Tag: Netflix Inc

Top Wall Street analysts remain optimistic about these five stocks

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The Netflix logo is seen on a TV remote controller in this illustration taken Jan. 20, 2022.

Dado Ruvic | Reuters

As the earnings season rolls on, investors are getting a glimpse into how companies are handling an array of macro pressures.

Analysts can pick apart these quarterly reports and help investors identify companies that can withstand near-term challenges and deliver attractive returns in the long term.

To that end, here are five stocks favored by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.

Netflix

Streaming giant Netflix (NFLX) recently delivered a beat on third-quarter earnings per share, with its crackdown on password sharing helping to add more subscribers to its platform.

Evercore analyst Mark Mahaney said that there were several key positives in the company’s third-quarter print, including 8.76 million subscriber additions, stronger-than-anticipated Q4 2023 subscriber addition guidance, and share buybacks of $2.5 billion. He also noted an increase in the 2023 free cash flow outlook to about $6.5 billion, from the previous guidance of at least $5 billion and a price hike for the basic and premium plans.

“We continue to believe that NFLX’s ad-supported offering and password-sharing initiatives constitute major Growth Curve Initiatives [GCI] – catalysts that will drive a material reacceleration in revenue and EPS growth,” said Mahaney.    

The analyst thinks that the company is pursuing these GCI catalysts from a position of strength, given that it is a global streaming leader based on several metrics, including revenue, subscriber base and viewing hours.

Mahaney reiterated a buy rating on NFLX stock with a price target of $500. Interestingly, Mahaney ranks No. 48 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 55% of the time, with each delivering a return of 25.4%, on average. (See Netflix Technical Analysis on TipRanks)

Nvidia

Next up is semiconductor giant Nvidia (NVDA). The stock has witnessed a stellar run this year, thanks to demand for NVDA’s chips in building generative artificial intelligence (AI) models and applications.

In a recently updated investor presentation, the company revealed roadmaps for its data center graphics processing units, central processing units and networking chipsets.

JPMorgan analyst Harlan Sur, who holds the 88th position out of more than 8,500 analysts on TipRanks, noted that NVDA’s product roadmaps indicate two major shifts. First, Nvidia has accelerated its product launch timing from a 2-year cycle to a 1-year cycle, which is expected to help the company keep pace with the growing complexity of large language compute workloads.

Regarding the second major shift, Sur said that the roadmaps indicated “more market segmentation (cloud/hyperscale/enterprise) by expanding the number of product SKUs [stock keeping units] that are optimized for a broad spectrum of AI workloads (training/inference).”

The analyst thinks that with these notable developments, the company is taking a multi-pronged approach to strengthen its data center market and technology. He reaffirmed a buy rating on the stock with a price target of $600, noting the growing demand for NVDA’s accelerated compute and networking silicon platforms and software solutions in the development of generative AI and large language models.

Sur’s ratings have been successful 64% of the time, with each rating delivering an average return of 18.2%. (See Nvidia Insider Trading Activity on TipRanks).

Instacart

Grocery delivery platform Instacart (CART) made its much-awaited stock market debut in September. Baird analyst Colin Sebastian recently initiated a buy rating on CART stock with a price target of $31.

Explaining his bullish stance, Sebastian said, “Despite a range of well-financed online and legacy retail competitors, Instacart enjoys an enviable combination of scale, retail integrations, vertical expertise, and proprietary technology.”

The analyst highlighted that the essence of Instacart’s business model is an asset-light partnership strategy. He also thinks that Instacart’s data and technology sophistication are its key competitive advantages. He believes that most food retailers might not be able to build similar internal e-commerce capabilities.

Most importantly, Sebastian views Instacart’s advertising business as one of the most successful launches of retail media, second only to e-commerce behemoth Amazon (AMZN). He pointed out that consumer packaged goods advertisers are promoting their products by leveraging Instacart’s performance ad formats that help in reaching target customers with relevant product ideas.   

Sebastian holds the 340th position among more than 8,500 analysts on TipRanks. His ratings have been successful 52% of the time, with each rating delivering an average return of 10.7%. (See Instacart Options Activity on TipRanks).

