Netflix and Tesla Lead Stock Rally

Netflix and Tesla are climbing back up from the selloffs that followed their Q4 earnings releases. A general recovery may be in the air as stock markets recover from January’s bearish atmosphere. 

Market Recovery

After the closing bell was rung on Monday in New York, traders may have been pleasantly surprised to see that major indices had marked their best two-day rally since 2020. Over the Friday and Monday trading sessions, the S&P 500 (USA 500) notched a 4.3% increase, while the Nasdaq jumped by 6.6%. 

These heartening rises come on the back of a generally bearish market mood that prevailed in the first month of the year. Some analysts were even speaking of a general correction as the S&P 500 and Nasdaq (US-TECH 100) declined by nearly 10% and 15.6% respectively over the course of January before Friday’s rally.

However, the market has seemingly recovered from its jitters related to concern about monetary policy. Although the Fed is gearing up for an interest rate hike that could come as soon as mid-March, according to many market watchers, economic fundamentals still seem positive, and a long-term bear market may not be in the cards over the near term. Technology- and growth-related stocks were some of those most deleteriously affected by January’s risk-averse market mood; these same shares were those leading the general rally on the trading floor Friday and Monday.

Netflix Marks Shift

Streaming giant Netflix has been on a general trend of decline for months now, losing 44% of its share value from the beginning of November until last week. When the firm’s Q4 earnings report revealed underwhelming subscription growth on January 20th, investors were further spooked.

Despite this negative trend, Netflix was on the rise as trading began this week, jumping by 11% on Monday. As previously mentioned, this fits with the general trend of a boost in technology-related stocks, but Netflix has some unique factors that may bode well for its fortunes on the market in 2022.

Netflix had been considered by many as one of the COVID-19 pandemic’s big winners, as viewership was promoted by stay-at-home orders that proliferated across the globe. However, growth in subscriptions may be set to grow more slowly as the key North American market reaches saturation. Investors may now be looking to assess Netflix’s financial fundamentals rather than bare growth in subscriptions when making their trading decisions.

With a shift in focus from industrialised to emerging markets, the firm could be opening itself up to new opportunities for revenue growth. Netflix (NFLX) is continually expanding investment in its slate of original films and televisions series and recently released its first Arabic-language movie. With the platform reaching out to new audiences as well as raising premium subscription prices in the United States and Canada, some analysts think that Netflix’s revenue is set to continue on its growth trajectory this year. 

The company’s co-CEO Reed Hastings himself gave Netflix’s prospects for an increase in value a vote of confidence when he purchased $20 million worth of stock last week. Traders could now be following Hastings’ example, as they sense a golden opportunity to buy the dip. Time will tell whether Netflix’s share price will continue recovering from its January decline. 

Tesla on the Rebound?

Another tech stock leading the pack in the rally on Wall Street was perennial headline-grabber Tesla (TSLA). From the beginning of 2022 until last Friday, the electric vehicle manufacturer’s stock price dropped by 31%. However, recently, a top Credit Suisse (CSGN.VX) analyst upgraded his rating of the firm’s shares following the recent selloff; a similar opinion seems to have been prevalent on the trading floor yesterday when the company’s shares jumped by 10.7%.

Despite continuing supply-chain issues, Tesla’s been ramping up production in its existing plants, with its California factory producing more vehicles than any other in America, outpacing rivals like BMW (BMW.DE) and Toyota (TM). Tesla’s cost margins are solidly encouraging, and the firm is moving more and more toward leading the revolution in self-driving technology.

Furthermore, some market watchers hold the opinion that the EV giant is set for strong long-term growth as electric vehicles take over the automobile market in decades to come. U.S. President Joe Biden has even promoted EV technology, although his administration has faced accusations of partiality toward more venerable industry players like General Motors (GM) and Ford (F).

All in all, it seems that a more attractive share price, as well as strong margins and prospects for revenue growth, have drawn investors back to Tesla. Despite CEO Elon Musk’s statement that no new models would be delivered in the coming year, Tesla posted record Q4 profits and strikingly high production figures against the backdrop of lackluster global car output may be setting the stage for the firm’s share price to continue to grow.

After January’s bear market, Wall Street seems to be showing signs of recovery as investors shed their risk aversion and begin buying technology and growth stocks again. Time will tell whether Monday’s trading rally was an Indian summer or the start of a broader return to steady growth.