Best Growth Stocks October 2021

Oftentimes, that can be institutional activity. We’ll go over what that looks like in a bit. But, the 5 stocks we see as long-term candidates are NFLX, PYPL, UPST, ASML, & TSLA.

For MAPsignals, we believe that Big Money trading can alert you to the forward fundamental picture of a stock. We want the odds on our side when looking for the highest quality stocks.

Up first is Netflix, Inc. (NFLX), which is the leader in on-demand video.

Strong growth candidates tend to have strong performance. Check out NFLX:

  • YTD performance (+16.68%)
  • Historical big money signals

Just to show you what our Big Money signal looks like, have a look at the top buy signals Netflix has made the past few years.

Blue bars are showing that NFLX was likely being bought by a Big Money player according to MAPsignals.

When you see a lot of them, I call it the stairway to heaven:

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Source: www.MAPsignals.com

But, what about fundamentals? As you can see, Netflix’s revenue numbers have been strong:

  • 3-year sales growth rate (+28.9%)
  • 3-year earnings growth rate (+71.92%)

Next up is PayPal Holdings, Inc. (PYPL), which is a leading digital payments firm.

Check out these technicals for PYPL:

  • YTD performance (+25.2%)
  • Historical big money signals

Let’s look long-term. These are the top buy signals PayPal has made since 2015. Clearly the Big Money has been consistent for years:

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Source: www.MAPsignals.com

Let’s look under the hood. As you can see, PayPal has grown revenues massively:

  • 3-year sales growth rate = +17.96%
  • 3-year earnings growth rate = +36.06%

Another growth name is Upstart, Inc. (UPST), which is a lending platform.

Strong candidates for growth usually have big money buying the shares. Upstart has that. Also, the stock has been a rocket:

  • YTD performance (+544%)
  • Recent Big Money signals

Below are the big money signals Upstart has made since 2019. It’s a newer listing with mega juice!

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Source: www.MAPsignals.com

Now let’s look under the hood. Upstart’s sales growth is impressive. I expect more growth in the coming years:

  • 3-year sales growth rate = +60.28%
  • 3-year earnings growth rate = +18.32%

Number 4 on the list is ASML Holding NV ADR (ASML), which is a huge semiconductor firm.

Here are the technicals important to me:

  • YTD performance (+77.2%)
  • Historical big money signals

Below are the big money signals for ASML since 2015:

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Source: www.MAPsignals.com

Let’s look under the hood. ASML has been growing nicely:

  • 3-year sales growth rate = +16.45%
  • 3-year earnings growth rate = +21.9%

Our last growth candidate is Tesla, Inc. (TSLA), which is the leader in the EV space.

Check out these technicals:

  • YTD performance (+6.7%)
  • Historical big money signals

Tesla is just now starting to crank with strong fundamentals, that’s why there’s few Big Money signals:

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Source: www.MAPsignals.com

Now look at these juicy growth numbers:

  • 3-year sales growth rate = +41.78%
  • 3-year earnings growth rate = +33.26%

The Bottom Line

NFLX, PYPL, UPST, ASML, & TSLA represent top growth stocks for October 2021. Strong fundamentals and big money buy signals make these stocks worthy of extra attention.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in NFLX, PYPL, & TSLA in personal accounts and long positions in NFLX, PYPL, & UPST in managed accounts. He holds no positions in ASML at the time of publication.

Investment Research Disclaimer

Wrong Time to Buy Netflix

Netflix Inc. (NFLX) failed to reward shareholders for more than a year but is trading at an all-time high on Wednesday after JP Morgan and Atlantic Equities raised their price targets above $700. The streaming giant has been on fire lately, gaining more than 60 points in less than two weeks. Unfortunately, this vertical impulse has now landed on hidden resistance that favors a steep pullback and buying opportunity at much lower levels.

Q3 Subs Below Management Guidance

Growing optimism about the second half content slate and favorable year-to-year comparisons following 2020’s first half lockdown have underpinned these bullish calls. However, third quarter results through August project quarterly subscriber gains of just 2.7 million, well below management’s 3.5 million guidance, indicating that analyst projections require a September sign-up surge, dependent on new content that includes Money Heist, Lucifer, and The Circle.

JP Morgan analyst Doug Anmuth raised the firm’s target from $625 to $705, noting “We continue to like NFLX shares toward year-end based on strength of the 2H content slate, greater distance from pandemic pull-forward, stronger seasonality, & the significant global secular streaming opportunity w/NFLX only 20-25% penetrated among global pay TV households ex-China & at just 7% of US TV time”.

Wall Street and Technical Outlook

Wall Street consensus hasn’t changed in the last three months despite recent commentary, yielding an ‘Overweight’ rating based upon 29 ‘Buy’, 5 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts recommend that shareholders close positions and move to the sidelines. Price targets now range from a low of $342 to a Street-high $971 while the stock opened Wednesday’s session less than $20 below the median $625 target. Given the two-week surge, this placement suggests greater downside risk than upside potential.

Netflix sold off through 300 in March 2020 and turned sharply higher, nearly doubling in price into the September high at 555.88. Progressive highs and lows since that time have carved a shallow rising channel, with resistance struck for the third time in 14 months on Wednesday morning. This barrier is likely to stall the upward advance and trigger a proportional retracement that could offer a low risk buying opportunity in the 540 to 560 range.

For a look at all this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Netflix Stock Attracts Big Money

Netflix, Inc. (NFLX) has been gaining steam in 2021, jumping +9%. In two years, shares are up a hefty 104%. And it could be setting up for more highs soon. One likely reason is due to Big Money lifting the stock.

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Netflix has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the stock is trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares for years.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the big money signals NFLX has made the last year.

The last few days have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

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Source: www.mapsignals.com

In 2021, the stock has attracted 5 Big Money buy signals. The only sell signal came back in May. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

  • 3-month outperformance vs. NASDAQ ETF (+4.9% vs. QQQ)

Outperformance is huge for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Netflix has been growing revenues and earnings rapidly. Take a look:

  • 3-year sales growth rate (+28.9%)
  • 3-year earnings growth rate (+71.92%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, Netflix has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock saw buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

NFLX has a lot of qualities that are attracting Big Money. And since it first appeared on this report back on 4/20/2015, it’s up 628%. The blue bars below show the times that Netflix was a top pick:

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Source: www.mapsignals.com

It’s been an all-star stock for years according to the MAPsignals process. I wouldn’t be surprised if NFLX makes additional appearances in the years to come. Let’s tie this all together.

Netflix continues to fire on all cylinders technically alongside growing sales and earnings. I like the long-term story of the stock.

The Bottom Line

The Netflix rally could have further to go. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds long positions in NFLX in personal and managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Looks Ready To Move Higher As Traders Stay Bullish

Traders Ignore Valuation Concerns And Continue To Buy Stocks

S&P 500 finished the previous week near all-time high levels as traders remained optimistic despite worries about the potential reduction of Fed’s asset purchase program.

