Market News Roundup (4/18-4/24): Hope for Netflix? 🍿
Sentiment measured in stock market news coverage finished considerably bearish this week behind hawkish comments from the Fed about inflation. We analyze conversation surrounding $NFLX, $IBM, and $JNJ
Welcome to this week’s Market News Roundup, thanks for being here.
this our quick and easy run-down of this past week’s stock market news coverage, curated by algorithmically analyzing thousands of finance articles. Market vibes = quantified.
Here’s what we’ll cover:
🖼️ Big Picture: this week’s overall news sentiment
📊 1 trending stock ($IBM)
📈 1 bullish stock ($JNJ) & 1 bearish stock ($NFLX)
🔭 Market Mood™ outlook for the week ahead
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1. 🖼️ Overall News Sentiment
After swimming in optimistic territory for most of the previous week, sentiment expressed in stock market news coverage was net-negative on 6 of 7 days this week, finishing with an overall sentiment rating of -20% for the week as a whole (on our scale from -100% to +100%). Zooming in, while sentiment expressed about large-cap stocks in the S&P 500 was slightly negative overall (-9%), the vast majority of negative discussion was directed towards small-cap stocks, with the sentiment measured for the Russell 2000 finishing at -87% overall — it’s lowest weekly sentiment score on record. This week’s stock market news was highlighted by the following topics and events:
📈 US Stocks: a strong start wasn’t enough to prevent the major U.S. stock indexes from falling for the third week in a row, resulting in declines of around 2% to 4%. The market had been on track for a positive week until Thursday morning, when stocks began a steep descent that extended into Friday amid further signs of tightening monetary policy.1 The good news is that with the earnings season now about 20% completed, the proportion of S&P 500 companies that had beaten analysts’ net income expectations stood at 79% as of Friday, which ranks slightly above the 77% five-year average beat rate.
🦅 Economy: it’s looking increasingly likely that the U.S. Federal Reserve will accelerate the pace of its interest-rate increases, based on public comments Thursday from Jerome Powell. The Fed chair said the central bank is likely to raise its benchmark rate by a half percentage point at its meeting on May 4. Concerns about inflation and the pace of interest-rate increases continued to weigh on prices of government bonds, sending yields to the highest levels in three and a half years. On Thursday, the yield of the 10-year U.S. Treasury bond briefly climbed as high as 2.95%; on Friday, it was trading around 2.90%.
2. 📊 Trending Tickers
IBM Corp. ($IBM): ⚛️ — TRENDING NEWS 🔥
this week: +1.6% news sentiment 🟢 | +9.2% stock price 🟢
In a week when much of the big tech sector stumbled on the markets, OG computing giant IBM forged its way back into the Wall St. spotlight behind a +10% surge in its share price, effectively erasing all of its year-to-date losses. IBM’s big boost on the markets and in news coverage came after the 111-year-old company reported surprisingly strong Q1 earnings on Tuesday, showing an 8% increase in revenues year-over-year to $14.2B, along with earnings per share (EPS) near $1.40; both of which were considerably higher than consensus estimates.
On top of these top-and bottom-line beats — which revealed strong growth within its software and consulting business lines — IBM added increased guidance for the remainder of 2022, with its revenue growth now expected to be “at the high end of the mid-single-digit range.” Wall Street analysts reacted optimistically, with the likes of Morgan Stanley and Credit Suisse raising their $IBM price targets above $150 (mind you, the stock is currently trading at $139 per share). All in all, the legacy tech giant is seeing better financials now than it has in the past 5 years, and given its decent growth projections, along with its shifting focus towards cloud computing and artificial intelligence, it doesn’t seem like IBM is going away any time soon. The question: should you buy it?
Our Thoughts: HOLD 🟨
If IBM’s impressive earnings report this week proved one things, it’s that perhaps you can teach an old dog new tricks. Its revenues are solid lately, its strategic direction seems promising, and its stock has ultimately outperformed the S&P 500 so far this year; all signaling that the company may be on the up and up. But to me, that doesn’t quite make it a “Buy” today.
Zooming out, this revenue growth remains relatively small compared to its major competitors in the tech space (Amazon, Microsoft, Alphabet), and though IBM is expecting $10B in free cash flow this year to offset its large debt, its debt expenses will almost assuredly climb over the next few years as they become pinched between rising interest rates and the eminent obligation to sustain its high stock dividend yield. Overall, even though IBM looks a bit more youthful today than in days past, if you’re looking for solid long-term growth prospects in a big tech company, I’d say your’re better off putting your money somewhere else right now.
3. 📈 Most Bullish & Bearish Tickers
my notes on a few tickers with the most bullish / bearish sentiment expressed in this week’s market news coverage:
Johnson & Johnson ($JNJ) 💊 — BULLISH HYPE🔺
this week: +91% news sentiment 🟢 | +1.10% stock price 🟢
Healthcare conglomerate Johnson & Johnson finished with one of the highest net sentiment measurements in stock market news coverage this week after rising +4.5% to reach an all-time high share price of $181.54 in the leadup to its Q1 earnings report on Tuesday. In its quarterly report, J&J released Q1 sales of $23.4B (+5% YoY, but slightly lower than consensus estimates), adjusted earnings per share of $2.57 (+3% YoY and above consensus estimates), and announced a
While these numbers came in near par, the big news out of the call was the company’s lowered sales and earnings outlook for the remainder of 2022, with its full-year revenue forecast now at $95B (about $1B lower than the guidance provided in January) and full-year adjusted EPS at around $10.25 (roughly 25-cents lower than the original forecast). This reduced outlook can be somewhat attributed to both excess global supply of the J&J Covid-19 vaccine, along with reduced global vaccination demand now that most nations are waning off of their pandemic-era mandates and restrictions. With the coronavirus now mostly in the rear-view mirror, CFO Joe Wolk announced during their earnings call that the company will no longer provide revenue guidance for its vaccine division going forward.
