Tuesday, October 26, 2021

Netflix Stock – Q1 Shows a Semiconductor Arms Race: Global Week Ahead – April 19, 2021

In the Global Week Ahead, stock traders get a 1st earnings lesson from a FAANG stock: Netflix (NFLX Free Report) .

That $242B market cap video streaming fixture reports After the Market Closes (AMC) on Tuesday, April 20th.

NFLX stock is now the ‘weak sister’ in that group, based on market capitalization.


  • AAPL is at a lofty $2.25T market cap
  • AMZN is at $1.71T
  • GOOGL is at $1.54T
  • FB is at a paltry $871B


Tech entrepreneurs out there: be appraised. You haven’t come up with much of a business model unless you have plans for a trillion-dollar company. Or at least a few hundred billion. OK, maybe a cool one hundred billion.

I am not sure what low hanging tech fruit is still out there for Apple co-founder Steve Wozniak to invest in. He titled his upcoming streaming TV series “Unicorn Hunters” around a $1B share valuation concept. We shall see. Small caps? Meh.

The S&P 500 earnings slate for Wednesday April 21st shows ASML Holdings N.V. (ASML Free Report) , Lam Research (LRCX Free Report) , Whirlpool (WHR Free Report) and Baker Hughes (BKR Free Report) .

In comparison, shares of a world leader in the manufacture of advanced technology systems for the semiconductor industry, Zacks #2 Ranked ASML, trade at a $271B market cap. Wafer fabricator equipment maker shares LRCX trade at a $92B market cap.

Thursday, April 22nd will be the week’s peak trading day for earnings reports. I see influential reports coming from American Airlines ((AAL) Free Report) , Intel (INTC Free Report) , Union Pacific (UNP Free Report) , Seagate (STX Free Report) , SNAP SNAP and FreeportMcMoRan (FCX).

Just a straightforward semiconductor chip maker; INTC has a $263B market cap.

After collecting these market cap facts, this became apparent to me:

Helping build chip factories is more lucrative than just producing chips!

The retail customer-facing front-end of the global tech value chain has the FAANG players. The middle holds plain vanilla chip companies and computer hardware makers. The back end holds these cutting-edge chip designers.

Keep the European Central Bank meeting wrap-up on Thursday as a macro focal point.

Next are Reuters’ five world market themes, reordered for equity traders.

(1) Netflix Reports Q1 Results on Tuesday

Netflix reports first-quarter results on Tuesday. It’s the first of the FAANG stocks — Facebook, Amazon, Apple, Netflix and Google-parent Alphabet — with others following suit in the coming weeks.

Netflix, the darling of the stay-at-home stocks, shone during the pandemic. But with vaccinations in full swing and consumers itching to get back out, darker days may lie ahead for the streaming giant. Still, recent efforts to crack down on password sharing could boost subscriber growth.

The stock hit a record high on Jan. 20th, right after fourth-quarter results, but has slipped back since.

Options markets are pricing a 7% post-earnings move in Netflix shares. That would boost Netflix close to January’s $593.29 record high, and may well help growth stocks get their mojo back.

(2) Don’t Overlook European Quarterly Earnings Reports

The likes of Nestle, ASML and Renault will kick off Europe’s earnings season.

An overall earnings jump of +56% is anticipated, which would mark Europe’s best quarter in recent history and drive it out of a COVID-19-induced recession with a rare outperformance against corporate America. S&P 500 earnings are seen up +25%.

The bar is high and with the STOXX 600 index running at record peaks, disappointment may be hard to avoid. Yet investors are confident “Europe Inc.” will make it as hefty stimulus boosts the global economy, outweighing setbacks in vaccine rollouts.

Reflecting that, perhaps, is the 6-month streak of earnings upgrades, with shares in luxury giant LVMH scaling all-time highs on Wednesday after blow-out numbers.

(3) The European Central Bank (ECB) Meets on Thursday

The European Central Bank meets on Thursday and will likely be pressed on signs of divisions over the future pace of bond purchases, which have been stepped up recently to prevent a rise in borrowing costs from derailing the recovery.

Dutch central bank head Klaas Knot believes the acceleration is temporary, while ECB chief Christine Lagarde says the economy is still standing on “crutches” and stimulus cannot be withdrawn.

The euro area is still grappling with lockdowns and a third wave of COVID-19 but business activity appears to be holding up. The April Flash Purchasing Managers Index (PMI) on Friday should provide fresh clues on the outlook. Signs of a swift recovery could raise questions over when the ECB will slow its bond buying, putting recent bond market calm to the test.

(4) The Biden Administration Slapped Sanctions on Russia. What Did Markets Think?

