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Business

Walmart Reaches Video-Streaming Deal to Offer Paramount+ to Members

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Walmart Inc.

WMT 0.29%

said it has agreed to a deal with

Paramount Global

PARA 1.41%

to offer the entertainment company’s Paramount+ streaming service to subscribers of Walmart’s membership program.

Walmart has been exploring a subscription video-streaming deal to draw more people to Walmart+ as it seeks to challenge

Amazon.com Inc.,

which has grown its own Prime membership program to about 200 million global members.

The companies agreed to a 12-month exclusivity agreement and a two-year deal that would give Walmart+ members access to Paramount’s ad-supported streaming service, according to people familiar with the deal. The perk will be available starting in September, Walmart said.

Walmart’s announcement on Monday came after The Wall Street Journal reported the two companies had reached an agreement. Walmart is scheduled to announce quarterly earnings on Tuesday.

The deal is the latest tie-up in the fast-changing streaming industry, where a growing group of companies are looking to bundle content to draw viewers or customers. YouTube is planning to launch an online store for streaming video services and has renewed talks with entertainment companies about participating in the platform. YouTube, which is owned by

Alphabet Inc.,

would join

Apple Inc.,

Roku Inc.

and Amazon, which all have hubs to sell streaming video services.

Walmart executives have held talks in recent weeks to discuss a streaming deal with executives at

Walt Disney Co.

,

Comcast Corp.

and Paramount Global, according to people familiar with the matter.

While this partnership is new, Paramount and Walmart have worked together for years. Paramount has had an office in Bentonville, Ark., dedicated to Walmart, which historically has been a big seller of its consumer products and home entertainment.

Paramount Global runs the Paramount+ service, which has shows such as “Halo,” the “Star Trek” series and “Paw Patrol.” The company said this month that Paramount+ had more than 43 million subscribers at the end of its latest quarter.

Walmart introduced Walmart+ in 2020 and aims to use the service to add new streams of revenue beyond selling goods, as well rival the success Amazon has had with its Prime membership services. A subscription to Walmart+ costs $12.95 a month or $98 a year and includes free shipping on online orders and discounts on gasoline. The retailer has added perks to build interest, such as six months of the

Spotify

music-streaming service.

Walmart said Monday that Walmart+ has had positive membership growth every month since its launch, without specifying membership numbers. A Morgan Stanley survey in May said the service has about 16 million members, compared with about 15 million the previous November.

Amazon has invested heavily to ramp up its own Prime Video service, adding original programming and live sports. Prime Video is included along with free shipping and other perks in its Prime membership, which costs $14.99 a month or $139 a year in the U.S. Amazon also recently added a year of Grubhub’s restaurant delivery services for Prime subscribers.

The deal would give Paramount+ a new avenue for growth in an increasingly competitive streaming market now that all of the major entertainment companies have streaming offerings and growth in the U.S. among many services, such as

Netflix Inc.,

has started to slow.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

The line between Amazon and Walmart is becoming increasingly blurred, as the two companies seek to maintain their slice of the estimated $5 trillion retail market while chipping away at the other’s share, often by borrowing the other’s ideas. Photos: Amazon/Walmart

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Business

Roku Swings to Second-Quarter Loss on Slower Ad Spending

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Roku Inc.

ROKU -2.01%

said it expected two of its main revenue drivers—advertising and sales of streaming hardware—to come under further pressure during the second half of the year, sending the company’s shares down 25% in after-hours trading.

“We are in an economic environment defined by recessionary fears, inflationary pressures, rising interest rates, and ongoing supply chain disruptions,” the company said in a letter to investors Thursday in which it announced its second-quarter results. It forecast that ad spending would continue to be negatively affected as a result. “We also believe that consumer discretionary spend will continue to moderate, pressuring both Roku TV and Roku player sales.”

The company said it expected to make $700 million in revenue during the third quarter, below analysts’ expectations of $898.3 million. Roku also withdrew its full-year revenue growth rate estimate, citing uncertainty and volatility in the macro environment.

San Jose, Calif.-based Roku is the nation’s largest maker of streaming hardware—accounting for about 37% of the U.S. market, according to Parks Associates—but it derives most of its revenue from advertising: It sells all ads viewed on The Roku Channel, its own streaming service, and also sells some ads that appear on other streaming services viewed on Roku devices.

In the second quarter, the company swung to a loss of $112.3 million, or a loss of 82 cents a share, compared with a profit of $73.5 million, or 52 cents a share, a year earlier. Analysts polled by FactSet expected a loss of 71 cents a share.

Supply-chain issues are pushing up prices for Roku’s component parts, the company said. Roku said it was absorbing the higher costs to insulate customers from price increases, which resulted in a negative gross margin of 24% for its players.

Roku’s stock has had a rough 2022 so far. Even before Thursday’s after-hours plunge, its shares were down 63% since the start of the year.

As markets react to inflation and high interest rates, technology stocks are having their worst start to a year on record. WSJ’s Hardika Singh explains why the sector — from tech giants to small startups — is getting hit so hard. Illustration: Jacob Reynolds

Revenue rose 18% to $764.4 million. Of that, $673.2 million came from platform revenue—which includes revenue from advertisers and content publishers—while player revenue accounted for $91.2 million.

Roku Chief Executive

Anthony Wood

described the ad-market upheaval as cyclical. “We’re in an economic cycle where advertising is trending down. It’ll turn around,” he said during a call with analysts Thursday. He also said Roku was the beneficiary of some of that upheaval, because some advertisers were shifting more ad dollars away from traditional TV and toward streaming services, helping Roku grow its market share.

During the second quarter, advertisers in the automotive and consumer-packaged-goods industries reduced their spending on traditional TV, but increased their spending on Roku by a double-digit percentage, said Alison Levin, Roku’s vice president for ad sales and strategy, during a call with journalists before the earnings call.

Roku will soon face competition for streaming ad dollars from two major competitors: streaming services

Netflix

and

Disney

+ are planning to begin selling ads. Mr. Wood said he believed the new entrants to the market would complement Roku by making streaming ads an even greater draw for advertisers.

“With companies like Netflix and Disney moving into ads, it makes streaming ads even more mainstream,” he said.

Write to Patience Haggin at patience.haggin@wsj.com and Denny Jacob at denny.jacob@wsj.com

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Business

Peloton Stock Is Tumbling. A Disappointing Report Sinks Another Pandemic Play.

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Peloton stock is down double-digits in after-hours trading after the at-home fitness company reported a big loss and cut guidance.


Courtesy Peloton


Peloton Interactive

was the latest pandemic-play stock casualty this earnings season. Shares were diving in premarket trading Friday after the at-home fitness firm reported a wider-than-expected net loss for the September quarter, and cut its full fiscal-year outlook.

Peloton reported a fiscal-first-quarter net loss of $376 million, or $1.25 a share. Total revenue grew 6% year over year to $805.2 million. Wall Street’s consensus estimate called for a net loss of $1.10 a share on revenue of $808.7 million, according to FactSet.

The company, which sells bikes and treadmills that pair with $39.99 a month subscriptions, said average monthly workouts per connected fitness subscription dropped to 16.6 from 20.7 a year ago. Investors watch that metric for signs of engagement.

Peloton stock dropped 33.5% to $57.27 early Friday. The stock set a 52-week intraday high of $171.09 in January. The company joins


Roku

(ROKU) and


Chegg

(CHGG) as popular pandemic plays that are now disappointing investors with reports this week.

Peloton now expects the 2022 fiscal year to end in June with 3.35 million to 3.45 million connected fitness subscribers, down from a prior forecast of 3.63 million. Its outlook for fiscal-year revenue ranges from $4.4 billion to $4.8 billion, down from a prior forecast of $5.4 billion.

For the fiscal second quarter, which includes the all-important holiday season, the company expects to hit connected fitness subscribers of between 2.8 million to 2.85 million. It expects revenue in the range from $1.1 billion to $1.2 billion for the quarter, below Wall Street’s consensus estimate of $1.49 billion, according to FactSet. The company said that so far, the fiscal second quarter has been softer than expected.

“With the benefit of adequate inventories and order-to-delivery windows that are now back to pre-pandemic levels, we expect a healthy holiday selling season,” the company added in a prepared statement. “Our forecast assumes unit sales modestly ahead of last year’s Q2 levels, driven by growing consumer interest in the Connected Fitness category and a resumption of our marketing and promotional activity.”

