NETFLIX A BAROMETER FOR S&P 500

Company seen as early indicator of risk appetite for high-volatility growth names among investors

NETFLIX’s quarterly results today may offer an advanced preview of whether Facebook, Amazon.com and other heavyweights behind much of the United States stock market’s recordbreaking rally can keep delivering.

Wall Street on Friday shrugged off a looming US government shutdown and propelled the S&P 500 to a record high as investors focused on upcoming quarterly reports.

Many of the largest companies — Microsoft, Apple, Alphabet and Amazon — have outperformed the broader market in the first 13 trading days of this year, with investors betting strong earnings growth will justify tech valuations at their highest in a decade.

Netflix, which is due to report its quarterly results today after the stock market closes, has jumped nearly 15 per cent this year, outpacing the S&P 500’s five per cent increase.

Netflix’s 53 per cent surge, along with rallies by Amazon and Silicon Valley’s largest tech companies, helped propel the stock market to new highs.

“Netflix is going to be a great early indicator of risk appetite for these high-volatility growth names,” said Wedbush trader Joel Kulina. “Netflix’s drivers are very company-specific, but if this stock can deliver, there’s no reason this whole market can’t keep going higher.”

The company faces increasing competition from streaming services, including Amazon’s Prime Video and moves by traditional media companies. But investors remain optimistic about its ability to beat expectations.

Its stock recently traded at 95 times expected earnings for the next 12 months, versus AMC Entertainment at 44 times earnings and Time Warner Inc at 14 times earnings, according to Thomson Reuters data.

Analysts on average expect S&P 500 technology companies to deliver a 15.9 per cent increase in earnings for the December quarter, according to Thomson Reuters I/B/E/S. Earnings for the entire S&P 500 are seen rising 12.2 per cent, bolstered by lower unemployment and fatter wages.

Technology investors during the reporting season just under way are also eager to hear company executives explain how their bottom lines will be affected by corporate tax cuts passed by congress last month, and whether they plan to repatriate overseas profits.

Apple said on Wednesday it would make about US$38 billion (RM149.65 billion) in one-time tax payments on its overseas cash, and investors want to know how much of the US$252 billion held abroad Apple will bring home and spend on dividends, share buybacks or acquisitions.

Facebook will post quarterly results on January 31, followed by Amazon, Apple and Alphabet on February 1.

Nvidia, which surged 81 per cent last year and replaced Qualcomm as the most valuable US chipmaker after Intel Corp, reports on February 7. Reuters