Big Growth Stocks Roar Back as Earnings Approach


Big growth stocks are roaring back to life as earnings approach.

Companies like Netflix (NFLX), Incyte (INCY), Broadcom (AVGO), Facebook (FB) and Alphabet (GOOGL) are leading the S&P 500 higher today as investors return to the most important part of the market.

Several things seem to be happening all at once.

First, NFLX lit a fire of enthusiasm by announcing 13-18 percent price increases for U.S. subscribers. That followed bullish analyst calls by Goldman Sachs and UBS earlier in the year. It also comes just two days before the streaming-video giant releases fourth-quarter results.

NFLX was the first major growth name to stumble last year, with tepid user growth triggering a bearish slide in early July. Investors mostly shrugged off good numbers in October that relied on overseas growth. Today’s price-increase announcement eases fears about the U.S. business. Sure, the domestic market may be near saturation in sheer headcount. But now that management is squeezing more revenue from each user, the growth story is back.

Second, money continues to pour into biotechnology stocks as investors look for more takeovers in the space. That’s lifting INCY and Nektar Therapeutics (NKTR) today. Stay tuned for our special report on biotechs tomorrow.

Third, a ton of cash is on the sidelines after investors dumped stocks in December. CNBC reported yesterday that money-market fund assets spiked to $3.066 trillion — the highest in almost eight years.

That raises two questions: Is there anyone left to sell? And, does it make sense to be underweight equities in the middle of an economic expansion, a few weeks before earnings?

Speaking of earnings, here are some big announcements to watch:

  • January 17: NFLX
  • January 23: Xilinx (XLNX)
  • January 24: Intel (INTC)
  • January 29: Apple (AAPL)
  • January 30: FB, Alibaba (BABA), Visa (V), Qualcomm (QCOM), PayPal (PYPL).
  • February 4: GOOGL

Finally, remember that new growth stocks continue to surface. Aside from names identified on Market Insights, the S&P 500 gained new members last year including Fortinet (FTNT), Arista Networks (ANET) and heart-device maker Abiomed (ABMD).

In conclusion, investors are looking past risks potentially resulting from the government shutdown and focusing on the positive. Right now, that means a return to one-time market leaders at discounted prices.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.