Tech investors turned more bullish Friday following a steep drop in tech and media stocks over the past two days, as they looked to snap up promising bargains.
Shares of Netflix jumped more than 5% and Snap was up over 7% in early trading, while Facebook (+1.7%), Amazon (+4%), Apple (+3%), and Twitter (+3.6%) all climbed as well. Shares of Alphabet, parent company of Google, were up 2.8%.
[UPDATE: Netflix closed the day up 5.75%, with others gainers including Snap (+5.4%), Amazon (+4%), Twitter (+3.7%) Apple (3.6%) and Alphabet (+2.85%). Facebook nosed up 0.25% by the end the session after sinking into negative territory much of the day.]
Analysts attributed this week’s earlier broad stock-market pullback as a response to recent signals from the Federal Reserve that it would tighten fiscal policy and fears it might raise interest rates.
Shares of Netflix had fallen more than 11% over the past week, before ending down 3.4% versus Oct. 5. Friday’s $339.56-per-share closing price was 17% off its all-time highs in June. “We view the recent sell-off [of Netflix] as an opportunity to own a high-quality, recurring revenue franchise with attractive upside potential,” Citi analysts led by Kevin Toomey wrote in a note Friday. Citi upgraded Netflix (from “hold” to “buy”) and maintained its 12-month price target of $375 per share.
The streamer, scheduled to report Q3 earnings on Tuesday, Oct. 16, should post solid numbers and is expected to turn in a “modest beat” on subscriber growth, Wedbush Securities analyst Michael Pachter wrote in a note. Netflix’s Q3 forecast calls for a gain of 650,000 net new U.S. streaming subs and 4.35 million internationally.
“We think that the quality of new originals content this year, the increased breadth and pace of releases throughout Q3… and a ramp in international marketing will result in global net subs additions above last year’s levels,” Pachter wrote.
Snap — whose stock hit a record-low closing price of $6.59 per share Wednesday — was lifted by upbeat sentiment from analysts who see the selloff off an opportunity.
The Snapchat parent has been beset with concerns about declining usage and that it’s “quickly running out of money,” as MoffettNathanson’s Michael Nathanson wrote in an Oct. 9 research note, adding that “Our math suggests a capital raise is needed in the middle to end of 2019.”
On Friday, Pivotal Research analyst Brian Wieser upgraded Snap from “hold” to “buy,” citing data showing a widening user base even though Snapchatters are on average spending less time on the platform. He also said Snap could become “an attractive candidate” to go private at the stock’s current lows.
“Our take is that it is not too late for [Snap] management to find ways to reverse recent usage trends and generally improve monetization regardless of those usage trends,” Wieser wrote in a note. “With ongoing experimentation, we have some faith that they should be able to do both.”
Wieser also upgraded his rating on Twitter from “sell” to “hold” based on the recent decline in the social network’s stock price.