SLB

Oilfield services company SLB (SLB), formerly Schlumberger, recently reported better-than-expected third-quarter adjusted earnings. SLB stated that the oil and gas industry continues to gain from a multi-year growth cycle that has shifted to international and offshore markets, where the company claims to enjoy a dominant position.       

Goldman Sachs analyst Neil Mehta contends that while there are no clear near-term catalysts for SLB stock, the long-term growth story remains intact due to resilient customer spending. The analyst highlighted that Saudi Aramco is expected to spend about $245 billion through 2030, reflecting about 5% to 6% annual growth. Further, additional spending (at a modest growth rate) is anticipated from the United Arab Emirates’ ADNOC, Qatar and other players in the region.

Given that 80% of SLB’s revenue is from international and offshore markets, Mehta is confident that the company is well-positioned to leverage the long-term momentum in the Middle East. 

“SLB remains the preferred way to gain exposure to the international and offshore theme, with additional growth drivers in the expansion of its digital footprint with customers, which is margin accretive at ~40-45%, in our view,” said Mehta. 

Calling SLB a structural winner, particularly during pullbacks, Mehta reiterated a buy rating on the stock with a price target of $65. He ranks No. 155 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 65% of the time, with each delivering an average return of 12.5%. (See SLB’s Stock Charts on TipRanks) 

Tesla

Our final name this week is electric vehicle maker Tesla (TSLA). The company missed earnings and revenue guidance for the third quarter, with macro pressures, a highly competitive EV market and aggressive price cuts affecting its performance.

Mizuho analyst Vijay Rakesh noted that despite the sequential decline in the company’s Q3 gross and operating margin due to lower pricing and Cybertruck R&D expenses, they remain at the high end of the margins of legacy automakers and way above rival EV makers’ margins.

The analyst lowered his price target for TSLA stock to $310 from $330 to reflect near-term headwinds like margin pressure, macro weakness and Cybertruck ramp challenges. Nevertheless, he reiterated a buy rating, noting that the stock still trades at a discount to disruptors such as Nvidia, while also generating profitability at scale.

“We believe TSLA is prioritizing market share, technology, and cost leadership and is better positioned than peers to weather any turbulence to the broader Auto market,” said Rakesh.

Rakesh ranks No. 82 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 57% of the time, with each delivering a return of 18.6%, on average. (See Tesla Financial Statements on TipRanks)

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The Investing Club’s top things to watch in the stock market Friday

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The Club’s top things to watch Friday, August 25

1. Stocks edge up in premarket trading Friday after coming under pressure Thursday. The market is looking to Federal Reserve Chair Jerome Powell’s speech in Jackson Hole, Wyoming, at 10:05 a.m. ET. Investors expect Powell to argue interest rates will need to stay higher for longer in order to stamp out sticky inflation.

2. The Chinese government on Friday moves to ease its mortgage policies in order to boost China’s struggling property market, but it isn’t enough to generate a rally in Asian markets. The Shanghai Composite Index lost 0.6%, while Hong Kong’s Hang Seng Index fell 1.4%.

3. Chipmaker Marvell Technology (MRVL) delivers a quarter and guidance in line with Wall Street’s expectations, as strength in artificial-intelligence applications is offset by continued weakness in some of its legacy businesses like storage. The stock fell more than 3% in premarket trading Friday. The company increases its outlook for AI, with the expectation to exit the year at a $200 million quarterly run rate, or $800 million annualized. That may not be enough upside for today given the tepid reaction to Club name Nvidia‘s (NVDA) huge upside guide Wednesday, but still a good long-term story.

4. Elsewhere in the the world of AI, Baird says next week’s Google Cloud Next conference could show how Club holding Alphabet (GOOGL) is leveraging AI capabilities. Meanwhile, Oppenheimer reiterates its thesis that Club name Microsoft (MSFT) will be the “operating system for AI.”

5. Retailer Nordstrom (JWN) beats on earnings but reiterates a cautious full-year outlook. The company also notes losses from theft are at a historical high. Shares fell over 4% in extended trading Thursday. More broadly, retail earnings this season have showed that American consumers are spending with value top of mind.