The stock market remains driven by available liquidity, as well as FOMO (fear of missing out) and TINA (there is no alternative). Meanwhile, the yield of 10-year Treasuries remains stuck near 1.30% which is bullish for stocks. The U.S. Dollar Index has pulled back from recent highs which is also bullish for the stock market, but it should be noted that fluctuations of the American currency had little impact on U.S. stock market in 2021.

Some analysts speculated that S&P 500 will find itself under pressure after the end of the earnings season as stocks would lack catalysts to move higher. In addition, September has been (on average) the worst month for S&P 500 in the last thirty years. However, the stock market started the month with a test of new highs which indicated that traders remained bullish despite problems like the spread of the Delta variant of coronavirus or the potential reduction of Fed’s asset purchase program.

As is often the case in the stock market, there is no pullback when too many people are waiting for such a pullback. The last chance to “buy stocks at a discount” was in mid-August, and this pullback was quickly bought. The two other pullbacks which happened during this summer were very quickly bought as well. This indicates that there are many traders on sidelines who use any pullback to buy stocks. When many traders want to buy and few traders want to sell, a correction cannot occur.

Obviously, many stocks are generously valued by the market. Tesla is trading at more then 105 forward P/E , and it remains well below yearly highs! Netflix is valued at more than 45 forward P/E after the recent rally.

The risks for high-flying growth stocks have been recently highlighted by Zoom which issued disappointing guidance for the third quarter and lost about 17% of market capitalization in just one trading session. However, even Zoom shares have found some support in recent trading sessions as traders rushed to buy the stock after the major pullback despite the fact that it is valued at more than 60 forward P/E while analyst estimates have started to move lower.

In this liquidity-driven market, the Fed is one of the main players. So far, the Fed was successful in managing market’s expectations. Fed Chair Jerome Powell remained very dovish and calmed markets on rare ocassions of small panic.

Powell has a more challenging task in front of him as the Fed will have to cut its asset purchase program in the upcoming months. Even if the Fed decides that it’s too early to announce tapering at its meeting on September 22, it will still have to reduce support to markets at the beginning of the next year to avoid pushing inflation above reasonable levels.

It should be noted that traders may stay bullish and bet on dovish comments from Powell up until the time he finally says that it is time to reduce the asset purchase program. In this light, the market may experience several months of calm, bullish trading in case the Fed keeps the current support intact at its next meeting.

The current bullish trend is strong, and traders have been “trained” to buy pullbacks. A change of trend demands strong catalysts, and there are no such catalysts at this point. The situation may change in case inflation gets out of control, Fed has to reduce its asset purchase program at a very fast pace while Delta variant forces new lockdowns, but this negative scenario is not the base case for the market right now.

Technical Analysis

sp 500 september 6 2021

Let’s take a look at the weekly chart. S&P 500 is moving higher in a rather tight upside channel, and any attempt to settle below the low end of this channel is quickly bought.

RSI is in the overbought territory and the risks of a pullback are increasing. However, RSI has been in the overbought territory for several weeks and nothing serious happened as pullbacks have been quickly bought.

sp 500 september 6 2021 daily

On the daily chart RSI remains in the moderate territory which is good for the continuation of the current upside trend. Pullbacks are more visible on the daily chart, but it is obvious that they were not big at all as the bullish trend remained strong.

This is the type of the market when being bearish and trying to short tops leads to poor results. At one point, the bears will be right, but they can lose a lot of money trying to find the true top. Put simply, the trend remains bullish until proven otherwise. The Fed may break the trend by reducing support too quickly, but it has been very supportive in previous months and will likely remain very cautious when it finally begins to reduce its asset purchase program.

For a look at all of today’s economic events, check out our economic calendar.

Best ETFs For September 2021

That’s why I spend my time crafting portfolios chock full of outlier stocks. If you choose right, you’ll have enormous gains on your hands in the years to come.

Now, I pick my ETFs perhaps a bit differently than other people. I can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when I catalog the components and find outlier stocks underneath… that’s the winning recipe.

First, I looked at all ETFs making Big Money signals by going to MAPsignals.com and scanning the Big Money ETF Buys and Sells chart. I looked for recent days with heavy buying (the bright blue spikes):

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Source: www.mapsignals.com

Once I knew which ETFs Big Money was buying, then I wanted the best opportunities. Remember: ETFs are just baskets of stocks. MAPsignals specializes in scoring more than 6,000 stocks daily. Therefore, if I know which stocks make up the ETFs, I can apply the stock scores to the ETFs. Then I can rank them all strongest to weakest.

So let’s get to the 5 best ETF opportunities for September.

#1 Real Estate Select Sector SPDR Fund (XLRE)

First off, real estate is hot. We can see that Big Money has been plowing money into this ETF over the last year. We saw a few fresh buy signals recently too:

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XLRE holds some awesome stocks and one great example is Prologis, Inc. (PLD). Below we see the Big Money signals for PLD:

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#2 iShares S&P 500 Growth ETF (IVW)

Next, I’m looking for growth. IVW has it and lots of green signals, too:

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One great stock that IVW holds is Microsoft Corp. (MSFT). It has awesome fundamentals and some recent big money buying:

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#3 Global X Cloud Computing ETF (CLOU)

The cloud is a big area for growth this year. CLOU holds some phenomenal stocks. It’s also collecting lots of green:

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One big winner that caught my eye inside of CLOU is Netflix, Inc. (NFLX). It’s starting to get its mojo back:

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#4 ARK Innovation ETF (ARKK)

Cathie Woods, the star of Wall Street last year has hit some head winds. The ARKK saw huge buying through February then hit a wall. But the pullback, I believe, is an opportunity because it holds some terrific companies:

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It holds a monster growth stock, Square, Inc. (SQ). Big Money has been consistent for years:

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#5 iShares NASDAQ Biotechnology ETF (IBB)

The biotech space has been booming. Big Money has been flowing into IBB:

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It holds some great stocks too. One that I have my eye on is Regeneron Pharmaceuticals, Inc. (REGN), which has benefited from the COVID pandemic:

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Here’s a reminder for what to look for in the charts above:

  • When Big Money buying pours in, stocks tend to go up
  • Repeated buying usually means outsized gains

Let’s summarize here:

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IVW, XLRE, & CLOU rank high. ARKK and IBB however, rank lower on our list, mainly due to weaker technicals. That’s why I think these weaker ETFs represent great potential bargains.

The Bottom Line

IVW, XLRE, CLOU, ARKK, and IBB are my top ETFs for September 2021. Growth, REITs, & cloud stocks have performed well lately. My bet is they continue.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in XLRE, IVW, CLOU, ARKK, IBB, PLD, SQ, or NFLX, but holds long positions in MSFT & REGN in managed accounts at the time of publication.

Investment Research Disclaimer

https://mapsignals.com/contact/

For a look at all of today’s economic events, check out our economic calendar.

Nasdaq Ekes Out Record Finish as Wall St Ends Higher

The energy sector rose, reversing most of the losses suffered during the first three days of the week. Thursday’s performance was fueled by U.S. crude prices jumping 2% on a sharp decline in U.S. inventories and a weaker dollar.

Cabot Oil & Gas Corp and Occidental Petroleum Corp were among the largest risers, with oil majors Exxon Mobil and Chevron Corp also posting solid gains.

The technology index slipped into negative territory, as some of the industry’s largest companies saw their recent upward momentum stall.

Amazon.com Inc, Microsoft Corp, Facebook Inc and Google-owner Alphabet Inc were all under water. A notable exception was Netflix Inc, which hit an all-time high intraday.

U.S. stocks have regularly hit record highs over the past few weeks as a solid corporate earnings season and hopes of continued central bank support underpinned confidence as data showed the country’s post-pandemic economic growth was beginning to slow.

Data on Thursday showed the number of Americans filing new claims for jobless benefits fell last week, although the focus will be on the Labor Department’s monthly jobs report on Friday to set the stage for the Fed’s policy meeting later this month.

The report is likely to show job growth slowed to 750,000 in August from 943,000 the previous month.

“You have to see very wide beats or misses in this data to really change people’s minds,” said Greg Boutle, U.S. head of equity and derivative strategy at BNP Paribas.

“Investors are either in this renormalization camp that thinks inflation will not happen, or they believe there will be some persistence to inflation. Really, it will be a collection of beats or misses that will move the needle for investors and the Fed, rather than a single data point.”

Unofficially, the S&P 500 gained 12.92 points, or 0.29%, to end at 4,537.01 points, while the Dow Jones Industrial Average  gained 129.38 points, or 0.37%, to 35,441.91. The Nasdaq Composite  rose 21.15 points, or 0.14%, to 15,330.53.

Despite deadly flash floods in New York City, trading on Wall Street was operating normally.

Wells Fargo rose after three straight sessions of losses. The lender had been weighed by a report it could face further regulatory sanctions over the pace of compensating victims of a years-long sales practice scandal.

Contracting services company Quanta Services Inc jumped to a record high after saying it would buy privately held Blattner Holding Company in a deal valued at about $2.7 billion.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Shashank Nayar in Bengaluru and David French in New York; Editing by Aditya Soni and Lisa Shumaker)

Why Netflix Stock Is Trading At Yearly Highs

Netflix Stock Moves Towards The $600 Level After Analyst Upgrade

Shares of Netflix gained additional upside momentum and moved closer to the $600 level after the stock was upgraded by Citi.

Analyst estimates have been moving higher in recent weeks although they remain below previous highs. Currently, analysts expect that Netflix will report earnings of $10.45 per share in 2021 and $12.81 per share in 2022, so the stock is trading at roughly 47 forward P/E.

This is a rich valuation, but today’s market is ready to tolerate even higher multiples (for example, Tesla) if the company is a major force in the market it serves and has solid growth potential.

Recent reports indicated that Netflix’ shows were more popular compared to competition in the streaming space, and it looks that the market expects that the company’s pricing power should increase.

What’s Next for Netflix Stock?

Netflix shares moved from the $510 level towards the $600 level without any pullback, and the stock’s RSI reached extremely overbought levels. From a technical point of view, the risks of a near-term pullback are increasing as some traders will likely use the recent rally as an opportunity to take some profits off the table.

From a longer-term point of view, Netflix has decent chances to settle above the $600 level and continue its upside move in case the general market continues to move higher.

While forward P/E is close to the 50 level, traders will likely ignore valuation concerns if the company shows a clear path to future growth. As the streaming space gets crowded, the market may focus on pricing power rather than subscriber growth, and Netflix shares may get an additional boost in case the popularity of the company’s shows translates into higher prices for its customers.

The potential for multiple expansion is limited at this point, but the potential for earnings’ estimates growth is not. If earnings estimates keep moving higher, Netflix stock will get more support.

For a look at all of today’s economic events, check out our economic calendar.

Wall Street Boom or Bubble? Don’t Blame It All on the Fed: Jamie McGeever

It is undeniable that trillions of dollars of asset purchases and years of official interest rates of zero and 10-year bond yields barely above 1% have boosted stock prices.

But the significance of Fed actions are overstated.

The tech-heavy composition of Wall Street, which benefits more from low interest rates and plain old stronger economic growth, are adding fuel to the U.S. stock surge. And the Fed’s large balance sheet expansion is nowhere near the European Central Bank or Bank of Japan’s.

Look no further than Wall Street: The S&P 500 has more than doubled from its COVID low of March last year, chalking up 51 record highs this year.

According to Ryan Detrick, chief market strategist at LPL Financial in Charlotte, North Carolina, only 1964 and 1995 had more than 50 new highs by the end of August. He reckons the S&P 500 could make 78 new highs this year, eclipsing the all-time record of 77 set in 1995.

On a 12-month forward earnings valuation basis, the S&P 500 earlier this year was its most expensive since 1999, just before the tech bubble burst. This price/earnings ratio has since drifted lower. But it is still above 20, which is unfamiliar territory for most of the last two decades.

Official interest rates and ultra-low benchmark bond yields make investing in profitable, cash-generating companies an attractive proposition. To some investors desperate for return, riskier stocks are a no-brainer.

Many argue there is a natural consequence of the Fed doubling the size of its balance sheet to $8.3 trillion since the pandemic outbreak.

As a share of GDP, that is now around 40%.

With stocks and other financial assets mostly in the hands of society’s better off, critics say U.S. monetary policy is widening the gap between rich and poor and directly exacerbating wealth inequality.

The world’s second and third largest central banks, meanwhile, have also ramped up their pandemic-fighting asset purchases. Their balance sheets, as a share of GDP, are far bigger than the Fed’s. Yet stock markets and valuations in the euro zone and Japan are nowhere near as high.

“The commonly held narrative centers on the Fed, and if everyone believes that, then it is self-reinforcing,” said Meb Faber, co-founder and chief investment officer at Cambria Investments in El Segundo, California.

“But there is a limit as to how far you can extrapolate that.”

The ECB has grown its balance sheet to $9.5 trillion since the outbreak of the pandemic. The ECB’s balance sheet is now worth more than 60% of euro zone GDP.

Similarly, the Bank of Japan has grown its balance sheet by $1.4 trillion since March 2020 to $6.6 trillion, around 120% of GDP.

Yet the euro Stoxx 50 is up ‘only’ around 65% from the COVID low, and is still 23% below its record high from March 2000. Euro stocks’ 12-month forward price/earnings ratio is around 16.

Japan’s Topix is up 55% from the COVID low and has a forward multiple of around 13.

Both figures, again, are significantly below their U.S. equivalents, suggesting factors other than central bank largesse are behind Wall Street’s surge.

For one, the U.S. equity market is far more tech- and digital-heavy than its global peers.

