Will Abysmal Netflix Earnings Dent Sentiment?

S&P 500 Forecast:

S&P 500 Worth Outlook: Will Abysmal Netflix Earnings Dent Sentiment?

Netflix introduced earnings after the shut on Thursday, lacking market expectations on earnings per share and issuing weaker than anticipated steerage for the third quarter. Though the agency’s income was a brilliant spot, the fast value response would counsel buyers have been wholly unimpressed by the outcomes because the inventory tanked greater than -10%.

Netflix Worth Chart: After Hours July 16, 2020

Supply: MarketWatch

In our Netflix earnings preview, we outlined the significance of the inventory as a member of the hotly watched FANGMAN group, and its year-to-date chart helps spotlight its outperformance. With that in thoughts, the earnings miss – and the disappointing steerage specifically – is moderately shocking given the enterprise mannequin of the company when broader market circumstances are considered.

Netflix, Nasdaq 100, S&P 500 Worth Charts within the 12 months-to-Date

Chart created in TradingView

Though moderately reductive, logic would counsel an organization that earnings when folks keep indoors and look at their content material would thrive when a lot of the developed world is actually confined to their properties by legislation. Given these circumstances and subsequent steerage miss, the staggering value response turns into extra palatable. Like with many themes out there nonetheless, the precise monetary particulars of the report could also be solid apart in favor of the broader narrative.

S&P 500 Worth Chart: 4 – Hour Time Body (March – July)

To that finish, we all know Netflix is a widely-watched inventory and as a consequence, has noteworthy affect over the broader Nasdaq 100. Additional nonetheless, it appears the company’s enterprise mannequin is right for the present circumstances of the world and it has seen its inventory outpace the overwhelming majority of its friends consequently. Now, nonetheless, buyers are in search of proof to justify the current valuation of not solely Netflix, however maybe the complete Nasdaq, but NFLX has did not ship.

Whereas there are undoubtedly a plethora of different elements to contemplate, the outcomes provided by Netflix usually are not an encouraging first look into a number of the Nasdaq’s high-flyers. Maybe the query now’s will the Nasdaq take heed? Or will it anticipate additional proof from the likes of Fb, Apple, Amazon and firm? Both method, it may be argued sentiment has been broken.

With the Nasdaq 100 on the forefront of speculative danger urge for food, the blow to sentiment might have been dealt at a pivotal time for its sister index, the S&P 500, because it seems to check overhead resistance close to 3,235. Solely time can reply our bigger questions, however as Netflix suffers early losses within the realm of 10-15%, the preliminary response would counsel buyers have little urge for food for accepting lower than stellar outcomes from the FANGMAN group this quarter. As we await studies from different firms, observe @PeterHanksFX on Twitter for updates and evaluation.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and observe Peter on Twitter @PeterHanksFX