Fed Rate Cut Sparks Potential Gains for Zillow and Netflix

A recent report highlights the Federal Reserve's substantial interest rate cut, which may boost consumer spending and benefit companies like Zillow and Netflix. Investors are encouraged to consider these shares as potential opportunities in the current market.

Date: 23-09-2024

AI Rating: 7

The recent report discusses a significant reduction in the federal funds rate by 50 basis points, which is anticipated to lower interest rates further. This change is expected to increase consumers' disposable income, thereby stimulating spending and economic activity.

Lower interest rates pose a particularly strong advantage for companies within the real estate sector. Notably, Zillow Group is expected to benefit from this shift. Although Zillow faces challenges due to prior interest rate hikes adversely affecting the housing market, it has reported a 12.9% increase in revenue, generating $1.1 billion in the first half of 2024. This figure is promising amid a declining real estate landscape, particularly as its mortgage and rentals segments have shown growth. Analysts forecast that Zillow will reach $2.2 billion in revenue for 2024, indicating potential recovery as interest rates decrease, enabling increased housing transactions.

On the other hand, Netflix may also see benefits from lower rates, as consumers are likely to have more disposable income that can be spent on streaming services. In its most recent quarter, Netflix added over 8 million new subscribers, marking a robust 16.5% year-over-year growth. Additionally, its advertising platform is gaining traction, with increasing numbers of businesses seeking to target potential customers through Netflix.

Given the healthy growth trends reported, particularly the new subscriber additions, Netflix's revenue generated over the last four quarters was reported at $36.2 billion, although this represents a small fraction (6%) of its estimated $600 billion addressable market. Therefore, significant growth opportunities remain for both companies.

In conclusion, both Zillow Group and Netflix are positioned to leverage the anticipated economic benefits stemming from the Federal Reserve's rate cut. While Zillow is in a rebuilding phase, Netflix's subscriber growth showcases the potential demand for entertainment services in a quickly evolving industry.

Stocks: ZG NFLX