Write to Connor Smith at connor.smith@barrons.com

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Business

Stock Market Today: Dow Holds Near Records, the Fed Meets, Zillow Slumps

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Fed Chair Jerome Powell’s press conference Wednesday afternoon will be closely watched.


Kevin Dietsch/Getty Images

The


Dow Jones Industrial Average
was slightly lower Wednesday morning after closing at a record high Tuesday as markets await the Federal Reserve’s monetary policy decision.

In morning trading, the Dow was off 75 points, or 0.2%, after the blue-chip benchmark closed above 36,000 for the first time. The


S&P 500
fell 0.1%, while the


Nasdaq Composite
was essentially flat. All three indexes ended Tuesday at new all-time highs.

Today the spotlight is squarely on the Federal Open Market Committee (FOMC)—the Federal Reserve’s monetary-policy body. Its monthly meeting got under way Tuesday and will wrap up Wednesday with a statement from Fed Chair Jerome Powell.

“Stock futures are little changed near record highs as a sense of Fed paralysis grips the markets ahead of the FOMC announcement today,” wrote Tom Essaye, founder of Sevens Report Research before the market opened. 

It’s largely expected that the central bank will announce that it will start slowing, or tapering, its Covid-19 pandemic-era program of monthly asset purchases, which add liquidity to markets. The Fed has been buying $120 billion in bonds to keep their prices high and yields low since June 2020, when it settled into a steady pattern after more fervent bond-buying near the beginning of the pandemic.

Markets now largely expect that the Fed will begin slowing these purchases, which consist of Treasury securities and agency mortgage-backed securities, at a rate of about $15 billion a month, starting this month. If the central bank announces a faster pace, investors could react negatively, and it could put pressure on stocks.

The larger risk is that the Fed could indicate that it is considering short-term interest rate hikes sooner rather than later. With inflation running hot and economic growth slowing, an indication of a rate hike too soon could also cause a selloff in stocks.

“It is widely expected the central bank will commence tapering in November or perhaps December,” wrote Kent Engelke, chief economic strategist at Capitol Securities Management. “The question at hand is whether or not it will change its time line as to when it intends to increase the overnight rate.” 

As the Fed looms, not even solid economic data could move stocks higher. The ADP jobs report showed that the U.S. added 571,000 private-sector jobs in October, above the consensus forecast for 395,000. 

Also read: Is Inflation Here to Stay? The Data Are Cause for Worry. The Fed Will Have its Say Today

Overseas, Hong Kong’s


Hang Seng Index
slipped 0.3% as investors in Asia tread water ahead of the FOMC meeting. The pan-European


Stoxx 600
was up 0.1% as investors in Europe adopted a similar wait-and-see attitude.

In commodity markets, oil prices fell back amid indications that U.S. crude supply is higher than expected and pressure on the OPEC+ group of national producers to ramp up production.

U.S. futures for West Texas Intermediate crude were down 2.5% to around $81.80 after trading near $85 earlier in the week—the highest levels since late 2014.

Analysts cited data from the American Petroleum Institute Tuesday showing that U.S. crude inventories jumped by 3.6 million barrels last week—far more than the 1.5 million estimated—in a surprise to supply expectations. That puts the spotlight on official data Wednesday from the U.S. Energy Information Administration.

Here are six stocks on the move Wednesday:


Lyft (ticker: LYFT) stock gained 11% after the company’s earnings report showed a more than 50% rise in adjusted earnings before interest, tax and non-cash expenses. Sales were $864 million, above expectations for $863 million.

Lyft’s results helped rival


Uber (UBER) stock rise 5.6% ahead of its Thursday earnings report.


Bed Bath & Beyond (BBBY) stock gained 34% after the company announced a partnership with


Kroger (KR) to sell certain products at the grocer’s locations and through online channels. Still, the Bed Bath & Beyond stock is also benefiting from its status as a “meme stock,” so the initial buying has forced short-sellers to buy shares back.

Zillow Group (ZG) stock dropped 19% after seeing several analyst downgrades after the company said it will terminate its home buying and selling business. 


Shake Shack (SHAK) stock gained 3.8% after getting upgraded to Buy from Neutral at Northcoast.


