Market Insights

The last week of earnings showed increased competition hurting big companies like Netflix.

The streaming-video giant added just 550,000 subscribers in the U.S. and Canada, about 39,000 less than expected. That confirmed worries about viewers shifting to new services from Walt Disney (DIS) and Comcast (CMCSA).

Investors shrugged off strong earnings and revenue. They also gave the company little credit for global subscriber numbers beating estimates by more than 1 million. Always forward looking, the market is now focused on customer losses in NFLX’s core domestic market.

Consumer-goods giant Procter & Gamble (PG) had a similar issue with diapers. Its baby-care segment, led by Pampers, grew just 1 percent last quarter. That’s potentially negative for because investors have seen other major brands, like Kraft and Heinz, crumble in the face of generic competition.

Johnson & Johnson (JNJ) was the third major company in the last week struggling to defend market share. The health-care giant missed sales targets as patients defected from key products like Zytiga (prostate cancer) and Remicade (arthritis). Its CFO warned growth will “probably not be as robust” as previously hoped.

IBM Turnaround?

While blue chips like PG and JNJ have come under pressure, another member of the Dow Jones Industrial Average showed signs of finally turning around: International Business Machines (IBM).

IBM beat earnings and revenue forecasts thanks to gains in newer business areas like RedHat and cloud-computing. CEO Ginny Rometty also boosted guidance as her shift toward subscription-based software begins to bear fruit.

For years, technology investors have favored early cloud leaders like Salesforce.com (CRM) and Microsoft (MSFT). A big question now is whether IBM should join the list.

Citrix Systems (CTXS) also reported strong numbers across the board as management shifts customers to subscription-based revenue models. We’ve seen this transition from old-fashioned licenses to recurring fees countless times in the software space. It’s usually been a positive for share prices.

5G Networking

Texas Instruments (TXN) was the first major chip maker to report earnings. Its results were mostly uneventful, with profit beating slightly and revenue missing slightly. More importantly, guidance for the current quarter was better than expected as the company prepares for the big 5G networking buildout.

Remember, telecom companies will spend more than $1 trillion upgrading to the super-fast mobile system. It’s already lifted a few companies like Taiwan Semiconductor (TSM) and Qorvo (QRVO). Tech investors expect many more to benefit. Keep reading Market Insights for more as this story unfolds.

VF (VFC), on the other hand, crashed after sales of Timberland clothes and Vans footwear disappointed. The apparel company is also in the midst of a complicated transformation as management works to launch new products and possibly sell its employee-uniform business.

Coronavirus Hits Casinos

Insurance giant Travelers (TRV) gapped lower after “net written premiums” missed estimates. That’s similar to NFLX’s subscriber numbers, indicating the strength of future quarters. It was TRV’s second straight bearish report.

The spread of coronavirus in China has also spread concerns about casino companies operating in Macau. That includes Wynn Resorts (WYNN), Las Vegas Sands (LVS) and Melco Resorts (MLCO). While it hasn’t impacted earnings yet, the market is always forward looking and anticipating future events.

In conclusion, earnings have been less impressive in the last holiday-shortened week. Big companies like NFLX, PG and JNJ face more competition, although IBM is showing signs of a turnaround.

Next week is a much bigger deal with major names like Apple (AAPL), Facebook (FB), Amazon.com (AMZN), Tesla (TSLA) and Microsoft (MSFT) set to report.