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Nasdaq Today: Netflix Plunges on Earnings, Microsoft’s on Deck

Bret Kenwell

U.S. equities wavered on the day, with stocks initially falling on Thursday as investors digest another round of earnings. However, the indices jumped abruptly in the final 120 minutes of trading. After settling down a bit, investors eventually saw a 0.27% advance in the Nasdaq today. The PowerShares QQQ ETF (NASDAQ:QQQ) tacked on a 0.11% gain.

chart of the Nasdaq today

Source: Shutterstock

The S&P 500 and Dow Jones also rose on Thursday.

Of course, the main discussion right now is earnings. As interesting as the banks can be, we’ve finally got a big one to talk about: Netflix (NASDAQ:NFLX).

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Netflix reported earnings of 60 cents per share, which fell 30% year-over-year but beat analysts’ expectations by 4 cents. Unfortunately, this isn’t a story about profits, it’s a story about growth and NFLX failed to deliver — big time.

Revenue of $4.92 billion grew 33% year-over-year, but was only in-line with estimates. It’s surprising NFLX didn’t miss, given that subscriber results missed so badly. In the U.S., Netflix lost 126,000 subscribers, well below the 300,000 subscribers analysts were expecting it to add in the quarter. It was the company’s first decline in eight years. Internationally, Netflix added 2.8 million subs, which came up short of expectations for 4.8 million.

It’s no surprise that shares tanked more than 10% on the day and closed near the lows. We’ve mentioned a few times over the past few weeks that increasing competition and Netflix losing some its top shows could be a problem. It’s not like NFLX is going anywhere, but with negative free cash flow and little in the way of profits, investors may not be willing to assign it such a premium valuation.

Surprisingly, the other FANG stocks took Netflix’s beating pretty well.

International Business Machines (NYSE:IBM) beat bottom-line expectations but — shocker — came up short on revenue. Still, the Street looked past the miss and bid up shares of IBM, which is now quite close to new annual highs. (Here’s the trade setup).


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Shares of eBay (NASDAQ:EBAY) climbed 1.9% on Thursday, after beating on earnings and revenue expectations. However, that’s well off the stock’s initial 7.6% rally to $42, which set a new 52-week high in the process. Let’s see if there’s more upside to come in the days ahead or whether $40.50 will remain as tough resistance.

Last but not least is Microsoft (NASDAQ:MSFT), which will report earnings after the close. Up 33.5% year-to-date, boasting a $1 trillion market cap and less than 2.5% off its highs sets up for tough bar to hurdle. Expectations call for revenue to grow 9% year-over-year to $32.77 billion and for earnings to jump 7% to $1.21 per share. And you know its Azure unit will be in focus.


Heard on the Nasdaq Today

Shares of Advanced Micro Devices (NASDAQ:AMD) fell about 3.5% at one point. However, AMD ended down “just” 1.8%, after the company was downgraded by Mizuho analysts. They cut their rating from buy to neutral, but raised their price target to $37 from $33. Seems like it might be an opportunity for investors if AMD goes lower.

Apple (NASDAQ:AAPL) caught a lift on the day, rising about 1% on a Raymond James upgrade. The analysts went from market perform to outperform on increased confidence for next year’s 5G iPhones. They also bumped Skyworks Solutions (NASDAQ:SWKS) to an outperform rating.

In the M&A deal that will never end, reports now suggest that we may soon have an answer for the Sprint (NYSE:S) tie-up with T-Mobile (NASDAQ:TMUS). Apparently, if the Justice Department and the companies can’t come to an agreement, the DoJ will sue to block the deal. That may not be what investors want to hear, but just to have a decision would be nice at this point.

It’s reminiscent of the Qualcomm (NASDAQ:QCOM) deal for NXP Semiconductors (NASDAQ:NXPI).

Speaking of Qualcomm, shares sank about 2% on the day after the EU hit it with a $272 million fine. This follows last year’s EU fine of more than $1 billion. Of course, QCOM plans to appeal the ruling, but man, does this company have some political risk or what? The DoJ, FTC, European Union, etc. This name seems to move more on government and legal rulings than fundamentals and earnings.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long AAPL

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