Stocks Go on a Streaming Rally
Netflix paved the way for another strong performance in the market on Tuesday. Last night after the bell, the streaming giant reported an impressive quarter that included a much larger-than-expected growth in subscribers, so we felt pretty good that this important stock would have a solid session.
It didn’t disappoint.
Shares of NFLX climbed more than 9% today, which, combined with other positive quarterly performances, sent each of the major indices sharply higher. The NASDAQ won the day with a surge of 1.74% to 7281.1. The S&P gained 1.07% to 2706.4 and the Dow was up 0.87% (or another 200+ points) to 24,786.6.
Investors have lofty expectations for this quarter. We here at Zacks are expecting total earnings for the S&P to jump more than 16.5% from last year on 7.5% higher revenues. It’s very early in the season, but the first reports suggest those estimates are very doable.
In addition to Netflix, UnitedHealth also was a bright spot by climbing more than 3.5% after better-than-expected results and a raised earnings forecast. Other companies like Goldman Sachs and Johnson & Johnson had good quarters as well but didn’t translate into higher prices. (Jeremy Mullin has more on these differing reactions in the highlights section below.)
Surprise Trader really comes alive at earnings season, and today Dave added two positions with positive Earnings ESPs for quarters coming next week. Options Trader bought a chemicals company that’s making a bullish move in its chart pattern, while Stocks Under $10 picked up a stock that looks to have just bottomed and seems set to move upward. Also, Short List swapped out two names. Learn more about all of this below:
Today’s Portfolio Highlights:
Surprise Trader: Earnings season is just getting started, so expect to see a lot of activity in this portfolio for the next several weeks. On Tuesday, Dave added two names. Allegheny Tech (ATI) surprised by more than 90% last quarter and has a positive Earnings ESP of 9.38% for the report coming before the bell next Tuesday. This specialty materials manufacturer is also a Zacks Rank #1 (Strong Buy) and part of a space in the top 2% of the Zacks Industry Rank.
The other buy today was Xilinx (XLNX), a semiconductor stock that has beaten the Zacks Consensus Estimate for 15 quarters. It will be looking to continue that streak when it reports after the close on Wednesday, April 25th. The company has a healthy Earnings ESP of more than 14% and its recent dip provided Dave with a great opportunity to buy the stock. Both of today’s picks were added with 12.5% allocations. Read the full write-up for more.
Options Trader: The chart pattern for Chemours Company (CC) shows the stock breaking through the upside of a head-and-shoulders ‘failure’ pattern, which Kevin notes is actually a very bullish sign. In addition, this chemicals company is a Zacks Rank #1 (Strong Buy) from a highly-ranked industry that sports a Zacks VGM Score of ‘A’. The editor likes everything he sees so he bought to open 2 July 55.00 Calls in CC. Kevin will likely add on strength. Get more specifics in the full write-up.
Stocks Under $10: With the market correction possibly coming to a close amid earnings season, Brian Bolan added a company that appears to have bottomed after getting beat up during the selloffs. MDC Partners (MDCA) is a marketing communications firm that is down almost 50% from its 52-week high and off 30% from February. However, shares have taken off after a recent upgrade to Outperform. The editor is most impressed with MDCA’s valuation. The company reports on April 26. Read the complete commentary for a lot more on this new addition.
Zacks Short List: In this week’s adjustment, the portfolio short-covered Cavium Inc. (CAVM, +2.1%) and Zayo Group (ZAYO). The new buys that replaced these names are Sian Corp. (SINA) and Tal Education Group (TAL). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.
Counterstrike: “The S&P has now closed above the 200-day moving average and the bulls are now in full control for the first time since early February. Luckily, we have been playing the right side of this the last couple weeks and saw big gains. While the momentum is overall positive, investors should realize the easy money isn’t back. There are still fears out there that could pop out of nowhere, so let’s take it one day at a time.
“I want to be real bullish into all these earnings coming out. But both Goldman and J&J went negative today. At the same time, UNH and NFLX just surged higher. This tells me that we will be seeing a stock pickers market this earnings season. By this I mean, even if your stock beats earnings this quarter, it doesn’t mean the stock will go up.
“Sit back and watch the grind higher. That’s our strategy at the moment. And with the VIX breaking below 15 I think that’s a strategy that could work well.” — Jeremy Mullin
Have a Good Evening,
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