6. Loop Capital on Friday upgrades Netflix (NFLX) to buy, from hold, while raising its price target to $500 a share, up from $425. The firm cites improving fundamentals, while noting the shares have corrected 15% from Netflix stock’s recent gains. Upgrading at this juncture is the right way to look at a sell-off in a high-quality company.

7. More ESPN partnerships on the way? Club holding Amazon (AMZN) is reportedly in talks with fellow Club name Walt Disney (DIS) about developing an ESPN streaming service, according to The Information. Disney currently owns 80% of the sports network.

8. Realty Income Corp (O) on Friday announces a $950 million investment in the real-estate assets of The Bellagio Las Vegas, acquiring a 21.9% indirect interest from Blackstone Real Estate Income Trust (BREIT) that values the property at $5.1 billion.

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THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER.  NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB.  NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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Britain blocks Microsoft’s $69 billion acquisition of Activision Blizzard

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LONDON — Britain’s top competition regulator on Wednesday moved to block Microsoft‘s acquisition of video game publisher Activision Blizzard.

The measure marks a major blow for the U.S. tech giant, as it seeks to convince authorities that the deal will benefit competition. Microsoft said it plans to appeal the decision.

Shares of Activision Blizzard slumped more than 8% in early U.S. trading. Microsoft shares were up 7% but this was largely linked to the company’s strong earnings report Tuesday.

The U.K. Competition and Markets Authority said it opposed the deal as it raises competition concerns in the nascent cloud gaming market. The CMA previously held concerns about competition in games consoles being undermined but ruled out this concern in a preliminary decision in March.

Microsoft could make Activision’s games exclusive to its cloud gaming platform, Xbox Game Pass, cutting off distribution to other key industry players, the CMA said.

Microsoft has reached its iPhone moment in terms of excitement but not applications, says Tim Horan

Cloud gaming is a technology that enables gamers to access games via companies’ remote servers — effectively streaming a game like you would a movie on Netflix. The technology is still in its infancy, but Microsoft is betting big on it becoming a mainstream way of playing games.

“Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities,” the CMA said in a press release Wednesday.

Microsoft offered the CMA remedies in an attempt to resolve its concerns — including “requirements governing what games must be offered by Microsoft to what platforms and on what conditions over a ten-year period.” However, the regulator rejected the proposals.

“Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market,” the CMA said.

‘Flawed understanding of this market’

Microsoft Vice Chair and President Brad Smith said in a statement that the company remains “fully committed to this acquisition and will appeal.”

“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,” Smith said Wednesday.

“We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”

Activision Blizzard subsequently released its first-quarter earnings report early following the CMA’s announcement. In the report, the company said it “considers that the CMA’s decision is disproportionate, irrational and inconsistent with the evidence,” reiterating that it believes the transaction will go through.

The firm reported earnings per share of 93 cents, almost doubling from 50 cents a year earlier. Net revenue grew 34% to $2.38 billion from $1.77 billion. The company canceled its earnings call.

Bobby Kotick, CEO of Activision Blizzard, told employees in a letter Wednesday that the company and Microsoft have “already begun the work to appeal to the UK Competition Appeals Tribunal.”

“We’re confident in our case because the facts are on our side: this deal is good for competition,” he said. 

“At a time when the fields of machine learning and artificial intelligence are thriving, we know the U.K. market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately,” Kotick added. “By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry.” 

‘UK is clearly closed for business’

An Activision Blizzard spokesperson said the CMA’s decision represented “a disservice to UK citizens, who face increasingly dire economic prospects.”

“We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric — the UK is clearly closed for business,” the spokesperson said.

Microsoft announced its intention to acquire Activision Blizzard in January 2022 for $69 billion, in one of the biggest deals the video game industry has seen to date.

Executives at the Redmond, Washington-based technology giant believe the acquisition will boost its efforts in gaming by adding lucrative franchises like Call of Duty and Candy Crush Saga to its content offerings.

However, some of Microsoft’s competitors contested the deal, concerned it may give Microsoft a tight grip on the $200 billion games market. Of particular concern was the prospect that Microsoft may shut off distribution access to Activision’s popular Call of Duty franchise for certain platforms.