U.S. President Joe Biden’s administration slapping sanctions on Russia has served as a potent reminder that geopolitical tensions are very much alive.

The immediate market impact seems to have been somewhat muted, but few doubt the curbs — including restrictions on Russia’s sovereign debt — mark a turning point and will have long-term effects.

Elsewhere, greater China markets are closely watching the first summit between Biden and Japan’s Prime Minister Yoshihide Suga and a possible joint statement that might refer to Taiwan for the first time since 1969.

Investors have so far not priced much risk from the sudden increase in China’s maritime activities near Taiwan, but the prospect of an embittered China is giving Japanese stocks some pause.

(5) The UK. Enters a Post-Lockdown World

The coming days offer up the first real sense of how the UK. economy has fared since it began emerging from lockdown.

A rapid vaccination rollout — which has eclipsed most major rivals — and tumbling COVID-19 infection rates makes Britain a litmus test for how confidently businesses and consumers stocked up on savings will respond to a reopening of the economy.

So, a clutch of data including March retail sales, inflation, employment numbers and Flash PMI surveys for April released from Tuesday onwards should shed light on how ready consumers and companies are to start spending again.

Inflation numbers will also be of interest after the Bank of England’s chief economist, a policy hawk who has sounded the alarm about inflation and has remained upbeat about a post-COVID-19 recovery, announced he would quit in June.

Top Zacks #1 Rank (STRONG BUY) Stocks

Let’s look into Zacks #1 Ranked major Oil and Commodity-driven stocks this week.

(1) Exxon Mobil (XOM Free Report) : This is a $57 supermajor oil stock with a market cap of $242B. I see a Zacks Value score of D, a Zacks Growth score of F, and a Zacks Momentum score of D.

(2) Chevron (CVX Free Report) : This is yet another supermajor. I note a $103 share price and a $201B market cap. I see a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of A.

(3) Deere and Company (DE Free Report) : This is the Farm Equipment maker. The share price at $382 and the market cap is $119.6B. I see a Zacks Value score of D, a Zacks Growth score of C, and a Zacks Momentum score of C.

To me, it looks like only Deere has any gas in the momentum tank. Both XOM and CVX have Growth scores of F.

In sum, I think Growth still matters to traders.

Key Global Macro

I would mainly focus on the ECB’s policy statement. It is out on Thursday.

On Monday, Japan’s industrial production figures for FEB should show a -2.6% y/y decline.

Consistent with that, Japan’s capacity utilization figures are expected to show a +3.2% increase in FEB. Both of these Japan macro figures are likely backward-looking.

On Tuesday, the UK. ILO unemployment rate should be 5.2%. in FEB.

Reminder: the U.S. household unemployment rate was 6.0% in FEB. Those look and sound consistent. The U.S. rate is surely lower in MAR, given what we have already learned.

On Wednesday, the Bank of Canada (BoC) issues a rate and policy statement. The policy rate of 0.25% will not change. But what else will be said or written?

On Thursday, ECB decisions hit the global stock market tapes Their 0% policy rate and their -0.5% deposit rate will not change. Again, what else is in store? That matters more.

U.S. weekly jobless claims will get close scrutiny, as a leading indicator of where monthly data in April is going, post-stimulus checks. 576K was last week’s number.

On Friday, the preliminary U.S. Markit Manufacturing PMI hits the tape. I see a 59.3 is consensus for APRIL. For U.S. Services, it is 61.5.

The Euro Area Manufacturing PMI should be 62 in April, preliminarily. Services should be 49.1. That latter number reflects ongoing shutdowns there.

U.S. New Home Sales should be up to 0.88M in MAR, after a more-wintry 0.775M in FEB.


On Friday April 16th, Zacks Research Director Sheraz Mian summarized Q1 earnings season with the following words–

“Looking at the quarter as a whole for the S&P 500 index, combining the actual results that have come out with estimates for the still-to-come companies, total earnings and revenues are now expected to be up +24.1% and +6.0%, respectively.”

As I have already stated, and repeated for emphasis: the Global Week Ahead will be a mix of the first big tech stock EPS reports and a European Central Bank meeting.

No trader can ignore the ongoing, monthly money printing from any G10 player. That is a primary lift for stock indices. Everywhere.

On top of that, mega-cap tech names carry a significant weight inside the major U.S. large cap indices. Big stocks can make real changes to the direction of a benchmark.

Those backstops to this stock market are super-tankers, if you will.

They don’t move quickly or often. But when they do, the course change is significant.

Happy trading and investing to all!

John Blank

Netflix Stock – Q1 Shows a Semiconductor Arms Race: Global Week Ahead – April 19, 2021

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