A world of zero interest rates benefits tech companies disproportionately because a low discount rate inflates future cash flows for companies where cutting edge innovation is likely to fuel faster growth. By any measure, the big five tech ‘FAANG’ stocks – Facebook, Amazon, Apple, Netflix and Google – dominate Wall Street. They have risen more than three times the broader S&P 500 in the last five years and their $7 trillion market cap is 21% of the whole index.

Another is good old-fashioned economic growth.

Some of the more bullish U.S. forecasts have been trimmed recently, but the International Monetary Fund expects 7.0% GDP growth in the United States this year, 4.6% in the euro zone, and just 2.8% in Japan.

On top of that, Corporate America is motoring along nicely.

LPL Financial’s Detrick notes that some 85% of S&P 500 companies posted second quarter earnings beats. And 2021 consensus earnings per share estimates are for a 43% jump from last year.

“The Fed backstop helps explain why people are willing to pay higher multiples. But higher earnings are higher earnings, and that justifies a lot. Investors still see better opportunity in the U.S., and are willing to pay that premium,” he said.

For a look at all of today’s economic events, check out our economic calendar.

(By Jamie McGeever; Editing by Edward Tobin)

How Options Are Fueling The Markets

First, let’s look at the covid crisis and how it played a role. As a result of the shutdowns, the FED took a really aggressive stance with its quantitative easing measures.  Lots of money printing to pay for massive stimulus payouts.  The worse news we hear historically is that the markets will react sharply to the downside.

In this market, they did the opposite because many in the market viewed the bad news as a sign the FED will keep its foot on the gas with their aggressive quantitative easing.  The markets love this as they see it as huge economic growth with less risk, even when things were shut down.  Many people were at home and had nothing to do but spend their stimulus money.  The markets loved this.  That is why we saw massive growth in AMZN, FB, GOOGL, and MSFT.  Other stocks favored from staying at home were ZM, NFLX, and TTD.

Now how do options fuel the markets?  Well, when an underlying stock has options there is a secondary derivative market that has its own supply and demand outside of the stock.  This can cause market makers to balance those demands.  How do they do this?

They do this by taking the difference of the total contracts bought and sold and adjust accordingly.  So for example let’s look at SPX.  In the below picture you can see Put volume is roughly half the call volume.  In this case, the market maker would engage in an activity called delta hedging where they would buy shares of stock to offset the difference between the Put and Call contract volume.  Since the market maker is only interested in the arbitrage between the bid and ask of these contracts, they want to stay delta neutral or, in other words, not be affected by stock price movement.

When they buy to offset, this can drive the price of an underlying stock up.  This is one reason why so many traders watch unusual options activity.

Every day on  Options Trading Signals we do defined risk trades that protect us from black swan events 24/7.  Many may think that is what stop losses are for.  Well, remember the markets are only open about 1/3 of the hours in a day.  Therefore, a stop loss only protects you for 1/3 of each day.  Stocks can gap up or down.  With options, you are always protected because we do defined risk in a spread.  We cover with multiple legs which are always on once you own.

Enjoy your day!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Founder & Chief Market Strategist
www.TheTechnicalTraders.com

 

Why Netflix Stock Is Down By 4% Today

Netflix Stock Dives After Company Misses Earnings Estimates

Shares of Netflix are losing ground in premarket trading after the company released its second-quarter results.

Netflix reported revenue of $7.34 billion and GAAP earnings of $2.97 per share, beating analyst estimates on revenue and missing them on earnings.

Netflix stated that it finished the quarter with over 209 million paid memberships, which was above its own forecast. In total, the company added 1.5 million paid memberships in the second quarter.

The company also noted that average revenue per membership increased by 8% over the two-year period (last year’s numbers are not used for comparison as they were heavily impacted by coronavirus-related measures).

For the third quarter, the company projects revenue of $7.48 billion and earnings of $2.55 per share. The number of paid memberships is expected to increase from 209.18 million to 212.68 million.

What’s Next For Netflix Stock?

Netflix’ growth is slowing down, which is not surprising given the fact that people return to their normal lives after the blow dealt by coronavirus pandemic.

In addition, competition in the streaming space is increasing, and it looks that the market is worried that this segment becomes very competitive.

Netflix has recently stated that it wanted to expand its offerings into the gaming segment, but it remains to be seen whether this move will serve as an additional positive catalyst for the company’s stock.

Analysts expect that Netflix will report earnings of $12.96 per share in 2022, so the stock is trading at 39 forward P/E. This is a suitable valuation level for a company that grows fast, but Netflix’ growth has slowed down which makes the stock vulnerable to multiple compression.

It should be noted that the general market mood remains very bullish which should provide some support to pricey stocks, but it looks that Netflix stock will need additional catalysts to get out of the current wide trading range between $480 and $560.

For a look at all of today’s economic events, check out our economic calendar.

Netflix Misses Earnings Expectations Despite Beating Paid Subscriber Growth

The shares of Netflix are trading in the red zone in the early hours of Wednesday after the company reported its second-quarter 2021 earnings.

Netflix Subscribers Increase Massively in Q2

Entertainment giant Netflix presented its earnings report yesterday with some interesting data reported by the company. Analysts had estimated that Netflix would add 1.19 million new paid subscribers in the second half of the year. However, the company surpassed that mark after adding 1.54 million new users.

Netflix now has over 209 million paid subscribers globally. The growth has decreased over the past year. The roll-out of vaccines means that more people are resuming their daily activities, and some have no need for Netflix subscriptions for now.

For the third quarter of the year, Netflix expects to add 3.5 million new users. The optimism stems from the company’s slate of content, with most of its movies and TV shows expected to be released earlier this year were pushed back to the second half of 2021 and next year.

In the first half of 2021, Netflix spent $8 billion on content and expected to add another $4 billion in the second half of the year. Netflix stated that if it achieves its forecast, it would have added over 54 million paid subscribers in the past 24 months.

Netflix Misses Earnings Expectations, Stock Price Slips

Despite recording a better-than-expected addition of paid subscribers, Netflix missed its earnings expectations. The earnings per share (EPS) was $2.97 compared to the $3.16 expected by the Refinitiv survey of analysts.

NFLX stock chart. Source: FXEMPIRE

The company didn’t disappoint in terms of revenue. The Q2 revenue was $7.34 billion vs. $7.32 billion expected. Despite that, the shares of Netflix dropped following the earnings report. NFLX is down by 0.23% in the early hours of Wednesday and is trading at $531 per share.

Year-to-date, NFLX has underperformed. The stock began trading at $540 per share at the start of the year but has dropped after reaching a yearly high of $586 in January.

Today’s Market Wrap Up and a Glimpse Into Wednesday

Investors couldn’t stay away from stocks long after yesterday’s meltdown. All three major market indices finished the day in the green with gains of more than 1%. The Dow Jones Industrial Average tacked on nearly 550 points, while the S&P 500 and Nasdaq each gained 1.5% on the day. Travel-related stocks as well as the financial sector and industrials all took back lost ground.