Sony, in particular, has voiced concern with Microsoft’s Activision purchase. The Japanese gaming giant fears that Microsoft could make Call of Duty exclusive to its Xbox consoles in the long run.

Microsoft President Brad Smith says it's a 'good day for gamers' after Nintendo, Nvidia deals

Microsoft sought to allay those concerns by offering Sony, Nintendo, Nvidia and other firms 10-year agreements to continue bringing Call of Duty to their respective gaming platforms.

Microsoft contends it wouldn’t be financially beneficial to withhold Call of Duty from PlayStation, Nintendo and other rivals given the licensing income it generates from keeping the game available on their platforms.

Microsoft’s Smith told CNBC last month that the company is offering Sony the same agreement as it did Nintendo — to make Call of Duty available on PlayStation at the same time as on Xbox, with the same features. Sony still opposes the deal.

The CMA had raised concerns with the potential for Microsoft to hinder competition in the nascent cloud gaming market via its Xbox Game Pass subscription service, which offers cloud gaming among its perks. Microsoft has committed to bring new Call of Duty titles to Xbox Game Pass on day one of its release.

Cloud gaming, or the ability to access games via PC or mobile devices over the internet, is still in its infancy and requires a strong broadband connection to work well. Cloud gaming made up only a fraction of global internet traffic in 2022.

Microsoft still needs to convince other regulators not to block the deal. The EU continues to probe the merger to assess whether it hurts competition, while the U.S. Federal Trade Commission has sued to block the deal on antitrust grounds.

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Stocks making the biggest moves premarket: United Airlines, Netflix, Morgan Stanley and more

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Check out the companies making headlines before the bell.

United Airlines — The airline lost 0.9% in the premarket after it announced a net loss for the first quarter. United posted a loss of 63 cents per share, which is 10 cents smaller than the 73-cent estimated loss from analysts polled by Refinitiv. The company reported $11.43 billion in revenue, slightly above the $11.42 billion estimated. 

Interactive Brokers Group — Shares of the electronic broker were down 3.7% after the company reported a miss on earnings in the first quarter. The company posted earnings per share of $1.35, which fell below the $1.41 consensus estimate from analysts polled by Refinitiv.

Netflix – Shares of the streaming giant fell more than 2% after the company reported mixed results on the delayed rollout of its crackdown on password-sharing, which was originally scheduled for the first quarter. Revenue came in slightly below the analyst consensus from Refinitiv, although earnings topped estimates.

Western Alliance – Shares of the beaten-down regional bank jumped more than 20% in premarket trading after Western Alliance said its deposits have been rebounding in April after declining 11% in the first quarter. Wedbush upgraded the stock to outperform after Western Alliance’s quarterly report despite the bank’s net income falling more than 50% from the previous quarter.

Travelers — The insurance stock added more than 3% before the bell after beating Wall Street’s expectations on both the top and bottom lines. The Dow Jones Industrial Average component reported adjusted earnings of $4.11 a share on $9.40 billion in net premiums.

Intel — Shares were down almost 2% after the semiconductor manufacturer announced it would be discontinuing its bitcoin mining chip series, Blockscale, after just a year of production. 

Abbott Laboratories — The medical device company advanced 2.8% after beating top- and bottom-line expectations and reaffirming guidance. The company reported $1.03 in earnings per share on revenue of $9.75 billion for the first quarter, while analysts polled by FactSet anticipated 99 cents in per-share earnings on $9.67 billion in revenue. The company said it still expects full-year adjusted earnings per share to come in between $4.30 and $4.50, in line with the $4.39 consensus estimate of analysts. 

U.S. Bancorp — Shares of the bank were up 1.7% after it announced an earnings and revenue beat for the first quarter. U.S. Bancorp posted $1.16 earnings per share and revenue of $7.18 billion. Analysts polled by Refinitiv had estimated per-share earnings of $1.12 and revenue of $7.12 billion. Meanwhile, the bank reported its quarter-end deposits were down 3.7% to $505.3 billion. 

