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Netflix Stock Dives; Apple, Amazon, Facebook, Google Fall

Nasdaq futures signaled significant losses Tuesday morning, while Dow futures and S&P 500 futures were more muted as Netflix stock plunged on weaker-than-expected subscriber growth.  Fellow FANG stocks Amazon.com (AMZN), Facebook (FB) and Google parent Alphabet (GOOGL) also were notable losers, along with Apple (AAPL) stock. Amazon, perhaps the biggest long-term threat to Netflix (NFLX), kicked off Amazon Prime Day with big website glitches.

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A slew of earnings take place before and after the open, with Dow Jones component UnitedHealth (UNH) topping EPS views already. Fed chief Jerome Powell testifying before the Senate Banking Committee at 10 a.m. ET.

Nasdaq Futures Fall Sharply

Nasdaq 100 futures fell 0.9% vs. fair value. Dow Jones futures lost 0.1%. S&P 500 futures sank 0.3%.

Keep in mind that the Nasdaq composite and especially the big-cap Nasdaq 100 have relied heavily on Netflix stock, Apple stock and other FANG+ stocks for gains in 2018 and in recent years.

Netflix stock suffered a double-digit loss early Tuesday. Facebook stock, Google stock and Amazon stock retreated about 1%. Apple stock, near a buy point, slid 0.7%.

During Monday’s regular session, the Dow Jones industrial average rose 0.2%. The S&P 500 index dipped 0.1%. The Nasdaq composite lost 0.3%.

Netflix Subscriber Growth Misses

Netflix earnings swelled to 85 cents a share excluding various items, up from 15 cents a year earlier and topping views by 5 cents. Revenue grew 40% to $3.91 billion, just below estimates.

Netflix subscribers grew by 5 million in Q2, below the 6.2 million expected. A net 670,000 Americans joined, far below estimates of 1.19 million. International subscribers rose by 4.47 million vs. views for 4.97 million.

Cash burn continued, with negative free cash flow of $559 million. Not only is Netflix content spending soaring, but also it’s marketing spending to promote all those shows. Netflix spent just over $1 billion on marketing in the first half of the year vs. $545 million in the first half of 2017.

Netflix sees net subscriber growth of 5 million in the third quarter: 650,000 in the U.S. and 4.35 million in international markets. The company also guided Q3 earnings and revenue estimates lower.

Netflix Stock

Netflix stock, which had more than doubled in 2018, fell 12% to 353.50 before the open. That suggests a plunge below its 50-day line and moving toward a round trip from Netflix’s recent 338.92 buy point. But it’s off Netflix’s worst levels after Monday’s close.

Keep in mind, overnight trading in Netflix stock may not translate into how it opens and closes in Tuesday’s regular session.

Amazon Prime Day

At noon Pacific, Amazon Prime Day began with the Amazon website crashing.

Amazon stock closed up 0.5% to 1,822.49, but off its new intraday peak of 1,841.95.

Amazon Prime Day traditionally isn’t a great day for deals. But it drives sales of Amazon devices, which often fuel further Amazon purchases. More important, Amazon Prime Day spurs Amazon Prime memberships.

Earlier, an Amazon executive told Bloomberg TV that a recent Amazon Prime price hike hadn’t affected membership growth trends.

Netflix Vs. Amazon

Amazon may be the biggest rival to Netflix. Amazon Prime Video is global, like Netflix, which means it can spread high content costs over a bigger audience. Amazon Prime Video comes free as part of an Amazon Prime membership.

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