Investors had fled stocks on Monday on fears of the Delta variant, but cooler heads prevailed today. Apple was among the stocks that redeemed itself after sharp losses on Monday. The tech giant advanced almost 3% on the day. Apple reportedly postponed employees’ return to the offices until the fall due to the spread of the COVID-19 variant.

 

The oil price similarly found its footing, with Brent crude climbing 1.1% higher on the heels of yesterday’s sell-off of nearly 7%. Investors appeared to have had lumped oil in with their Delta variant-related fears, but it was just a blip on the radar.

Stocks to Watch

Netflix shares were under pressure in extended-hours trading after the streaming giant fell short of subscriber growth expectations. The company added 1.5 million subscribers vs. estimates for 1.75 million, as per Factset. Netflix also missed on the bottom line while beating on the top line.

Netflix blamed the pandemic for its uneven subscriber growth, and management is eyeing 3.5 million new members in Q3, which is weaker than expected. Chief executive Reed Hastings also made it official — Netflix is making a push into gaming.

Restaurant stock Chipotle Mexican Grill had a strong Q2 as customers flocked back to its locations after last year’s lockdowns kept them away. Revenue and earnings beat Wall Street estimates, and Chipotle expects the momentum to continue into Q3, as evidenced by an outlook for same-store sales growth in the double-digit percentage range. Chipotle shares are up 4% in after-hours trading.

AMC Entertainment saw its value balloon by nearly 25% in the session, sending the stock back above USD 40 per share.

Look Ahead

Investors will be looking to see if the stock market can extend today’s rally. On the earnings front, Coca-Cola is set to report its quarterly results ahead of the opening bell, as is Johnson & Johnson. Energy company Kinder Morgan’s earnings come out after the closing bell.

Netflix Holds Its Own in Midst of Market Sell-Off

It’s hard to spot a winner in today’s session, as the bottom appears to have fallen out from beneath stocks. The Dow Jones Industrial Average is suffering what is shaping up to be its steepest drop of the year so far, and the other major indices are in freefall too.

Netflix, which is a component in both the S&P 500 and the Nasdaq, has been meandering between positive and negative territory. Most recently, it succumbed to the selling pressure but its declines are modest. Investors appear to be confident about the streaming giant’s upcoming earnings, which are planned for tomorrow after the bell.

Potential Gaming Gains

One of the catalysts for Netflix’s stock is a planned push into video games, for which the company has brought a seasoned gaming executive on board. Netflix tapped Mike Verdu, an alum of Electronic Arts and Facebook, to lead its gaming efforts.

ARK analyst Nicholas Grous suggests that Netflix could start its gaming push by “distributing third-party titles” and eventually build its own “in-house titles.” Games could reportedly make their way onto Netflix’s platform in the next 12 months. As Grous points out, the strategy certainly paid off for Netflix and investors with content streaming.

Incidentally, Netflix recently inked a multi-year contract with Sony in which the film giant’s movies will be available on the streaming platform starting next year. Speculation on social media suggests the relationship could potentially spill over into gaming.

Analyst Optimism

Wall Street analysts are expecting good things from Netflix’s second quarter. JPMorgan’s Doug Anmuth remains “positive into earnings” amid the streaming company’s content lineup for the balance of the year. Anmuth has a bullish USD 600 price target on the stock, which is currently hovering at USD 529.

Investors are focused on the number of new subscribers that Netflix managed to add in the quarter. Netflix is up against tough comparisons from the pandemic year when the company saw explosive numbers. Consumers were stuck at home due to the lockdowns and turned to streaming content for entertainment.

The JPMorgan expert is predicting 2 million added subscribers for Q2, which he upped from his former forecast of 1.6 million. He expects the momentum to continue for the final two quarters of the year.

Earnings vs Inflation – What Is The Right Bet?

As investment money will always be looking for a place to roost many stocks still look like the best opportunity for alpha, especially some of your bigger high-tech companies like Microsoft, Google, Facebook, etc… who don’t face the same headwinds created by supply chain dislocations, higher commodity prices, etc.

Fundamental analysis

Bulls are hoping to see more money lured into the market by strong Q2 earnings which have so far failed to ignite a meaningful rally. Analyst expectations for S&P 500 company earnings is still around +65%, something stock bears argue is lofty considering the extreme level of supply chain dislocations and labor shortages.

There is also a lot of debate about whether corporate profit gains are “peaking” in the face of slower growth in the quarters ahead as the reopening boom begins to fade. Remember, investors place bets on the future, not what happened last quarter.

The earnings pace really picks up next week with highlights including IBM on Monday; Chipotle and Netflix on Tuesday; ASML, CocaCola, Novartis, and Verizon on Wednesday; Abbott Labs, AT&T, Biogen, Capital One, Dow Inc., Intel, Snap, Southwest Airlines, Twitter, and Union Pacific on Thursday; and American Express, Honeywell, and Nextera on Friday.

Inflation

One of the biggest factors that seem to be weighing on investor sentiment continues to be inflation. The latest indication of rising costs was reflected last week in U.S. Import Prices, which climbed for an eighth straight month in June.

However, the year-on-year increase slid to +11.2%, down from +11.6% in May is an encouraging sign that some inflationary pressures might be starting to ease. Federal Reserve Chairman Jerome Powell, testifying before the Senate Banking Committee yesterday, repeated the script he’s stuck with for months, saying inflation will likely remain elevated in the coming weeks and months before moderating.

Powell also told lawmakers that the Fed is not in a hurry to start paring its monthly asset purchases but he stressed that the central bank is prepared to adjust policy if they see signs of inflation moving “materially and persistently beyond levels consistent with our goal.” Wall Street increasingly expects the Fed to start trimming asset purchases later this year and even start lifting rates as soon as Q4 2022.

The Fed meets next on July 27-28 but most analysts think Powell will wait to make any big policy change announcements at either the annual Jackson Hole symposium at the end of August or possibly the FOMC’s September policy meeting. Central banks in Canada and New Zealand this week scaled back their asset purchase schemes which some worry could start to put pressure on central bankers in other developed countries to also tighten.

The European Central Bank releases its latest policy decision next Thursday. Bulls still largely believe that U.S. growth will be able to outpace “transitory” inflation pressures but the outlook for some companies could dim if the Fed starts reining in its “easy money” policies sooner than investors have been anticipating.

sp500 analysis forecast 18 july 2020

SP500 technical analysis

SP500 pulled back last week after another attempt to break out. There is no surprise we see such choppiness in the middle of summer. Moreover, very likely this price activity will stay for a few more weeks. We are still in a bull market. However, the risk of deep pullback is rising. If that happens, SP500 will target to close the gap near 4000.

On the other hand, if the price sustains above Gann resistance 4400, bulls will target 4500 at least. Two of my favourite indicators are giving opposite signals now. So, I don’t have any strong bias at the moment. Advance Decline Line remains bearish. At the same time, Insider Accumulation is bullish. In general, swing traders have to focus on daily support and resistance. Likely it will take few more weeks to see a real direction. Short-term traders can use Gann levels and Cycles on 4h charts to find trading opportunities.