Rivian Automotive — The electric-vehicle maker slipped about 2% after being downgraded by RBC Capital Markets to sector perform from outperform. The Wall Street firm remains constructive on the longer-term outlook for the stock, but sees limited catalysts to accelerate profitability in the near term. It also slashed its price target in half, to $14 from $28 per share.

ASML Holding – Shares of the chipmaker lost 2.6% in early morning trading after the company reported net bookings for the first quarter were down 46% year-over-year on “mixed signals” from customers as they work through inventory. The shares fell despite ASML reporting an earnings beat for the quarter.

Boeing — Shares of the industial rgiant dipped 0.6% in premarket after CEO Dave Calhoun said that a flaw detected in some of its 737 Max planes won’t hinder its supply chain plans for increased production of its bestselling jetliner this year. The company disclosed a flaw with some of its 737 Max planes last week and said it was likely to delay deliveries.

Morgan Stanley  — Shares were down 3.2% after the bank announced its quarterly earnings. The investment bank and wealth manager posted earnings per share of $1.70 for the first quarter, greater than the $1.62 estimate from analysts polled by Refinitiv. Overall revenue came in at $14.52 billion, above the $13.92 billion consensus estimate from Refinitiv as equities and fixed income trading units performed better than expected. One growth area was wealth management, where revenue increased by 11% from a year ago. The shares, which are outperforming most other banks this year, eased by 2% in early trading despite the results.

Ally Financial — The digital financial services company’s shares were down 1.3% after its first quarter earnings and revenue missed Wall Street’s expectations. Ally posted per-share earnings of 82 cents, while analysts had anticipated 86 cents per share, according to FactSet data. The bank’s adjusted total net revenue also fell below estimates, coming in at $2.05 billion versus the $2.07 billion consensus estimate from FactSet analysts.  

Intuitive Surgical — Shares jumped 8.1% after Intuitive Surgical reported an earnings and revenue beat. The company reported adjusted earnings per share of $1.23, topping against a consensus estimate of $1.20 per share, according to FactSet. Revenue grew 14% from the prior year, coming in at $1.70 billion, compared to estimates of $1.59 billion.

Tesla – Shares dropped more than 2% in the premarket after Tesla slashed prices on some of its Model Y and Model 3 electric vehicles in the U.S. The cuts come ahead of Tesla’s earnings report after the bell on Wednesday and is the sixth time the EV maker has lowered prices in the U.S. this year.

 Zions Bancorporation — The regional bank stock jumped nearly 4% in premarket before its earnings report after the bell Wednesday. Investors could be getting optimistic after its peer Western Alliance said in its first-quarter that deposits have stabilized since last month’s collapse of Silicon Valley Bank.

CDW — The IT company’s shares plunged 10.6% after it reported a weaker-than-expected preliminary quarterly earnings report. CDW issued quarterly revenue guidance of $5.1 billion, falling below the FactSet analysts’ consensus estimate of $5.58 billion. The company said it was significantly impacted by more cautious buying amid economic uncertainty. It also issued guidance for its full-year earnings to fall “modestly below” 2022 levels.

Citizens Financial Group — Shares were down almost 4% after the company’s first-quarter earnings disappointed investors. Citizens Financial’s earnings per share came in at $1, while analysts had estimated $1.13, according to Refinitiv data. The company’s revenue of $2.13 billion also came below analysts’ expectations of $2.14 billion. Citizens Financial reported a 4.7% decline in deposits to $172.2 billion.

— CNBC’s Alex Harring, Tanaya Macheel, John Melloy, Michelle Fox, Yun Li, Jesse Pound and Kristina Partsinevelos contributed reporting

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Jim Cramer’s top 10 things to watch in the stock market Tuesday

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My top 10 things to watch Tuesday, April 11

1. Truist Bank downgraded natural gas producer EQT Corporation (EQT) to hold from buy, while lowering its price target to $28 per share, from $41, on “potentially lower volumes.” Meanwhile, the bank raised its price target on Club holding Coterra Energy (CTRA) to $29 per share, from $26, on the expectation the oil-and-gas producer will “significantly outperform” the broader market in the second half of the year and in 2024. Truist maintained a hold rating on Coterra.

