Netflix set for record highs

The Daily Breakdown dives into the new $100 billion AI project, Stargate, and looks at earnings from Johnson & Johnson and Netflix.

Wednesday’s TLDR

• Netflix set for new all-time high
• New AI project sparks rally 
• J&J beats earnings

What’s happening?

Last week, the banks kicked off earnings with a round of good news, helping cheer up Wall Street amid a 5% correction in the S&P 500. Now the focus is turning to other stocks and sectors, as companies like Netflix, Procter & Gamble, and United Airlines report earnings.

The reaction for all three of those stocks is positive — for now — but Netflix really stands out. The stock is set to open at record highs, with shares trading higher by about 15% this morning. 

That’s got Wall Street in an even better mood, as does a recent development in an AI project called Stargate, which is worth at least $100 billion.

According to Bloomberg, initial equity will come from SoftBank, OpenAI, Oracle and Abu Dhabi state investor MGX. SoftBank and OpenAI are the lead partners in the venture, with SoftBank in charge of financing and OpenAI set to oversee operations. Lastly, Arm Holdings, Microsoft, and Nvidia will provide technology, along with Oracle and OpenAI. 

Between earnings and the rally we’re seeing in AI stocks, the Nasdaq 100 via the QQQ ETF is up almost 1% in pre-market trading, while the SPY ETF is up about 0.5%.

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The setup — Broadcom

Broadcom is taking a leadership role within the semiconductor space, a reality that became clear in December when shares surged higher on earnings and the company’s market cap vaulted over the $1 trillion mark. 

As annotated on the chart below, the stock has traded quite well since that earnings report. Now breaking out over downtrend resistance, bulls want to see continued momentum drive the stock higher. 

If AVGO shares can continue higher, investors will hope to see a rally back toward the stock’s prior highs near $250. However, if the recent momentum wanes and shares pull back, the $220 area will be a key area to keep an eye on. If it fails to support Broadcom stock, then shares may continue lower. 

Options

Buying calls or call spreads may be one way to speculate on more upside. For call buyers, it may be advantageous to have adequate time until the option’s expiration. 

For those that aren’t feeling so bullish or who are looking for a deeper pullback, puts or put spreads could be one way to take advantage.

To learn more about options, consider visiting the eToro Academy.

What Wall Street is watching

AAPL – Apple shares have been tumbling, with the stock down trying to avoid its fourth straight weekly decline. From its highs, shares have fallen more than 15% amid this correction. The stock was under pressure on Tuesday following a downgrade from Loop Capital over concerns for its sales in China. 

NFLX – Shares of Netflix are higher by about 15% in pre-market trading, putting shares near the $1,000 mark. The move comes after the firm beat on earnings and revenue expectations for its Q4 results. Check out the charts for Netflix. 

JNJ – Johnson & Johnson stock is inching lower this morning, down slightly in pre-market trading despite the firm beating on earnings and revenue expectations. The decline also comes despite management’s full-year earnings outlook of $10.75 and $10.95 per share easily topping analysts’ consensus expectation of $10.56 a share. 

Disclaimer:

Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.