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Stock Market News: Netflix Gets (Half) a Thumbs-Up; U.S. Steel Allays Fears

By Dan Caplinger – Updated Oct 10, 2019 at 12:17PM

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Hints of trade war optimism gave a boost to the stock market Thursday morning.

Wall Street was in a good mood on Thursday morning, sending the  benchmark indexes higher. In the opening hours of trading, stock market participants seemed to react favorably to news that scheduled plans for President Trump to meet with China's vice premier are still on track, and many are looking forward to seeing how the coming earnings season goes. At 12:15 p.m. EDT, the Dow Jones Industrial Average (^DJI 0.01%) was up 203 points to 26,549. The S&P 500 (^GSPC -0.16%) was up 25 points to 2,944, and the Nasdaq Composite (^IXIC) had gained 59 points to 7,962.

Among individual stocks, a lot of people are looking forward to Netflix's (NFLX -0.07%) earnings report, due out next week, and another set of stock analysts weighed in Thursday with their views on what the streaming video giant is likely to tell investors. Meanwhile, U.S. Steel (X 1.06%) released preliminary results for the third quarter, and although the news was far from ideal, the company avoided the worst-case scenario that some analysts had feared.

The show must go on

Shares of Netflix climbed 3% after analysts at Goldman Sachs gave their latest views on the streaming  video leader. Goldman kept its buy rating on the stock, pointing to an attractive array of new content set to debut in the fourth quarter, and the likelihood of solid subscriber growth.

Icon of television, with text reading Netflix recommended TV inside.

Image source: Netflix.

However, the analysts acknowledged that the streamer faces challenges. Downloads of the Netflix app have been in decline, which could lead to weaker financial results than some currently expect. Moreover, Goldman cut its full-year earnings estimate by about 2% and reduced its price target on the stock by $60 to $360 per share.

Netflix faces plenty of competitive threats, most notably new streaming services from some of the giants of the media and technology world. Netflix's first-mover advantage is formidable, but rivals are investing a lot of money in entering the market. Investors are nervous that Netflix might face pricing pressure that will eat into its margins. In combination with sharply rising prices for new content, that could spell longer-term trouble for Netflix from a fundamental perspective -- despite the buy ratings that Wall Street analysts have maintained on the stock.

Steeling its resolve

Shares of U.S. Steel picked up 3% following the release of preliminary third-quarter financial results that reflected difficulties the domestic steel industry faces broadly, but weren't as poor as some had feared.

U.S. Steel expects third-quarter adjusted net losses to come between $35 million and $45 million. That works out to $0.20 to $0.26 per share in red ink for the steelmaker, and better than the $0.33 per share in losses that those following the stock had on average anticipated.

Steelmakers have had to operate in an uncertain environment due to Washington's tariffs and trade wars. Yet U.S. Steel said that it had been able to drive stronger results primarily due to contributions from its flat-rolled segment, where shipment volumes and manufacturing performance topped expectations. The steelmaker also got a windfall when bankruptcy claims against a supplier produced greater recoveries than anticipated.

U.S. Steel has a lot further to go before its performance will please its shareholders. Yet signs of a recovery gave investors confidence that better times might be ahead for the steelmaker.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Netflix Stock Quote
Netflix
NFLX
$280.96 (-0.07%) $0.21
United States Steel Stock Quote
United States Steel
X
$25.75 (1.06%) $0.27
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,852.53 (0.01%) $3.07
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,957.63 (-0.16%) $-6.31
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,049.50 (%)

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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