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Netflix dips as analysts brush off forecast miss, Chipotle at record high

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Yahoo Finance’s Jared Blikre reports on the day's trending tickers.

Video Transcript

ALEXIS CHRISTOFOROUS: Let's go to the markets, where stocks are building on yesterday's gains. Jared Blikre here now with a closer look at some of the action.

And Jared, it looks like finally, finally, investors are paying attention to those earnings reports.

JARED BLIKRE: Yes, and they're going to be paying attention for quite a few weeks here. First, let's take a look at Netflix. This is our first candidate. I'm going to show what's happened over the last five days. Not the best price reaction, but it's only 4%. And I do have some analysts notes from the Street, and see what they're saying about the stock. Now, we know that their subscriber outlook was a little bit shy of what analysts had been hoping for, and that's kind of what happened last quarter. Plus, they missed on their bottom line, profits not as big as was expected.

So here's Wells Fargo, they hold it with an overweight price target of $700. They're saying, "The streaming giant is in a period of relative financial predictability supported by strong EPS growth. Gaming is incremental to the story, rather than risky." And we've spoken with a number of analysts today and they agree gaming is going to take a long time to take off, if at all. Netflix says they're already producing games, I think it was a choose your own adventure-- not exactly "Call of Duty." So not looking for a big spend there. But they're probably just going to dip their toes in the water, as Wells Fargo is saying.

KeyBanc Capital Markets overweight price target lowered to $645 from $650. You can see that's well above the current price of $509. But, "Investor worries surrounding annual operating expansion will likely moderate, with more attention on EPS growth and free cash flow," writes the analysts led by this gentleman, Patterson. "Entry into video gaming akin to dipping a toe in the pool." So I guess that was KeyBanc that I was reading before.

But those operating margins, think about it, they got kind of a pass last year. Everybody signed up for Netflix who didn't have it, probably, and then they didn't have to pay the development costs. Well, all of those come into the forefront this year. And one of the key takes from an analyst we spoke to from Bank of America in the morning was, you know, given all the hype around and-- not the hype-- given all the attention around the subscriber numbers, we didn't learn that much this morning if they are approaching that key threshold of peak streaming. Have-- have they edged out all the cable players? How much room is left? We still don't know. Alexis?

ALEXIS CHRISTOFOROUS: All right, Jared, let's look at another company that reported earnings, and that is Chipotle. Tell us how they're doing today.

JARED BLIKRE: Chipotle is doing very well. Let me cancel this right now, just show you the stock, up 12% today to a record high. So it's nice to see that. Of course, their digital strategy has been paying off many dividends here. And let's take a look at what the Street is saying. Truist, they rated a buy with a price target of $1,800, and they're raising that from $1,750. You can see almost there, it's about $24 away.

And they're saying, "Same-store sales, they remain strong, driving earnings estimates and price target increases. Company is guiding to acceleration in two-year same-store sales in the third quarter, driven by increase in menu pricing, recovery in dine-in sales, and strong retention of digital sales." So Chipotle is working on a number of fronts. Their digital strategy paid off, and people are finally coming back in the restaurants.

But we do have to contend with what the analyst is saying, "Food costs and wage increases will limit margin expansion, but pricing should drive--" they have pricing power so it should drive, probably, increases in sales. So it looks like we're done there. But I just want to show a longer term chart of Chipotle. This is over a one year basis, and you can see it's been kind of fits and starts here. But nevertheless, from the lower left to the upper right, on a five year basis, you see what a strong stock this is, up 325%. Pretty impressive, given the size of the company. Market cap now $50 billion.