Earnings to Watch Next Week: IBM, Netflix, Coca-Cola, Twitter, Intel and American Express in Focus

Earnings Calendar For The Week Of July 19

Monday (July 19)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company is expected to report its second-quarter earnings of $2.32 per share, which represents year-over-year growth of over 6% from $2.18 per share seen in the same quarter a year ago.

The world’s largest computer firm would post revenue growth of about 1% to $18.24 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

The better-than-expected results, which will be announced on Monday, July 19, would help the stock recover its last year’s losses. IBM shares rose about 12% so far this year.

“We expect IBM to marginally beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings figures in each of the last four quarters while revenue beat consensus in three of the last four quarters,” noted analysts at Trefis.

“In the past year the company has increased its investment in R&D and capex and since October has acquired seven companies focused on hybrid cloud and AI. As the pace of vaccination increases and countries are opening up, we expect the momentum to continue in the second-quarter FY2021 results as well. Our forecast indicates that IBM’s valuation is around $140 per share, which is in line with the current market price of $140.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 19

Ticker Company EPS Forecast
TSCO Tractor Supply $2.97
PPG PPG Industries $2.20
JBHT J B Hunt Transport Services $1.57
CCK Crown $1.78
STLD Steel Dynamics $3.38
PACW Pacwest Bancorp $0.99
WTFC Wintrust Financial $1.59
FNB FNB $0.28
SFBS ServisFirst Bancshares $0.93
IBM IBM $2.32
PLD ProLogis $0.45
ACI AltaGas Canada $0.68
ZION Zions Bancorporation $1.29
NVR NVR $72.35
ELS Equity Lifestyle Properties $0.28
AN AutoNation $2.67

Tuesday (July 20)

IN THE SPOTLIGHT: NETFLIX, UNITED AIRLINES HOLDINGS

NETFLIX: The California-based global internet entertainment service company is expected to report its second-quarter earnings of $3.18 per share, which represents year-over-year growth of 100% from $1.59 per share seen in the same quarter a year ago.

The streaming video pioneer would post revenue growth of about 19% to around $7.3 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

“Areopening consumer and the lingering effects of 2020’s production delays suggest risk to consensus 2Q/3Q estimates. However, more content is on the way, supporting an increase in net additions in 4Q21/’22. In this cross-asset report, we reiterate OW on shares and reiterate our recommendation to buy 10Y bonds in credit,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow NFLX to leverage content investments and drive margins. Higher global broadband penetration should increase the NFLX addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

UNITED AIRLINES HOLDINGS: One of the largest airlines in the world is expected to report a loss for the sixth consecutive time of $4.21 in the second quarter of 2021 on July 20 as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions.

However, that would represent a year-over-year improvement of about 55% from -$9.31 per share seen in the same quarter a year ago.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 20

Ticker Company EPS Forecast
DOV Dover $1.82
OMC Omnicom $1.38
SBNY Signature Bank $3.14
PM Philip Morris International $1.54
HCA HCA $3.16
SYF Synchrony Financial $1.38
KEY KEY $0.54
ALLY Ally Financial $1.50
MAN ManpowerGroup $1.41
GATX GATX Corp $1.03
BMI Badger Meter $0.46
ONB Old National Bancorp $0.40
FMBI First Midwest Bancorp $0.38
NFLX Netflix $3.18
CNI Canadian National Railway USA $1.49
CMG Chipotle Mexican Grill $6.50
IBKR Interactive Brokers $1.03
UAL United Airlines Holdings -$4.21
PNFP Pinnacle Financial Partners $1.44
RXN Rexnord $0.50
UCBI United Community Banks $0.62
SNBR Scs Group Plc $1.07
FULT Fulton Financial $0.33
RUSHA Rush Enterprises $0.79
ISRG Intuitive Surgical $3.07
UBS UBS Group $0.42
TRV Travelers Companies $2.38
HAL Halliburton $0.22
CFG Citizens Financial $1.10
SNV Synovus Financial $1.03
IRDM Iridium Communications -$0.06
NEOG Neogen $0.14
EXPO Exponent $0.42
RNST Renasant $0.77

Wednesday (July 21)

IN THE SPOTLIGHT: COCA-COLA

The world’s largest soft drink manufacturer is expected to report its second-quarter earnings of $0.56 per share, which represents year-over-year growth of over 30% from $0.42 per share seen in the same quarter a year ago. The company’s revenue would grow over 30% to $9.4 billion.

“We are Overweight Coca-Cola (KO) after significant stock underperformance given COVID impacts on KO’s on-premise eating / drinking out business (~40% of sales) and gas & convenience (~10%) with gov’t mandated restaurant closures and reduced foot traffic. COVID impacts drove a large -9% organic sales decline in 2020, but we forecast a recovery to ~8% organic growth in 2021/2022 with a post-COVID recovery in away-from-home,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We believe Coke’s LT topline growth outlook is above peers, with strong pricing power, and favorable strategy tweaks under Coke’s CEO, including increased innovation and a cultural shift towards a total beverage company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 21

Ticker Company EPS Forecast
JNJ Johnson & Johnson $2.29
ASML ASML $2.98
KO Coca-Cola $0.56
ANTM Anthem $6.34
NDAQ Nasdaq Omx $1.72
RCI Rogers Communications USA $0.62
NTRS Northern $1.71
BKR Baker Hughes Co $0.16
MTB M&T Bank $3.65
MKTX MarketAxess $1.72
LAD Lithia Motors $6.01
HOG Harley Davidson $1.21
BOKF BOK Financial $1.83
STX Seagate Technology $1.84
KNX Knight Transportation $0.88
CCI Crown Castle International $0.68
CSX CSX $0.37
DFS Discover Financial Services $4.01
EFX Equifax $1.71
GL Globe Life Inc $1.83
LVS Las Vegas Sands -$0.15
SEIC SEI Investments $0.91
WHR Whirlpool $5.95
GGG Graco $0.61
REXR Rexford Industrial Realty $0.09
OMF OneMain Holdings $2.12
THC Tenet Healthcare $1.07
FR First Industrial Realty $0.22
SLM SLM $0.37
LSTR Landstar System $2.33
SLG SL Green Realty $0.17
VMI Valmont Industries $2.50
RLI RLI $0.75
UFPI Universal Forest Products $1.56
STL Sterling Bancorp $0.50
UMPQ Umpqua $0.45
FTI FMC Technologies -$0.01
CNS Cohen & Steers $0.82
MC Moelis & Company $0.83
TCBI Texas Capital Bancshares $1.24
BXS BancorpSouth $0.67
PLXS Plexus $0.91
NVS Novartis $1.54
SAP SAP $1.44
TXN Texas Instruments $1.83
EBAY eBay $0.95
KMI Kinder Morgan $0.19
URI United Rentals $4.90
IPG Interpublic Of Companies $0.43
FNF Fidelity National Financial $1.41
CMA Comerica $1.60
MTG MGIC Investment $0.42
FCFS FirstCash $0.60
CVBF CVB Financial $0.35
PTC PTC $0.63
PPERY PT Bank Mandiri Persero TBK $0.18

Thursday (July 22)

IN THE SPOTLIGHT: TWITTER, INTEL

TWITTER: The online social media company that enables users to send and read short 140-character messages called “tweets”, is expected to report its second-quarter earnings of $0.07 per share, which represents year-over-year growth of over 105% from a loss of -$0.16 per share seen in the same quarter a year ago.

