Deep Dive
Shownotes Transcript
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis.
Good afternoon. Today is Wednesday, July 2nd, and I'm your host, Kim Kahn. Our top story so far. Netflix has held talks for a partnership with Spotify on music shows, live concert series, big celebrity interviews, and shorter turnaround documentaries. The Wall Street Journal says Netflix is currently working on rebooting the classic American talent show Star Search. Who can fill Ed McMahon's shoes here? And is set to launch a new music-focused show, Building the Band, debuting on July 9th.
Building the band will be on demand, but the show's finale could be live if there is a second season, Brandon Rhee, VP of Nonfiction Series and Sports at Netflix, told the paper. He added that the Star Search reboot will allow fans to vote live. Sources said that Netflix is planning another music competition, which it hopes to release in the coming months. People familiar with the industry discussions have said that while executives at Netflix have considered celebrity interviews,
They argued about whether people would be attracted to watch them immediately after seeing snippets of them on social media. On the economic front, as we head into the June employment report, arriving Thursday pre-market due to the July 4th holiday, ADP said its measure of private sector payrolls unexpectedly fell. Payrolls fell by 33,000 while economists were predicting a rise of 103,000. But the ADP report has a terrible track record of predicting the official numbers.
Pantheon macroeconomist Oliver Allen says ADP has typically understated the official estimate for payrolls recently, but there is no consistent pattern in its forecast errors historically. Rather than add 100k or so to the June ADP estimate to gauge official payroll growth, we're inclined to ignore it. Among active stocks, Jefferies threw in the towel on its Apple sell rating, upgrading the stock to hold due in part to the possibility of a surprise growth in global iPhone sales during the third quarter of fiscal 2025.
Citing data from CounterPoint Research, Jefferies analyst Edison Lee noted that the global iPhone sales volumes increased 15% year-over-year during April and May.
which was the strongest growth since 2021. Quantum stock Rigetti Computing was started with an overweight rating and $15 price target at Canter Fitzgerald. Analyst Troy Jensen said, And health insurer Centene is tumbling after it withdrew its 2025 earnings guidance.
The company said its Medicaid business has experienced a step-up in medical costs trend in the same areas previously identified by the company: behavioral health, home health, and high-cost drugs. In other news of note, highly-shorted Jack in the Box fired off a poison pill to defend itself against activist investors.
Jack in the Box disclosed that it adopted a limited-duration stockholder rights plan to protect the interests of all stockholders in response to Big Laurie Capital's accumulation of the restaurant company's stock. Big Laurie Capital now owns 9.9% of the company's common stock and intends to increase its stake. The Jack in the Box rights plan is effective immediately and will generally become exercisable if a person or group acquires beneficial ownership of 12.5% or more of the outstanding shares.
The board said it took the defensive action to enable shareholders to realize the long-term value of their investment and ensure fair and equitable treatment in the event of any proposed takeover. And in the Wall Street Research Corner, Robico Asset Management says, "...put on your binoculars and position for 2026, as trade policy flip-flopping has made near-term visibility foggy at best."
Audrey Kaplan, senior portfolio manager, says, We still anticipate high-quality companies will continue to lead the market, as they have done so for more than 30 years, noting that her team continues to use return on invested capital and free cash flow yield as preferred indicators to identify these companies. Companies with strong pricing power are expected to outperform as tariffs rates rise, forcing many businesses to either raise prices or accept lower profit margins.
Favorites include Rolex, an information and data analytics company that achieved a 10% pricing increase in full year 2024, with strong gross margins around 40%. Halion, a consumer health company with price-setter status, and AutoZone, described as a classic price-setter that may benefit if consumers repair existing vehicles rather than purchasing new ones to avoid tariff-inflated prices.
That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com slash WSB. And for a full suite of news, analysis, ratings, and data on stocks and ETFs, go to SeekingAlpha.com slash subscriptions.