Last year’s big market losers have been this year’s winners, at least so far. However, once a trend is underway, it’s unlikely to change unless there’s a big reason for doing so. That’s why a number of big tech companies look attractive going into earnings.
That’s particularly true of companies that haven’t been associated with the rally in AI stocks this year. These companies likely have more upside and less volatility in the second half of the year.
One clear example is Netflix (NFLX). The streaming platform surprised investors last quarter, showing subscriber growth following a crackdown on subscribers. Analysts expect a repeat performance when the company reports earnings today.
The market most cares about paid subscriber growth, rather than revenues. But those grew 4 percent over the past year, a tough year for anything tech. Chances are that revenue growth trend can improve in the quarters ahead.
Action to take: While shares have already had a big run off of last year’s lows, they’re still well off their prior highs. And at 30 times earnings, they’re reasonably priced for future growth in the coming quarters, making for a buy now.
For traders, the November $500 calls, last going for about $26.00, could see mid-double-digit gains in the months ahead, or even sooner if the market likes what Netflix has to say in its latest earnings.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.