2. Barclays cut its price target on Club holding Constellation Brands (STZ) to $277 per share, from $279, while maintaining an overweight rating. The move is somewhat meaningless given how far the target is from where the stock is, with shares of STZ closing at $224.60 apiece on Monday. The bank also lowered its price target on Lincoln National (LNC) to $20 per-share, from $29, while maintaining an equal weight rating.

3. JPMorgan is positive on Netflix (NFLX) going into its first-quarter earnings, but sees a risk to the second quarter due to its new paid-sharing policy. The bank maintained a price target of $390 per share, along with an overweight rating.

4. Wells Fargo upgraded natural gas exploration-and-production group Range Resources (RRC) to overweight from equal weight, while raising its price target to $31 per share, from $30. The bank expects RRC to “relatively outperform” other gas players in a weak gas price environment. Meanwhile, the bank downgraded Southwestern Energy (SWN) to underweight, or sell, from equal weight, while lowering its price target to $5 per share, from $6 — largely a result of limited capital returns and weak cash flow generation.

5. Guggenheim lowered its price target on Club holding Walt Disney (DIS) to $130 a share, from $140, on the back of moderating growth at its parks and resorts — a target that is very far off. Shares of Disney closed at $100.81 apiece on Monday.

6. Citi reiterated neutral ratings on chipmakers Intel (INTC) and Club holding Advanced Micro Devices (AMD), a result of ongoing weak cloud demand. Still, computer notebook shipments were up 41% in March, month-over-month, 18% above Citi’s estimate.

7. KeyBanc raised its price target on Club holding Nvidia (NVDA) to $320 per share, from $280, citing strengthening demand for artificial intelligence (AI).The semiconductor firm’s graphics processing units (GPUs) have proven central to the proliferation of AI, which reached a tipping point late last year with the launch of OpenAI’s viral chatbot, ChatGPT.

8. Morgan Stanley raised its price target on Club holding Humana (HUM) to $637 per share, from $620, saying the health insurer has “the strongest earnings growth story in managed care through 2025.” The bank maintained an overweight, or buy, rating on the stock. But Morgan Stanley chose UnitedHealth (UNH) as its top pick in the sector, replacing Cigna (CI).

9. UBS lowered its growth estimates on Club holding Microsoft‘s (MSFT) Azure cloud business, suggesting customers will continue to cut back on cloud spending amid slower economic growth. The bank maintained a neutral rating and price target of $275 per share.

10. Despite recent price cuts, electric vehicle maker Tesla (TSLA) should be able to maintain “industry leading” operating margins and is better positioned than competitors to navigate economic headwinds, Baird argued. The firm maintained an outperform, or buy, rating and price target of $252 per share.

(See here for a full list of the stocks in Jim Cramer’s Charitable Trust.)

As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.

THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER.  NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB.  NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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Why you won’t see many car ads during Sunday’s Super Bowl

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General Motors and Netflix partnered for a 60-second ad starring actor and comedian Will Ferrell driving GM electric vehicles in popular Netflix shows and movies to promote the streaming service using more EVs in its productions.

Screenshot

Automakers — historically among the largest Super Bowl advertisers — are mostly bypassing this Sunday’s NFL championship game to preserve cash or spend ad dollars elsewhere.

The only automakers expected to advertise during Sunday’s game between the Philadelphia Eagles and Kansas City Chiefs on Fox are General Motors, Kia and Stellantis‘ Ram and Jeep brands. Porsche said it will air a spot shortly before the game in collaboration with Paramount.

The broad resistance is a swift change from a year ago, when the automotive industry represented the largest segment for Super Bowl ads, at $99.3 million, according to Kantar Media’s Vivvix. That total was up by more than $30 million from 2021 when web-based, media and movie companies outspent the industry.

The decline in automotive ads this year comes as companies invest billions of dollars in electric vehicles or attempt to preserve cash in preparation for a potential economic downturn. They also are continuing to battle through supply chain problems.

The average cost of a 30-second commercial during last year’s Super Bowl was $6.5 million, up more than $2 million over 2016 rates. That cost is now approaching $7 million, according to Kantar Media.

“This has less to do with the Super Bowl itself and more to do with individual issues within the automotive industry,” Eric Haggstrom, director of business intelligence for Advertiser Perceptions, told CNBC. “The auto industry has been battered by supply chain issues, inflation eating into consumer budgets, and rising interest rates that have made car payments dramatically more expensive.”

Haggstrom noted several automakers pulled back ad spending in recent years — the result of fewer products to sell due to tight inventories caused by supply chain problems during the coronavirus pandemic. Newer automakers have also traditionally advertised less, or not at all, as they attempt to emulate Tesla’s advertising-free model, Haggstrom said.

Eight auto brands or companies advertised during last year’s Super Bowl, including returning companies GM and Kia. Embattled car retailers Carvana and Vroom, which advertised during last year’s game amid record used vehicle demand, are not returning. And EV startup Polestar, whose ad was a success in the 2022 Super Bowl, said it will also not advertise this year.

For the 10th consecutive year, auto accessory company WeatherTech will air a 30-second ad. The Illinois-based company is the longest-running automotive business to consecutively advertise during the big game.

Those who are advertising say they are taking the opportunity to reach a captive audience that’s expected to be around 100 million viewers. The game is historically one of the most-watched events of the year, offering advertisers an opportunity to capitalize on viewership amid declining television audiences.

GM’s 60-second ad stars actor and comedian Will Ferrell driving GM EVs through popular Netflix shows and movies to promote the streaming service upcoming efforts to include more EVs in its productions.

“It is a big moment,” GM marketing chief Deborah Wahl told reporters during a briefing about its ad. “To do something like this is really different.”

Ferrell also appeared in GM’s Super Bowl ad promoting EVs two years ago.

Those who aren’t returning largely attributed the decision to business priorities or available products and capital. Toyota Motor, one of the top Super Bowl advertisers in recent years, said its product plans didn’t align with this year’s game.

“We look at the Super Bowl very strategically, and we want to make sure that we have a purpose for being in the Super Bowl,” Lisa Materazzo, group vice president of Toyota Marketing, told CNBC at an event this week for the Chicago Auto Show. “We definitely think the Super Bowl has a place. This year it just wasn’t the right time or place for us.”

Hyundai Motor, in an emailed statement, said the decision not to advertise was “based on business priorities and where we felt it was best to allocate our marketing resources.” Audi, which last advertised in 2020, said it’s “focusing on other efforts within our electrification and sustainability commitments.”

Stellantis, formerly known as Fiat Chrysler, has been one of the most prolific advertisers for more than a decade and is returning after a one-year hiatus. The company’s chief marketing officer, Olivier Francois, is well known for attracting standout talent including Bruce Springsteen, Bill Murray, Clint Eastwood and Eminem.

Stellantis has not released its ads, while GM, Kia and WeatherTech released their commercials earlier this week.

Kia’s 60-second “Binky Dad” ad features a father going viral for racing to retrieve a “binky” for his baby, driving a 2023 Telluride X-Pro SUV. It’s set to “Gonna Fly Now” of 1976, famously known as the “Rocky” movie theme music. Uniquely, the commercial features three alternate endings that will be available exclusively on TikTok.

The ad has drawn some criticism online, as Kia and its parent company Hyundai have come under fire for at least four of its suppliers reportedly violating child labor laws. Both Hyundai and Kia have condemned such practices. Reuters this week reported the parent company is in talks with the U.S. Department of Labor to resolve concerns about child workers in its U.S. supply chain.

The 30-second ad for WeatherTech promotes the company’s U.S.-made products, showing bank executives and others criticizing the company for its American investments and production.

The ad for Porsche is a collaboration with Paramount for this summer’s “Transformers: Rise of the Beasts” film. It is the second year for such a tie-up following a commercial last year for “Top Gun: Maverick.”

Haggstrom said there’s been a general “cautiousness” in the auto industry around advertising.

“They’re really looking at what is the value of advertising today? How does that affect my top line, how does that affect my go-to-market,” he said. “We’ve seen a general trend in accountability in consumer advertising.”

– CNBC’s John Rosevear contributed to this report.

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