The San Francisco, California-based company would post revenue growth of about 55% to $1.06 billion.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for TWTR given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

INTEL: The California-based multinational corporation and technology company is expected to report its second-quarter earnings of $1.07 per share, which represents a year-over-year decline of about 14% from $1.23 per share seen in the same quarter a year ago. The company’s revenue would fall over 10% to $17.73 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 22

Ticker Company EPS Forecast
ULVR Unilever £1.29
PSON Pearson £8.40
ABB ABB $0.36
CBSH Commerce Bancshares $1.02
DOW Dow Chemical $2.36
DHR Danaher $2.05
FITB Fifth Third Bancorp $0.81
FAF First American Financial $1.70
RS Reliance Steel & Aluminum $4.73
T AT&T $0.79
WBS Webster Financial $0.99
UNP Union Pacific $2.54
BKU BankUnited $0.86
SNA Snap-On $3.21
ABT Abbott $1.02
NEM Newmont Mining $0.81
MMC Marsh & McLennan Companies $1.42
BIIB Biogen $4.60
TRN Trinity Industries $0.09
DGX Quest Diagnostics $2.86
ALLE Allegion $1.30
CLF Cliffs Natural Resources $1.52
TPH Tri Pointe Homes $0.81
VLY Valley National Bancorp $0.29
EWBC East West Bancorp $1.39
DHI DR Horton $2.82
SON Sonoco Products $0.86
POOL Pool $5.49
WSO Watsco $3.01
SAFE 3 Sixty Risk $0.33
CSL Carlisle Companies $2.22
WRB W.R. Berkley $0.98
SAM Boston Beer $6.69
SIVB SVB Financial $6.42
CE Celanese $4.34
RNR Renaissancere $4.62
TWTR Twitter $0.07
INTC Intel $1.07
WSFS Wsfs Financial $0.90
GBCI Glacier Bancorp $0.72
ABCB Ameris Bancorp $1.20
OZK Bank Ozk $0.92
ASB Associated Banc $0.47
FFBC First Financial Bancorp $0.52
VICR Vicor $0.33
VRSN Verisign $1.36
COF Capital One Financial $4.57
INDB Independent Bank $1.08
ASR Grupo Aeroportuario Del Sureste $36.49
SKX Skechers USA $0.51
RHI Robert Half International $1.05
FE FirstEnergy $0.57
SNAP Snap -$0.18
AEP American Electric Power $1.12
LUV Southwest Airlines -$0.27
AAL American Airlines -$2.12
DPZ Dominos Pizza $2.86
ALK Alaska Air -$0.62
NUE Nucor $4.76
BX Blackstone $0.78
FCX Freeport-McMoran $0.75
SASR Sandy Spring Bancorp $1.20
GPC Genuine Parts $1.52
ORI Old Republic International $0.53
HTH Hilltop $1.03
CROX Crocs $1.54
BCO Brinks $0.98
FFIN First Financial Bankshares $0.38
CNA Centrica £1.80

Friday (July 23)

Ticker Company EPS Forecast
HON Honeywell International $1.94
SLB Schlumberger $0.26
AXP American Express $1.63
KMB Kimberly Clark $1.74
NEP Nextera Energy Partners $0.61
ROP Roper Industries $3.67
RF Regions Financial $0.53
NEE NextEra Energy $0.69
AIMC Altra Industrial Motion $0.81
GNTX Gentex $0.44
FBP First Bancorp FBP $0.22
VTR Ventas -$0.08
GT Goodyear Tire & Rubber $0.16
ACKAY Arcelik ADR $0.48
MGLN Magellan Health $0.60
SXT Sensient Technologies $0.78

 

Today’s Market Wrap Up and a Glimpse Into Thursday

Stocks finished the day mixed as comments out of Federal Reserve Chairman Jerome Powell resonated with investors. The Dow Jones Industrial Average and the S&P 500 finishing with gains while the Nasdaq extended its recent declines. Powell told lawmakers he expects inflation will calm down while monetary policy should remain intact.

Bank of America flexed its muscle with a more than doubling of profits in the second quarter. Investors, however, focused on falling revenue and punished the stock, sending shares lower by 2.5%.

Stock index futures are treading lightly on Wednesday evening as investors brace for another round of jobs data coupled with the continuation of the Q2 earnings parade.

Stocks to Watch

Netflix is trading 2% higher in the after-hours market. The company has snagged a seasoned video game executive for its gaming venture. Netflix hired Facebook’s VP of augmented reality, Mike Verdu, as it looks to take share in the gaming space. Verdu also held stints at Electronic Arts and Zynga.

Meme stocks were under pressure today, with shares of AMC Entertainment tumbling 15% in the regular session. The declines continued in extended-hours trading. The selling pressure also spilled over into GameStop, which could be feeling the heat from Netflix’s gaming push.

There could be some M&A news coming up. Cybersafety company NortonLifeLock announced it could be combining with British cybersecurity play Avast. Shares of NortonLifeLock came under pressure on the development and are down more than 2% in extended-hours trading.

Look Ahead

Investors will be looking to see if stocks return to their record levels on Thursday or continue to trade cautiously amid an uncertain inflationary outlook. On the earnings front, banks will continue to report their results including Morgan Stanley.

Economic data could also influence the direction of stocks. Industrial production for June is expected at 9:15 a.m. ET. Wells Fargo economists described manufacturing demand as “robust.” While input costs are high and supply chain constraints are an issue, the economists are predicting a 0.8% increase for June.

In addition, unemployment claims come out on Thursday. Consensus estimates call for a decline in the number of claims to levels not seen since before the pandemic reared its head.

Has Walt Disney Topped Out?

Dow component Walt Disney Co. (DIS) topped out just above 200 in March following a historic 257% advance off March 2020’s 6-year low. The stock has lost altitude since that time, despite the reopening of California Disneyland, moviegoers flocking back to multiplexes, and the success of highly-touted Disney+ entries “Loki” and “WandaVision”. Q2 2021 earnings in May failed to stop the slide, missing revenue expectations with a 13.4% year-over-year decline.

Slowing Disney+ Subscriber Growth

The entertainment giant’s cruise ships remain landlocked until at least Aug. 6 despite relaunching by Floridian rivals, further impacting 2021 income. “Black Widow” and other Disney films should do relatively well, as evidenced by the solid “F9” box office in the last two weeks. However, the slate of entries includes the next generation of Marvel films that could fall flat with an audience seeking raw entertainment, rather than Hollywood’s usual dose of heavy-handed political messaging.

