projected, as more viewers stayed at home during the coronavirus pandemic. As a result, the total number of paying subscribers rose to almost 204 million at the end of 2020. Fourth quarter revenue of $6.64 billion beat analysts’ expectations of $6.62 billion, while EPS of $1.19 missed the Street consensus estimate of $1.38 and dropped 8.5% year-on-year.
In deal news, International Airlines Group (IAG) has agreed to buy Spain’s Air Europa for €500 million ($606.7 million), which is half the price tag offered back in 2019. According to the revised agreement, IAG’s subsidiary Iberia will acquire the entire issued share capital of Air Europa from Globalia. The deal value was slashed in half from the €1 billion proposed on Nov. 4, 2019. Additionally, the two parties agreed to defer the payment until the sixth anniversary following the completion of the deal. The acquisition is projected to be earnings accretive in the first full year following its completion and generate significant cost and revenue synergies, with full run-rate synergies now expected by 2026.
Lumentum Holdings has entered into an agreement to snap up Coherent in a cash and stock deal valued at $5.7 billion. The deal is expected to help Lumentum enhance its footprint in the more than $10 billion market for lasers and photonics outside of communications and 3D sensing. Under the terms of the proposed transaction, Coherent stockholders will get $100 per share in cash and 1.1851 shares of Lumentum common stock for each Coherent share they own. Following the closure of the deal, Coherent shareholders will own about 27% of the combined company. Lumentum shares advanced 1.8%.
Deal, or no deal: MGM Resorts pulled out of a $11 billion deal to buy Entain after refusing to make a revised bid for the British sports betting and gaming company. The move comes after Entain had rejected MGM’s offer made earlier this month, stating that it was undervaluing the company “significantly”. Entain owns gambling and sports betting sites including Bwin, Coral, and Eurobet. The company, however, stated that it was still committed to BetMGM – its online sports betting and gaming joint venture with Entain. Following the decision, Macquarie analyst Chad Beynon reiterated a Buy rating on the stock and added that the decision indicated that MGM “remains disciplined around its balance sheet”.
In earnings news, Comerica reported stronger-than-expected fourth-quarter results, driven by higher loans and deposit growth. Meanwhile, net reserve release further cushioned its bottom line. Comerica’s earnings of $1.49 per share beat the Street’s estimates of $1.19 per share but declined 19.5% year-over-year. However, earnings grew 3% sequentially, driven by “revenue growth and strong credit quality,” according to the company’s CEO Curt C. Farmer. The bank’s revenue (including net interest income and noninterest income) of $734 million declined by about 9% year-over-year but exceeded analysts’ estimates of $704 million. On a quarter-over-quarter basis revenue grew 3.4%.
Last, but not least, ViacomCBS announced that its streaming service, Paramount+ will be rolled out in the US and Latin America on March 4. The rebranded streaming service will be launched in Nordic countries and Australia on March 25 and in mid-2021, respectively. ViacomCBS is expected to announce its 4Q and FY20 results on Feb. 24. At the end of 3Q20, ViacomCBS had 17.9 million streaming services subscribers in the US, reflecting a 72% increase year-on-year. Barclays analyst Kannan Venkateshwar downgraded the stock from Buy to Sell and cut the price target from $36 to $35, as he views the optimism around the launch of Paramount+ as premature. Additionally, the analyst believes that there is not much upside to the stock at present levels. Shares declined 1.5%.
