Netflix in Financial Advisors’ Spotlight Following Earnings, Revenue Beat But Missed Subs Growth

During the last shortened trading week, the US stock market lost some ground as concerns regarding the new coronavirus outbreak in China overshadowed strong financial results reported by a number of companies, including Intel Corporation (NASDAQ: INTC), American Express Company (NYSE: AXP), and IBM (NYSE: IBM). US stock markets were closed on Monday, January 20 on the back of Martin Luther King Day, but between January 21 and January 24, the S&P 500 lost 0.76%, followed by the Dow Jones Industrial Average and NASDAQ Composite, which recorded declined of 0.71% and 0.60%, respectively.

The spotlight for the past week was on China, where an outbreak of a new coronavirus already killed over 40 people and the number of infected people surged to more than 2,000. The virus already managed to spread to other countries, including South Korea, Japan, France, and the US. Despite the fact that the World Health Organization declined to raise an international virus alert and health experts suggest that the virus will not be disruptive, investors remained concerned about the impact of the virus on the Chinese economy. However, some analysts suggest that the coronavirus could be just an excuse for investors to sell off stocks that are trading near record highs.


On the other hand, the ongoing earnings season in the US continues to bring good news. According to FactSet, by January 24, 17% of the companies in the S&P 500 had reported their results for the fourth quarter. Of these companies, 73% managed to post better-than-expected EPS and 67% topped sales estimates, both figures being above 5-year averages.


Now that we’ve looked at overall market performance for the past week, let’s focus on some individual companies that captured the attention of Financial Advisors, based on data compiled by TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors.


The list of top five stocks that ranked as the most searched among Financial Advisors includes two companies that reported their results: Netflix Inc. (NASDAQ: NFLX) and IBM (NYSE: IBM). IBM ranked on the fourth spot amid posting better-than-expected EPS and revenue. The company also provided a strong guidance for the current fiscal year.


The first three spots in the list of most searched tickers were taken by Tesla Inc. (NASDAQ: TSLA), whose market cap topped $100 billion last week, placing it ahead of Volkswagen and making it the second most valuable carmaker in the world, Apple Inc. (NASDAQ: AAPL), and The Boeing Company (NYSE: BA). Apple is expected to report its results this week, and analysts have high expectations on the back of strong sales of iPhone 11. The Boeing Company (NYSE: BA) remained in the spotlight amid its ongoing troubles over the 737 MAX. The company said last week that the ungrounding of the 737 MAX will start no sooner than mid-2020.


The fourth most-searched ticker last week was Netflix, which posted its results on January 21. The company reported EPS of $1.30, better than the expected $0.52 and revenue of $5.47 billion was $16.90 million above the consensus estimate.


At the same time, Netflix missed its subscriber growth targets and provided a softer than anticipated subscribers growth guidance for the first quarter. Overall, Netflix had 550,000 additions in the US and Canada and 8.33 million additions internationally. Analysts had expected a subscriber growth of 611,000 in the US and Canada and 7.20 million internationally. The miss for streaming additions in the US and Canada came amid increasing competition from two new streaming services launched by Walt Disney Co (NYSE: DIS) and Apple.


In addition, Netflix said it expects revenue of $5.73 billion in the first quarter, lower than the expected $5.76 billion and EPS of $1.66 versus estimates of $1.20. However, Netflix also issued guidance for subscriber growth of 7.0 million, versus a consensus of 8.5 million.


Despite the softer-than-anticipated subscriber growth, some analysts remained positive on Netflix. JPMorgan and Bank of America maintained ‘Overweight’ and ‘Buy’ ratings on the stock. Bank of America said that Netflix will maintain its dominant position on the international market and that the caution shown by some investors over increasing competition creates an opportunity for investors.


In another development, renowned investor David Einhorn’s Greenlight Capital said last week that it increased its short position in Netflix last quarter. Among the reasons, the investor cited the heightened competition and the heavy debt load that Netflix had accumulated as it continues to burn through cash to finance new content.

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