CVS Health (CVS) stock rose 3.6% after the company reported a profit of $1.97 a share, beating estimates of $1.78 a share, on sales of $73.8 billion, above expectations for $70.5 billion.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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Business

Cathie Wood Extends Hot Streak With ARK Space Exploration ETF

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Cathie Wood’s

new

ARK Space Exploration & Innovation ETF

ARKX -1.09%

is already on track to be one of the most successful fund launches ever despite criticism that it doesn’t necessarily reflect the nascent space-exploration market.

Investors poured $536.2 million into the actively managed exchange-traded fund, known as ARKX, in its first five days of trading, according to FactSet data through Tuesday. That trounces the industry average of three years to gather $100 million and puts the fund on course to top $1 billion in assets within days, analysts said.

Such a milestone would put the fund in rare company: The fastest ETF to reach $1 billion was

State Street’s

SPDR Gold Trust

GLD -0.01%

fund, which hit the mark in just three days back in 2004.

“That speaks to the overall power of ARK right now,” said Nate Geraci, president of ETF Store, an investment-advisory firm. “At this point, investors think anything Cathie Wood touches turns to gold.”

The fund is ARK Investment Management LLC’s first launch in two years and stands in contrast to the lukewarm receptions its earlier products received. ARK’s flagship innovation fund, begun in 2014, took more than 3 1/2 years to reach $1 billion. Its last launch, the fintech innovation ETF in 2019, took about 21 months.

A lot has changed for ARK, though. In the span of a year, Ms. Wood’s ARK has transformed from a small, upstart manager of a handful of ETFs to one of the biggest fund managers in the U.S. The share prices of the firm’s five other actively managed ETFs doubled or tripled last year on the back of surging growth stocks such as

Tesla Inc.

and Roku Inc., earning Ms. Wood a cultlike following of individual investors who hang on her every tweet and video.

But those growth stocks are now the epicenter of a selloff that has left ARK’s older funds down at least 14% from their highs earlier this year. Rather than rolling out another fund primary tied to the tech trade, ARK has tilted nearly half of its space ETF toward manufacturers including

Lockheed Martin Corp.

,

Boeing Co.

and

Deere

DE 0.03%

& Co., a sector of the stock market that has benefited in recent months from rising interest rates and inflation expectations.

The fund is different enough for investors who say they are fans of Ms. Wood but also wary of plowing more money into a faltering tech trade.

“Most of Cathie’s ETFs are tech-heavy,” said Tré Diemer, 20 years old, a student at William & Mary who said he bought a couple of thousand dollars of ARKX shares Monday. “You look at this ETF and see a lot of names she hasn’t been as involved with.”

He already owns a variety of growth stocks and has been eyeing Ms. Wood’s other funds as a home for some of the money he earns from working as an emergency medical technician and running deliveries for

DoorDash Inc.

But tech and Ms. Wood’s other funds seemed overvalued, a point reinforced by the recent losses he said he sustained.

“You can look at this almost as a reopening ETF,” said Mr. Diemer, referring to underlying stocks poised to benefit most from a rebounding economy.

Not everyone is a fan of the fund’s makeup. Some took to social media, creating memes to mock ARK’s decision to include Deere and other companies that appear to have no significant ties to the fund’s theme of investing in space exploration and innovation. One showed a Deere tractor roving across a Mars landscape, another on the moon.

Deere, for its part, responded with several of its own memes, including one showing a UFO beaming up a tractor. Some analysts said the inclusion of Deere is less of a stretch when considering that the company makes satellite-guided machinery.

Other stocks included in the fund that seem at odds with its mandate include ARK’s passively managed 3D-printing ETF and shares of

Netflix Inc.

and

Amazon.com Inc.

Meanwhile, some of the few pure-play space stocks such as the satellite and imaging company

Maxar Technologies Inc.

didn’t make the cut. Neither did Rocket Lab USA Inc. nor Astra Space Inc., two rocket makers that are merging with blank-check companies to go public.

Ren Leggi,

a client portfolio manager at ARK, acknowledged that the holdings are causing some confusion but said that they are all in line with the fund’s mandate. “When we’re talking about space exploration and innovation, we define it as everything above ground,” said Mr. Leggi.

