13th July 2024 – 19th July 2024 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 5,505.00 | 17,726.94 | 16.52 | 40,287.53 | 3,002.53 | 18,406.05 |
| -1.97% | -3.65% | 32.58% | 0.72% | -1.83% | -0.54% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 24,530.90 | $2,402.80 | $29.40 | $82.56 | 83.73 | 91.13 |
| 0.12% | -0.55% | -5.22% | -3.18% | 0.25% | 0.03% |
Source: MarketWatch
Hello Saturday,
This week, a major IT outage causes global disruption, Byju’s comes closer to bankruptcy, and Netflix posts massive quarterly subscriber growth.
- A bug in an update from cybersecurity firm CrowdStrike brought down infrastructure and services around the world.
- An Indian court has approved insolvency proceedings against beleaguered edtech firm Byju’s; the latter has appealed.
- Netflix’s crackdown on password-sharing starts paying dividends; the firm also plans to eliminate the lowest-priced ad-free tier in the US.
- Paytm reels from the effects of the RBI’s regulatory clampdown on its payments bank subsidiary.
Taking stock | CrowdStricken | Bye-ju’s? | Netflix picks nix | Pay(TM)ing the price | Invest wisely
Taking stock
Friday saw a major tech sell-off that left the S&P 500 and the Nasdaq facing their worst week since April. While the former shed 1.97% and the latter lost 3.65%, the Dow gained a marginal 0.72%.
CrowdStricken
On 19 July, a faulty update from listed cybersecurity firm CrowdStrike triggered a global IT outage, possibly the largest in history. This malfunction caused widespread disruptions, impacting critical service providers like airlines, hospitals, and financial institutions.
The main cause was later revealed to have been a bug in a sensor configuration update for Microsoft Windows systems — Linux and Mac systems were spared. The outage mainly affected businesses using CrowdStrike’s Falcon Sensor for Windows, a program designed to protect against cyberattacks. Thus, ironically, it was a security tool that caused the issue.
The on-ground fallout was significant, with airlines grounding flights, healthcare providers struggling to access patient records, and financial transactions failing to go through. In addition, employees in several organisations might have to deal with delayed paychecks due to issues with payroll software.
Both CrowdStrike and Microsoft responded to the outage relatively quickly, issuing patches and advising manual reboots (up to 15 in some cases) to get systems back online. But while Microsoft’s share price closed less than 1% lower on 19 July, CrowdStrike shares fell by more than 10% on that day.
Bye-ju’s?
Once a $22 billion edtech giant, Think and Learn, the parent company of Byju’s, is on the brink of collapse after the National Company Law Tribunal (NCLT) approved insolvency proceedings against the company on 16 July. This move was taken in response to a petition by the BCCI, which is owed around 158 crores (i.e. around $19 million) in cricket sponsorship fees by Byju’s.
The company is appealing the court decision and says it needs more time to pay the outstanding dues. The company’s founder, Byju Raveendran, stated that if the insolvency proceedings were to go ahead, thousands of employees could go out of work and Byju’s online learning platforms could be shut down for good.
While the edtech platform saw exponential growth during the COVID-19 pandemic, the reopening of schools in its immediate wake impacted its pace of growth. Its decline became apparent in 2022, with missed financial deadlines and plummeting revenue coming to the fore. The company’s aggressive marketing tactics, allegedly poor working environment, and hefty acquisitions were also perennial concerns.
Its valuation has been repeatedly slashed, from a stratospheric $22 billion in 2022 to a mere $200 million in 2024. In June 2024, investment firm Prosus wrote off its 9.6% stake in the company, booking a loss of $493 million.
Netflix picks nix
Netflix has defied expectations by adding a whopping 8 million subscribers in Q2 2024, according to its latest earnings report, which came out on 18 July. In addition, quarterly sales increased by 17% year over year, and the earnings per share (EPS) also surpassed analyst expectation.
This stellar performance is in large part thanks to the crackdown on password sharing that Netflix initiated several months ago. Hit shows like ‘Bridgerton’, ‘Baby Reindeer’, and ‘The Roast of Tom Brady’ are also believed to be an additional factor.
However, the streamer appears to be convinced that ads are the future. Its ad-supported tier, introduced in 2022 and priced at $6.99 per month in the US, has proven to be a break-out star, driving a 34% subscriber increase.
“Our ad business is growing nicely and is becoming a more meaningful contributor to our business,” said Netflix in a recent letter to investors.
To further encourage ad-supported subscriptions, the firm has announced that it will eliminate its ad-free ‘Basic’ plan (priced at $11.99 per month). This means that customers who want an ad-free experience will soon have to pay $15.99 per month for the ‘Standard’ plan.
Despite its reputation for being at the forefront of streaming, Netflix still faces stiff competition, as well as the ever-present challenge of investing in content that resonates with audiences.
Pay(TM)ing the price
Paytm, once India’s fintech darling, is facing some turbulence: its revenue plummeted 36% and losses more than doubled in Q1 2024. The main reason for this decline is the RBI’s regulatory crackdown earlier this year on Paytm Payments Bank, a key subsidiary of Paytm’s that the latter relied on to process a large proportion of the mobile payments it depended on.
In January 2024, the RBI ordered Paytm Payments Bank to halt its business within a month’s time, due to “persistent” instances of non-compliance and “continued material supervisory concerns” that warranted “further supervisory action.”
As a result, Paytm was forced to scramble for partnerships in order to continue providing some of its services, thus hindering its core business.
While Paytm pioneered mobile payments in India, its dominance has waned. Competition from PhonePe and Google Pay, who now control over 86% of UPI transactions, has shrunk Paytm’s market share.
Despite the losses, Paytm remains optimistic, and has claimed its merchant services are recovering. However, whether it can regain its past glory remains to be seen.
Invest wisely
Netflix has remained nimble in the face of uncertainty, and continues to impress investors with its steady growth. And since the beginning of the year, Netflix’s share price has surged over 30%, potentially signalling a promising future ahead.
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Warm regards,
Another week
in the markets
