$500 billion reasons to buy, Netflix pops to record, United Airlines flies, CAE downgraded
Sometimes I like to imagine all the things my children may talk to a future therapist about. Based on the last 24 hours of tantrums it seems like their greatest traumas currently stem from being forced to sleep 12 hours a day, having to blow their nose into a Kleenex and only getting a regular bath not a lavender bubble bath. Call child services.
If you missed Eric Nuttall on In the Money with Amber Kanwar you can listen on Apple, Spotify or here, and on YouTube.
Isn’t it ironic: US futures are surging this morning after a big rally yesterday that not only took all the US markets within spitting distance of all-time highs but also saw the TSX finish in the green. Ironically, for all the consternation about President Trump enacting tariffs on Canada, it was actually another Trump announcement that helped the TSX finished stronger. Yesterday, Trump said he supports a $500 billion investment by Oracle (+8% in pre-market), Softbank (+10% in Japan) and OpenAI to build AI focused data centres in America. That propelled tech stocks like Celestica but also uranium stocks in Canada like Cameco and NexGen presumably because they would be part of the energy solution to power these data centres. This morning, tech stocks are leading the way higher, including quantum computing stocks. (Now would be a good time to bone up on the sector, you can watch our episode about quantum here). But, what’s interesting about the rally in the US this time around is that it is not just about US tech stocks. Recall, during the Christmas-time sell-off we saw the worst streak of breadth in decades (meaning even on up days for the market, most stocks were actually falling). One of the most prominent features of the rally over the last 6 days has been that the S&P 500 has seen more than 68% of stocks climb, which is an record streak going back to 1928 according to Jim Reid at Deutsche Bank. However, the CEO of JPMorgan warned that the US markets may be overheating. “Asset prices are kind of inflated,” said Jamie Dimon in an interview from Davos with CNBC.
Netflix and own: Shares of Netflix are surging 14.5% right now, poised to open at a record high and possibly trade above $1000/share for the first time ever. Netflix added a record 18.9 million new customers in the fourth quarter, double what analysts were expecting. This is all thanks to live-events like the Jake Paul & Mike Tyson fight and shows like Squid Games. Sales grew 16% and the company said sales for 2025 would be higher than expected. Part of that will come from increasing prices for subscribers in the US, Canada, Portugal and Argentina. Not much we can do about it, we are all hooked now! What does this mean for Disney and other streamers? Disney shares are up about 1.5% in the pre-market. However, Mark Mahaney at Evercore thinks this is mainly a Netflix story. “Netflix is simply running away with the streaming market thanks to excellent execution, a stellar content slate, and scale advantages,” he wrote in a note to clients.
Take off: United Airlines is poised to open at a record high this morning after earnings beat expectations and it forecasted better than expected profit next quarter. The better outlook is being driven by strong travel for demand that is spilling into a quarter that is typically softer for the airline. In fact, United Airlines hasn’t seen a post-holiday first quarter profit since 2019. Both United Airlines and Delta have benefitted from this stronger-than-usual demand. The contrast between them and Air Canada has been stark as you can see from the chart below. While some may say this bodes well for Air Canada, the stock nosedived in December after lackluster projections at its Investor Day.
Insured gains: Shares of Travelers are popping 5% in the pre-market after notching a record profit. The insurance giant and Dow component did see higher catastrophic losses however a key measure of profitability (combined ratio) improved as premiums went up. There was also no mention of the financial impact to the company stemming from the devastating wildfires in Los Angeles. While the fires are the most expensive natural disaster in US history, insurers like Travelers have pulled back on offerings in disaster prone areas and aren’t on the hook.
Notable calls: CAE is getting its wings clipped with a downgrade from National Bank’s Cameron Doerksen on share price appreciation. “We continue to see CAE enjoying a multi-year period of growth supported by positive end market backdrops for both its Civil and Defense segments. However, since reporting fiscal Q2 results in mid-November, CAE shares are up 33%,” he wrote. Remember there is an activist investor in there trying to shake things up (Browning West), so the call is effectively saying the early gains are in. Scotia is weighing in on the debate about whether TD should sell its stake in Charles Schwab. A few days ago, CIBC put out a note saying they could sell the stake and do a huge buyback. Scotia’s Meny Grauman is arguing against that move in a note this morning. Grauman argues that a buyback is unlikely to lift the stock. “With buybacks unlikely to lift the shares on a sustainable basis, and in the absence of any inorganic capital deployment options (in Canada because of a lack of targets and in the US because of regulatory constraints) we think that it makes sense for TD to hold onto this (growing) US earnings stream for now,” wrote Grauman this morning.