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What explains the success of Cathie Wood’s latest exchange-traded fund? Join the conversation below.

The advancement of drone technology plays a big part in why several companies, including Amazon, are in the fund, said Mr. Leggi. Netflix would benefit from the rollout of satellites that enable further adoption of broadband internet for streaming, and some rocket parts are 3D-printed, he added. As for the space companies left out, Mr. Leggi said valuations of some were too rich, especially those involved with special-purpose acquisition companies, while others didn’t pass their initial evaluation of whether the stock could sustain a 15% annualized return rate.

“We still continue to track a lot of companies in case we get a market environment where there’s a broader selloff and we can get in at an attractive price,” Mr. Leggi said.

Some investors remain unconvinced.

“I was not too fond of its holdings,” said Carter Wang, who is 19 and has roughly $3,000 in four of ARK’s earlier funds. He is a fan of Ms. Wood, citing her aggressive calls on Tesla as a key reason behind his decision to invest in several of the firm’s funds. But Mr. Wang, a business management economics major at the University of California, Santa Cruz, called the inclusion of ARK’s 3D-printing ETF odd, leading him to pass on the fund.

For several ARK investors, Ms. Wood’s past performance is key. With shares of ARKX trading around $21, some investors said they see a chance to get into the firm’s next success, likening it to ARK’s innovation fund, whose share price is six times higher since it launched in 2014 and continues to command investors’ attention. (The ETF saw record daily inflows one day last week, pulling in more than $700 million.)

“It doesn’t really bother me,” said James Carter, a 31-year-old tech writer in Washington, D.C., who snapped up shares on the space fund’s first day of trading. He said his mind was set on investing in the fund since he first heard about it earlier this year, even before any of its underlying stocks had been announced. He is holding out for the possibility that the fund ends up including shares of Elon Musk’s privately held rocket company, Space Exploration Technologies Corp.

“I was kind of late” with the other funds, Mr. Carter said of his other ARK investments. “So I specifically set money aside for the new ARK fund just because of my interest in ARK. I wanted to get in early.”

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Business

Cathie Wood’s ARK Investment Faces Reckoning as Tech Trade Stalls

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ARK Investment Management LLC’s winning bets on disruptive technology companies cemented

Cathie Wood’s

status as Wall Street’s hottest fund manager since Peter Lynch or Bill Gross.

Now, those gambits threaten to make ARK a high-profile casualty of the recent shift in investor sentiment away from tech stocks and toward cyclical shares tied to an economic upswing.

ARK runs five exchange-traded funds that actively invest in companies Ms. Wood and her team of portfolio managers believe will change the world through what they call “disruptive innovation.” Among the ETFs’ biggest holdings are electric car maker

Tesla Inc.,

payments company

Square Inc.

and streaming media firm

Roku Inc.

The stock prices of those three companies have surged at least 195% in the year since the Covid-19 pandemic upended the investing landscape—helping ARK’s funds more than double over the same period. But the stocks dropped more than 12% last week amid a broader selloff in fast-growing tech stocks, a slump many attribute to a sharp rise in government bond yields.

They have badly underperformed the tech-heavy Nasdaq Composite Index, which dropped 4.9% last week.

Worries about a rising interest-rate environment have posed a test for ARK, exposing the vulnerabilities of its investment approach. Higher yields generally make growth stocks, including shares of big tech companies, less attractive. Plus, some of ARK’s positions are in small, illiquid stocks that have the potential to swing dramatically.

The ETFs suffered double-digit percentage decreases last week, their biggest routs since the stock market’s plunge last March, according to FactSet. Further declines among growth stocks on Tuesday and Wednesday drove even deeper drops among ARK’s funds, bringing the declines for its flagship ARK Innovation ETF to 14% over the past month.

The cascade of red has proved hard for many investors to stomach. ARK’s funds collectively lost more than $1.8 billion between Feb. 24 and Monday, their biggest stretch of outflows ever, according to FactSet. Together, they managed roughly $51 billion at the end of February, making ARK the ninth-largest ETF operator. That’s after attracting $36.5 billion in assets over the past year, more than

Invesco Ltd.

,

Charles Schwab Corp.

and First Trust—the fourth, fifth and sixth biggest ETF issuers in the U.S., according to Morningstar Direct.

