Tech Today: Debating Netflix, Amazon's Glitches, Defending Nvidia


Here are some things going on today in the world of tech:

Debating Those Ugly Netflix Numbers


The Faang gang of stocks got a wobbly opening but is now solidly in the green, with (AMZN), Alphabet (GOOGL), and Facebook (FB) all rising.

Netflix (NFLX), the proximate cause of the pain, is down $27.39, or almost 7%, to $373.09, which is something of a victory given it's only half the decline the stock saw last night, after Netflix missed its own targets for net subscriber additions, and put expectations for more subscribers this quarter below consensus.

The comments of management on the company's video Q&A following the report is not exactly encouraging.

The company said that its problem with disappointing subscriber numbers was not a matter of churn of existing subscribers, but fewer "gross adds," meaning, " fewer people signed up for Netflix during the quarter."

The stock has gotten several price target cuts this morning, and at least one downgrade, from Deutsche Bank, but also two upgrades, from Stifel Nicolaus and BMO Capital.

Deutsche's Bryan Kraft cut his rating to Hold from Buy, and cut his price target to $350 from $360, writing that the the slowdown in the company's subscriber growth "is most significant because, if taken at face value, it could mark an end to the accelerating international net add trend that Netflix has exhibited over the past seven consecutive quarters, which would also imply a decelerating revenue growth rate from the 40% growth realized in 1Q and 2Q18."

Kraft keeps the same valuation multiple, however, 10 times 2018 projected sales, but now off of lower estimates.

Stifel's Scott Devitt, raisin his rating to Buy from Hold, with a price target to $406, writing that "2Q is historically Netflix's seasonally weakest quarter," and that original programming such as "Marvel's Luke Cage, Season 2," was part of a "lineup which may have been lighter on unexpected hits than in other recent quarters."

Despite that, he thinks "Netflix's long-term outlook" is "positive, given the upside case we believe exists for the company's domestic and international opportunities."

With the sell-off, the "shares are again at an attractive entry point."

And BMO's Daniel Salmon raises his rating to Outperform from Market perform, with a $400 price target, writing that India and Japan can be meaningful sources of growth for Netflix next year. He also sees the gradual shift to more and more original content as lifting profit margin over time.

Amazon's Prime Time

Despite a rocky start to Amazon's promotional "Prime Day" event yesterday, Bloomberg's Spencer Soperreports that sales "rose sharply" during the first three hours of the event, up 54% from the prior-year event, starting at 3 pm, Eastern time, citing data from data provider Feedvisor.

Reviewing the company's comments about the crash of its Web site, Instinet's Simeon Siegel reviews the good and the bad.


On the one hand, it's a good problem to have: "The crash is presumably due to too much demand, showcasing the power of what AMZN has created and suggesting lost sales can be made up, coupled with the fact that they had been offering AMZN-centric sales leading up to the event (i.e. devices and Whole Foods) and we believe will have good results to show for that."

But glitches bear watching : "Although lost sales from a self-created holiday can get a pass, the scope of AWS outages is something that requires more clarity."

Intel's Rising Competition

Shares of Intel (INTC) are down 52 cents, or 1%, to $51.50, after C.J. Muse of Evercore ISI cut his rating on the stock to "In Line" from Outperform, and cut his price target to $54 from $64, after concluding that the company "is facing increasing competition from the likes of Nvidia (NVDA) and Advanced Micro Devices (AMD), and its manufacturing advantages appear to be flagging, with TSMC's 7nm processes in production."

All this comes as the recent departure from the chief executive role of Brian Krzanich "adds additional uncertainty" during a "crucial time for the company."

Instead of Intel, Muse likes shares of Nvidia (NVDA), Micron Technology (MU), Marvell Technology Group (MRVL), and Analog Devices (ADI).


Muse thinks a whole bunch of things are going into the recent underperformance of the chip market-with the Philadelphia Semiconductor Index down 7% since June 7. He sees "generally a positive set-up," in demand remaining "generally positive" and inventories "relatively healthy," but also the prospect that companies this quarter will offer " conservative " forecasts.

He expects the earnings season will be " volatile," given "a lot of the bad news is already baked into shares, but uncertainty continues."

Defending Nvidia

Speaking of Nvidia, Morgan Stanley's Joseph Moore this morning pounds the table for the shares, defending the stock against some recent worries about video gaming perhaps slowing the company's GPU sales.

You'll recall that on Friday, Paul Peterson of the boutique BlueFin Research Partners, reported that "gamer demand appears relatively muted and that "GPU card sales dropped by more than 50% in the North America and Europe retail channels."

Moore, who has an Overweight rating on the stock, sees this as little more than a transition by Nvidia to new chips, noting that it's normal for older chips not to sell as well as gamers await the new chips.

Moore recently met with Chief Financial Officer Colette Kress and reports that Kress "expressed some surprise that investors aren't more confident in their ability to transition smoothly," referring to the company's upcoming transition to a new GPU, " Turing."

"We would expect older products to be selling poorly, and inventory clearance is normal," writes Moore.

"Our checks at bricks and mortar retail indicate that product is still out of stock in some locations, meaning that inventories do not seem bloated."

Moore also relates that Kress "highlighted confidence in other key issues, such as data center market share, and tangible automotive progress."

Nvidia shares today are up $3.67, or 1.5%, to $251.87.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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