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S&P 500 Futures: Netflix, Charles Schwab Are Buys With Earnings Due; Roku Sets Up | Stock News & Stock Market Analysis

Futures for the S&P 500, Nasdaq 100 and Dow industrials rose slightly Sunday afternoon after the major averages hit record highs Friday. On Monday, highly rated Netflix (NFLX) and Charles Schwab (SCHW) report third-quarter earnings. Both Netflix and Charles Schwab are still in buy zones. Meanwhile, newly public Roku (ROKU) is setting up in an IPO base, something Snapchat parent Snap (SNAP) has never done.

XAutoplay: On | OffS&P 500 futures rose about 0.1% vs. fair value. So did Nasdaq 100 futures and Dow futures.

Federal Reserve chief Janet Yellen said Sunday that “gradual” interest rate increases are “likely to be appropriate over the next few years to sustain the economic expansion.” Yellen, speaking at a Group of 30 banking seminar in Washington, didn’t say whether she backs a rate hike in December.

Meanwhile, Bank of Japan chief Haruhiko Kuroda, speaking at the same event as Yellen, said the BoJ will continue to “consistently pursue aggressive monetary easing.”

But investors’ focus will be on a flood of earnings this week, led by Netflix and Charles Schwab on Monday.

Netflix

Netflix broke out of a cup-with-handle base with a 190.05 buy point on Oct. 5, as the internet TV giant announced plans to raise subscription rates. Shares closed Friday at 195.49, just within the 5% chase zone that goes up to 195.55.

It’s better to buy stocks as close to the entry point as possible, especially when the overall market has had a tendency to grind higher, with small uptrends followed by small declines or sideways action.

Netflix will release results after Monday’s closing bell. Analysts expect Netflix to report third-quarter earnings of 32 cents a share excluding items, up 167%  from 12 cents a year earlier. Revenue likely rose 30% to $2.97 billion.

Wall Street has tended to focus more on subscriber numbers and guidance.

Netflix previously forecast that it would add 3.65 million international subscribers in Q3 and 750,000 U.S. subscribers. That would be a net gain of 4.4 million, giving it 108.35 subscribers worldwide.

Investors will pay close attention to Netflix’s Q4 subscriber outlook.

Amazon (AMZN) Prime Video and Hulu are growing peers in streaming media, with expanded libraries and original content. But for many households, especially those that have cut the cord on traditional pay-TV, the question is whether to subscribe to Amazon Prime Video or Hulu in addition to Netflix, not as a replacement.

Netflix and fellow FANG stock Amazon are both currently on Leaderboard, IBD’s premium service offering annotated charts of a select number of stocks, mostly growth names in or near buy range.


IBD’S TAKE: Buying or holding a stock can be risky heading into an earnings report. Here’s an earnings options strategy that can help you cash in on post-earnings stock gains, while minimizing the risk from a weak quarter. IBD discusses how to use this strategy with Netflix in the latest Earnings Preview column. 


Charles Schwab

Charles Schwab cleared a 44.20 flat-base buy point on Oct. 3. Shares nearly became extended a few days later, but have eased back to close Friday at 44.73, just over 1% above the entry.

Schwab is a leading online discount broker but a strong presence in wealth management. Schwab recently cut equity commissions to $4.95 per trade. That’s part of an industrywide price-cutting spree, though many startup apps such as Robinhood aimed at beginning investors offer trades with no commissions.

Charles Schwab likely will release financials Monday morning. Wall Street expects Schwab to report third-quarter earnings of 41 cents, up 21% vs. 34 cents a year earlier. Revenue likely grew 14% to $2.185 billion.

Fellow online brokerage E-Trade Financial (ETFC) reports after the market close on Thursday. Wall Street expects flat profit of 51 cents a share while revenue swells 23% to $596 million.

E-Trade also is in buy range, above a flat base, or base-on-base pattern, buy point of 42.29. E-Trade closed last week at 43.89.

Roku

Roku came public at 14 a share last month, soaring 68% in its Sept. 28 debut and rising to a record 29.80 the next day. Shares pulled back and began to consolidate, now forming a short IPO base. IPO bases are typically short: usually two to five weeks.

Roku closed Friday at 23. The potential buy point is 29.90, 10 cents above the high.

Keep in mind that having a potential buy point is no guarantee that a stock will reach and clear it. New IPOs are particularly volatile, so don’t try to get ahead of the market and buy a stock early.

It’s better to wait for a new IPO to prove itself before jumping in. Snapchat parent Snap also had a strong first two days after its IPO. But after peaking at 29.44 on its second day, Snap began retreating, hitting a record-low 11.28 on Aug. 14, well below its 17 offering price. Snap has since rallied to 16.50, but still has not developed a sound base with a proper buy point.

Roku is best known for its small set-top boxes for streaming TV used by many to access Netflix, Hulu and other streaming channels. Those Roku devices compete against the Amazon Fire TV stick, Apple (AAPL) TV and the Google Chromecast from Alphabet (GOOGL). But hardware sales are stagnant, so Roku sees the future in advertising and subscription-related revenue.

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