We are wrapping up a rather volatile month of trading. There was some considerable volatility in May, but in the end the major market indices were roughly where they were at the end of April. Stocks, which had been in decline for most of May, recovered last week.
Will June bring more of the same?I’ll make some predictions about what the next month will mean Netflix (American Football League 1.15%)cruise line stocks, and a fragile Elon Musk deal Twitter (TWTR -1.42%). Let’s dive in.
1. Netflix will head higher in June
There is a bearish narrative for Netflix. The leading premium streaming video service has clearly lost a step after becoming the only major platform to experience a sequential drop in subscribers in the first quarter. Clouded and grey, Netflix is now targeting an even bigger streak of hits to its membership this quarter.
Here comes the counterargument.If Netflix Lost Relevance, Why Kate Bush’s run up the mountain Climbing to the top of the iTunes download charts this holiday weekend?The 1985 song went viral after being featured in the new season stranger things, Debuts on Friday. Netflix isn’t going away. It remains the king of entertainment.
It still attracts viewers who envy the streaming space, and now it’s hungry. Netflix won’t release new financials until July, but it’s also smart enough to split new seasons Stranger Things Divided into two volumes. The second half of the installment won’t be released until early July, locking in subscribers through a tough quarter that everyone expected. At this point, the pros outweigh the cons.
2. Cruise stocks to outperform in June
Retailers have been reporting lackluster results this earnings season, and it’s becoming increasingly clear that shoppers are shifting their spending from physical items to experiences. This makes tourism businesses the main beneficiaries of the upcoming tourist season, but there is a problem.
Natural gas prices are rising, and relief doesn’t appear to be coming anytime soon. We’ve seen demand for road trips destroyed, but cruise ships are another story. Fuel costs are a major cost component for cruise operators, but they have so much revenue leverage to pull a cruise ship full of passengers who have pent-up demand for the high seas and exotic ports of call.
carnival (copper clad laminate -0.64%) is the largest cruise operator in the world. It will report quarterly results in late June. It would be a shock if bookings at higher price points didn’t increase in the future. It’s too early for an industry rebound in 2020, but despite improving fundamentals, all three major players have pulled back sharply.Whether the market rises or falls in June, I predict Cruise Line Stock will beat the major indices.
3. The Twitter acquisition will fall apart
There’s a lot of drama (and uncertainty) behind Elon Musk’s $44 billion acquisition of Twitter. He has stepped up his social media antics in recent weeks, appearing to try to negotiate a better price in public.
Like selling one of Musk’s most popular electric cars, there’s no bargaining. WYSIWYG, the board issued a preliminary proxy statement two weeks ago reiterating that it expects to close the transaction at the agreed price.
Shareholders are starting to lose patience. Musk’s ally Egon Durban — co-CEO and managing director of the Silver Lake private equity firm — didn’t get enough votes at last week’s shareholder meeting to keep his seat on Twitter’s board. Shares trade at a 26% discount to Musk’s $54.20 per share purchase price. That gap may seem like a once-in-a-lifetime opportunity for investors looking to easily buy in a few months from now, but it’s also a signal from the market that there’s a good chance the deal won’t go through.
Musk will have to Pay $1 billion If the deal doesn’t go through, and the fine print in the contract apparently gives Twitter the ability to sue him if the deal goes through. Despite Musk’s confidence in his talents in science, business and politics, it’s clear the deal isn’t likely to close anytime soon.
Why wait? Why not just tear off the bandage now? My third and final prediction is that instead of dragging on longer and only hurting Musk’s reputation, he will quietly hand over a $1 billion deal break fee, preferably before Twitter can’t sue him for the consequences Under conditions.