But the recent outflows triggered sales across ARK’s funds to meet redemptions, while the firm also opted to dump shares of its easier-to-trade holdings, including

Apple Inc.

and

Snap Inc.,

to load up on favorites like Tesla.

With tech stocks continuing to fall, ETF analysts and traders worry that a combination of broad market declines and additional outflows could create a snowball effect across ARK’s portfolio. That could potentially cause some of its more illiquid, small-cap holdings to trade sharply lower.

Tom Staudt, ARK’s chief operating officer, dismissed concerns of any liquidity problems and said ARK’s ETFs have continued to perform as any other ETF would during the tumult.

Still, it has been a rough patch for ARK and its star stock picker, Ms. Wood.

“What a crazy week or two we’ve had here,” Ms. Wood said in a YouTube video posted Friday that was viewed by nearly 600,000 people.

Ms. Wood founded ARK in 2014 and now serves as its chief executive and chief investment officer following a 12-year stint at AllianceBernstein. Her funds’ eye-catching performance, coupled with her willingness to engage investors through social media, podcasts and videos, has earned her a variety of endearing monikers from individual investors and Reddit’s day traders, including “Mamma Cathie,” “Aunt Cathie” and, in South Korea, “Money Tree.”

“ARK’s funds fit 2020’s narrative of secular growth, but we’re now seeing a shift in that,” said Steven DeSanctis, an equities analyst at Jefferies. “It probably won’t be the last time in the near term she sees outflows,” Mr. DeSanctis added, referring to Ms. Wood.

Outside of last week’s pullback, ARK’s returns have been the envy of the asset-management industry, reviving some investors’ belief in stock pickers after more than a decade of dominance by index-tracking funds. The ARK Innovation ETF has logged an average annual return of 36% since it started trading in 2014. That compares with the S&P 500’s average return of 11% over the past 10 years.

“There’s been lots of calls with clients over the last six months as the funds gained assets, and the primary conversation has been about what happens when the funds are no longer a hot topic,” said William Kartholl, director and head of ETF trading at Cowen.

Mr. Staudt said ARK has a soft limit of about 10% on any one stock within its funds. Tesla’s stock sits at that level in ARK’s innovation and autonomous funds, as does Square in ARK’s fintech innovation pool. As for ARK’s exposure to smaller stocks, Mr. Staudt said those worries are overblown and pointed to the fact that about 15% of ARK’s innovation fund is invested in stocks with market caps below $5 billion.

If anything, the volatility has created “attractive buying opportunities” for ARK, Mr. Staudt added.

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Do you think ARK’s funds will remain susceptible to further losses and outflows? Why or why not? Join the conversation below.

ARK loaded up on more shares of Tesla,

Teladoc Health Inc.

and Square during last week’s selloff, according to ARK’s daily trading logs. It also added more shares of

Zoom Video Communications Inc.

to one of its funds earlier this week.

Amid the redemptions across ARK’s funds, the firm also sold shares in some of its more widely traded liquid stocks. The firm cut its positions in Apple and Snap last week and sold all its remaining shares in

Salesforce.com Inc.,

he added. ARK also sold shares of

Facebook Inc.,

Bristol-Myers Squibb Co. and

Roche Holding AG

this week.

“It’s almost like having dry powder in the portfolio,” said Mr. Staudt, referring to how the funds basically build up a cash-like reserve to buy other stocks.

Not all investors are fazed by ARK’s bigfooted approach to investing. Flows into ARK’s innovation fund turned positive Tuesday, pulling in $464.3 million, according to FactSet.

But ARK’s most recent stumble continued to shake out others.

Paolo Campisi, a 31-year-old entrepreneur in Toronto, bought shares of ARK’s innovation fund in early February but sold his stake last week after shares dropped more than 10%. He decided to take a riskier bet on an eventual rebound by buying out-of-the money call options that expire at the end of the month. But he sold those options as well Wednesday when ARK’s flagship fund fell an additional 6.3%.

“I think everyone’s going to be challenged moving forward,” Mr. Campisi said, adding that he is unsure at what level he’d consider buying back into the fund again. “And the level of scrutiny on someone like Cathie [Wood] is going to be high.”

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Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

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