Netflix’s stock plummets, IBM outperforms forecasts, and Disney’s earnings are worth watching. What comes next for the three non-friends?
Netflix shares fell once more, this time due to weaker-than-expected quarterly earnings and a bleak outlook. Although Netflix shares are down 50% since November of last year, the collapse may not be over. On the other hand, IBM posted a better-than-expected quarterly performance and is experiencing increased business. So, might IBM stock break out of its downtrend? Also, with the market favoring experiential stocks, keep an eye on Disney’s results on May 11.
Netflix shares fell more than 20% after hours, indicating that they will most likely fall even further when trading resumes on Wednesday. Since November of last year, NFLX shares have dropped by 49 percent. Netflix’s quarterly performance and forecast were once again poorer than predicted; subscriber numbers decreased by 200,000. Subscribers have dropped for the first time in ten years. The number of customers is predicted to drop by 2 million in the second quarter. That frightened the market. However, we have been warning about this behavioral shift for quite some time. Now that interest rates are rising, there is a growing reluctance to sign up, and password sharing is on the rise. This is putting pressure on Netflix’s earnings and, as a result, its stock. All three growth measures are expected to slow in 2022, according to the market, with EPS growth, revenue growth, and profit growth all slowing. As a result, expect broker downgrades, which may cause Netflix shares to fall even more. To fight this, Netflix wants to make a cheaper version with ads, which could make more money.
IBM reported a higher-than-expected quarterly profit and increased business. IBM’s stock gained 2% after hours after the company reported better-than-expected first-quarter results and a more optimistic outlook. Q1 revenue increased by 8% to $14.2 billion (vs. $13.8 billion expected) after consulting revenue increased by 13% (more than expected) and software revenue increased by 12%. (also stronger than expected). According to market estimates, IBM’s growth metrics will likely improve in 2022. In 2022, revenue growth, profit growth, income growth, and EPS growth are all expected to rise, supporting share price growth. On a price-to-earnings (PE) basis, IBM shares are also less expensive than Netflix. IBM’s price to earnings (PE) ratio is 16.25. The price to earnings (PE) ratio for Netflix is 32.5 times earnings. IBM’s business is expanding, and technical signs indicate that the company may be set for a short-term rally.
Disney is another IT company to keep an eye on. Walt Disney shares are down 35% from their high but up 3% overnight, thanks to a surge in experienced economy stocks. The Disney results will be available on May 11. As international travel resumes, the market anticipates record profits, sales growth, and earnings growth on a yearly basis. We are wary, though, because consumer subscriptions account for 24 percent of Disney’s income. Given the behavioral shift, Disney may fall short. What’s particularly intriguing is that Disney’s technical indicate the stock may be oversold and due for a short run up. But let’s wait and see what their outcomes are.