Worse yet, The Information reported last week that Disney+ U.S. growth slowed sharply in the first half of 2021, following a similar shortfall at Netflix Inc. (NFLX). Its common knowledge the pandemic pulled future demand forward due to endless lockdowns, reducing 2021’s pool of available subscribers. As that publication notes “The slowdown in growth at Disney+ reinforces long-standing questions about Disney’s ability to expand the streaming service to its target of 230 million to 260 million subscribers globally by the end of the 2024 fiscal year.”

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 21 ‘Buy’, 2 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $147 to a Street-high $230 while the stock closed Friday’s session more than $30 below the median $212 target. This humble placement supports higher prices if recently-reported metrics are inaccurate and the company reports higher-than-expected subscriber growth in the Aug. 12 release.

Disney failed a breakout above the 2015 high at 122 during the pandemic decline and rallied to a new high in December. The subsequent uptick stalled after mounting 200 in March, giving way to a persistent slide that broke 50-day moving average support in April. The failure to remount that barrier in the last three months raises a red flag, highlighting continued weakness. In addition, the pullback has flipped long-term relative strength readings into an active sell cycle that project continued weakness into the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in the aforementioned securities at the time of publication. 

Netflix Surges Higher After Upgrade

Netflix Inc. (NFLX) rallied more than 5% last week, hitting a two-month high after a tier one upgrade and Spielberg deal lifted the stock above the psychological 500 level. The rally has partially filled the big Apr. 21st gap, printed when the streaming giant missed Q1 2021 subscriber estimates and lowered Q2 guidance. This marks the fourth time that price action has shaken off selloffs through that trading floor, predicting that support is growing stronger.

Pandemic Hangover

The company benefited from the pandemic, adding millions of subscribers who were stuck in their homes due to lockdowns. However, two negative forces have intervened in the last year, reducing the 12-month rolling return to zero. First, the pandemic pulled future subscriptions forward, reducing the population of potential customers. Second, the onslaught of new streaming services reached a saturation point, forcing customers to pick and choose between subscriptions.

Credit Suisse analyst Douglas Mitchelson upgraded the stock to ‘Outperform’ on Friday, noting, “Our tracking of Netflix releases, in addition to management commentary for the past year, suggests a strong August-December content slate with numerous potential top-of-funnel titles – and we expect a stronger full year slate in 2022 than 2021, led by Stranger Things Season 5 and Bridgerton Season 2. This follows a much lighter-than-normal first five months of the year, along with price increase churn and pandemic pull forward hangover”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 28 ‘Buy’, 5 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, four analysts are telling shareholders to close positions and move to the sidelines. Price targets range from a low of $340 to a Street-high $1,154 while the stock ended the week about $90 below the median $617 target. Taken together with last week’s positive action, the current uptick could easily stretch toward $600.

Netflix broke out above the 2018 high at 423 in April 2020 and took off in a rally that topped out at 575 in July. A January breakout failed after posting an all-time high at 593 while price action in the last year has endured multiple tests at the 500 level. The slight upward tilt of the pattern has now evolved into a shallow rising channel, with heavy resistance centered at 610. Swing trades make more sense in this mixed configuration than long-term investments.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Apple, Facebook Drive Nasdaq Futures Higher as Earnings Roll In

By Shivani Kumaresan

Apple Inc gained 2.7% in premarket trading after posting sales and profits ahead of Wall Street estimates, led by much stronger-than-expected iPhone and Mac sales.

Facebook Inc jumped 7.3% on beating analysts’ expectations for both quarterly revenue and profit, helped by a surge in digital ad spending during the pandemic, along with higher ad prices.

Other megacap companies, including Microsoft Corp, Alphabet Inc and Netflix Inc, rose between 0.2% and 1.1%.

Official data is likely to show that the number of Americans filing new claims for jobless benefits rose last week, while the Commerce Department is expected to report a 6.1% rise in first-quarter GDP.

More earnings reports from Dow components rolled in, with Caterpillar Inc rising 2.8% after the heavy equipment maker reported a rise in adjusted first-quarter profit. Drugmaker Merck & Co Inc, however, slid 3.2% on posting a 1.2% fall in quarterly profit.

Global shares extended gains after the Federal Reserve said it was too early to consider rolling back emergency support for the economy, and U.S. President Joe Biden proposed a $1.8 trillion stimulus package.

At the conclusion of the U.S. central bank’s latest policy meeting on Wednesday, Fed Chair Jerome Powell acknowledged the economy’s growth, but said there was not yet enough evidence of “substantial further progress” toward recovery to warrant a change in policy.

At 6:44 a.m. ET, Dow e-minis were up 177 points, or 0.52%, S&P 500 e-minis were up 30.25 points, or 0.72%, and Nasdaq 100 e-minis were up 138.75 points, or 1%.

Shares of electric vehicles companies, including Tesla Inc, Nikola Corp, rose 1.1% and 2.6%, respectively, as sales picked up speed in the first quarter, according to the International Energy Agency.

Amazon.com Inc, Twitter Inc, Mastercard Inc and Gilead Sciences Inc are also expected to report first-quarter earnings later in the day.

(Reporting by Shivani Kumaresan and Shreyashi Sanyal in Bengaluru; Editing by Saumyadeb Chakrabarty)

Why Shares Of Netflix Are Down By 8% Today?

Netflix Video 21.04.21.

Netflix Stock Falls As Subscriber Growth Slows

Shares of Netflix found themselves under strong pressure after the company released its quarterly results. Netflix reported revenue of $7.2 billion and GAAP earnings of $3.75 per share, beating analyst estimates on both earnings and revenue.

While financial results exceeded expectations, the market was very disappointed with the pace of subscriber growth. The company added 3.98 million global streaming paid memberships in the first quarter compared to its previous guidance of 6 million. In addition, Netflix expects to add just 1 million global streaming paid memberships in the second quarter of this year.

The company stated that “paid membership growth slowed due to the big Covid-19 pull foward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays”.

Netflix added that it anticipated a strong second half of this year as new seasons of its leading shows returned to the screen. The company also noted that streaming continued to gain market share from linear TV which was a long-term trend in entertainment.

What’s Next For Netflix?

Analysts expect that Netflix will report earnings of $9.89 per share this year and $12.99 per share in 2022 so the stock is trading at roughly 40 forward P/E even after the current sell-off. At such valuation levels, companies must meet growth targets, or their shares may quickly find themselves under pressure as it happened in the case of Netflix.

Some analysts have already upgraded the stock as they mentioned the opportunity to buy shares of Netflix at a discount to recent prices. However, Netflix will still have to show a clear path to robust growth amid serious competition in the domestic market and growing competition in the international market.

Netflix stated that it was less than 10% of TV screen time in the U.S. and even smaller in other regions which provided an opportunity to gain more market share. However, the company will have to convince the market that it will be able to return to higher growth or its shares will trade at a lower valuation.

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