Our Thoughts: BUY 🟩
In hindsight, J&J’s lowered guidance for full-year 2022 makes sense given where are in the long-arc of the coronavirus pandemic — J&J now expects less global demand for its vaccines than they’d initial projected back in January, and judging from $JNJ’s price and news sentiment over the past week, its investors seem more than okay with that.
In fact, it seem like J&J will be just fine apart from vaccine sales, with its Q1 report demonstrating handsome growth in its strategically important pharmaceutical and medical device divisions, with both grew roughly 6% over the past year. Add onto this the company’s recent boost to its quarterly dividend, along with an intrinsic financial valuation above $266 per share (according to this Simply Wall St. report), and it looks like $JNJ stock has plenty of room to grow from its recent all-time high.
Netflix Inc. ($NFLX) 🍿 — BEARISH HYPE🔻
this week: -94% sentiment 🔴 | -36.61% price 🔴
Streaming giant Netflix finished this week with more pessimism expressed in news coverage than any other stock on the market after falling a staggering -36% in share price in the wake of its Q1 earnings release. While the report revealed that the company’s revenue rose 9.8% YoY to $7.87 billion, these revenues missed analysts' estimates by $70 million. The bigger piece here, though, is that it also lost 200,000 subscribers, which represents its first quarter-over-quarter loss of subscribers since 2011 — and it expects to lose another two million subscribers sequentially in Q2.
This dump in subscribership, along with the company’s ramped-up spending on new content, ultimately led to a -6% decline in Netflix’s net income to $1.60B (or $3.53 per share), and while this is no small decline, it still managed to beat analyst estimates by $0.62 per share. One of the key factors that management blamed for its slowing subscriber growth is the estimated 100 million-plus households that share their accounts (which, if you’re counting, is nearly half of the company's global paid membership base). While in years past Netflix has allowed this password-sharing to take place with little interference — occasionally even admitting that it has helped to grow the platform to its current reach — the company is now allegedly considering clamping down on sharing such that it could be monetized.
Our Thoughts: BUY 🟩
The obvious bad news here is that $NFLX stock just saw its biggest drop in almost two decades, raising plenty of questions about the shifting consumer dynamics of today’s mega-streaming industry, and opening the door for all sorts of theories as to why so many people are cancelling their Netflix subscriptions. Some argue that it’s the pricing, some say its the sheer number of alternative streaming platforms that have popped up in the past few years, and others (like Elon Musk) have gone as far to say that “woke mind virus” has made a lot of Netflix’s content unwatchable.
But at the end of the day, this outcry of pessimism about Netflix seems extremely overblown to me. Yes, Netflix is no longer the lone-wolf of the streaming industry that it was 3-5 years ago, but it does still account for almost 45% of global streaming market share today. Its revenues are still growing considerably now in its 25th year in operation (though admittedly this growth has slowed a bit recently), and assuming some sort of crack-down on password sharing in the near future (which is already being piloted in select markets, with $2 fees to add additional households in countries like Chile and Peru, for example), they should have no issue continuing to monetize this giant base. Finally, the recent drop in share price now brings $NFLX stock to an impressive 19.6 price-to-book ratio, making it a solid buy right now over virtually any time horizon in my book.
4. 🔭 Market Mood Outlook
Market news sentiment finished with a net negative overall score this week as the market continued its downward trajectory signaling that we are likely to see more pessimism to come. Inflation, with its pressure on supply chains and consumer spending, remains top of mind (roughly 38% of articles written this week mentioned inflation in some form), while the ongoing crisis in Ukraine saw comparatively less news coverage this week than previous weeks (mentioned in roughly 8% of all articles published).
Overall, the markets were swayed downward this week by more hawkish comments from the Federal Reserve about rising interest rates causing more concern around inflation — in short, for a variety of factors, inflation has not proved to be as transitory as markets and policymakers had original expected (or hoped).2 The markets (both stocks and bonds) now seem to be acknowledging that the Fed has fallen behind the curve, reflecting an expectation for meaningfully more aggressive policy tightening vs. months prior.
Things to watch for this week:
The U.S. Bureau of Economic Analysis is expected to release its Q1 2022 GDP growth report on Thursday, which will show whether the US economy’s strong momentum in late 2021 carried over into early 2022.
Earnings season remains in full swing, with another huge batch of corporate earnings report scheduled for this week, including Facebook (Meta), Amazon, Apple, PayPal, Microsoft, Twitter, and many more. The full schedule from @eWhispers on Twitter is shown here:
That’s all for this week — let us know if there’s anything we missed by commenting below, replying to this email, or sending us a text at +1 (833) 878 9106. And if you liked this post, do us a favor and click the like button!! Best of luck to all of you in the markets this week, and thank you for reading!
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Credit to the respective teams at John Hancock Investment Group and Edward Jones for their research cited in this post: