Playstation Saves Sony’s Earnings, Plus Chinese Investors Bet On Gambling

By 08.01.16

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“Apple give Jay his check for Tidal now and stop trying to act like you Steve” — Kanye West, in a tweet over the weekend. The self-proclaimed “creative genius of our generation” really wants Apple to buy Tidal, Jay Z’s music streaming service. We expect West’s comments will be taken very seriously at Apple’s next board meeting.

MARKET SNAPSHOT

Big Picture

  • Markets finished mixed but mostly positive to end July, as solid tech earnings gave investors hope despite poor GDP figures and a lack of stimulus from Japan

Market Movers

  • Shares of Seres Therapeutics dropped an unheard-of 69% Friday after its key drug, which was supposed to prevent bacterial infections, failed miserably
  • Big data startup Talend closed up over 41% in its Nasdaq debut Friday. Welcome to Wall Street

CORPORATE PRIMER

Chinese Investors Bet on Gambling

…Literally. A consortium of Chinese investors led by Shanghai Giant Network Technology dropped $4.4 billion to acquire Caesars Entertainment’s online casino-style games unit. What’s the bet, exactly? Well, there are two parts. First, that users will continue to move away from PC and console-based gaming, and move into virtual gambling. Sounds reasonable. Second, that online gaming will eventually become legal in China. Now that’s a little tougher to predict. For now, the real winner is Caesars, which has been in dire need of cash since its biggest division went bankrupt last year.

Playstation Saves the Day

…Or at least Sony’s earnings. Sony, which trades on the Japanese stock exchange, wowed investors by posting stronger-than-expected net profit. The key? Gamers. Sales for Sony’s Game & Network Services jumped 14.5% year over year, thanks to an increase in sales of PS4 games. Unfortunately, Sony is far from invincible. The electronics and entertainment giant downgraded its outlook due to the strong yen, which is expected to reduce Sony’s profits abroad. For Sony, greatness still awaits.

NextEra is Scrappy

…And its hard work finally paid off. After two long years of bidding, the energy giant will be shelling out $18.4 billion to buy Dallas-based Oncor—from Energy Future. Oncor is a real diamond in the rough; the little-known company provides power to 10 million Texas homes. Energy Future is hoping that the divestiture will help lift the company out of a bankruptcy that has dragged on since 2014. Meanwhile, NextEra hopes the big deal will make it a real player in the utility sector. Welcome to the show.

U.S. MACRO

Talk About Weak Sauce

…U.S. GDP disappoints. GDP grew 1.2% in the second quarter, falling well short of the 2.6% growth expected. What’s going on here? For starters, business inventories fell for the first time since 2011, which took out 1.2% in GDP growth alone. On the bright side, consumer spending grew at a 4.2% rate, suggesting underlying strength in the economy. Nevertheless, the overall subpar numbers have investors betting that the Fed won’t raise interest rates anytime soon.

OTHER STORIES

ECONOMIC CALENDAR

  • Monday: AMC, Carmike Cinemas Earnings
  • Tuesday: Ferrari, Fitbit, Pfizer, Procter & Gamble Earnings; Motor Vehicle Sales; Personal Income and Outlays
  • Wednesday: Square, Tesla Earnings; ADP Employment Report
  • Thursday: Kellogg, LinkedIn, Kraft Heinz Earnings; Weekly Jobless Claims; Factory Orders
  • Friday: International Trade; Consumer Credit

THE CHOSEN FRANCHISE

And the Harry Potter obsession continues. Nine years after the final novel of the Harry Potter series, “the chosen one” is back. Yesterday, the script for the play Harry Potter and the Cursed ChildParts I and II hit the shelves, and muggles everywhere were freaking out. Just how popular is HP? See for yourself:

  • While we don’t know how many copies of the “eighth story” have been sold yet, the entire series has sold 450 million copies worldwide. Remember those midnight premieres?
  • Barnes & Noble reported that Cursed Child has been #1 on their bestseller list since February. That’s good for the most pre-ordered book since 2007, when Harry Potter and the Deathly Hallows shattered records.
  • And it’s not just the books. The last Harry Potter film remains the third biggest movie debut in history. The new play is so popular that another 250,000 tickets will be released for 2017. Getting a hold of one of those might be tougher than catching the Snitch.

INTERVIEW QUESTION OF THE DAY

A Russian gangster kidnaps you. He puts two bullets in consecutive order in an empty six-round revolver, spins it, points it at your head and shoots. Click. You’re still alive. He then asks you, “do you want me to spin it again and fire or pull the trigger again right away?” For each option, what is the probability that you’ll be shot? (Answer)

BUSINESS TERM OF THE DAY

The Nash Equilibrium – A game theory concept where, overall, an individual can receive no incremental benefit from changing actions, assuming other players remain constant in their strategies. The optimal outcome of a game is one where no player has an incentive to deviate from his or her chosen strategy after considering an opponent’s choice. A game may have multiple Nash equilibria or none at all.

FOOD FOR THOUGHT

Thought the first commercial flights to Cuba in over 50 years would be expensive? Think again. JetBlue is pricing its fares at $99 for a one-way ticket. The first route will run between Fort Lauderdale and Santa Clara. Pack your bags.

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