US stocks rallied on Friday ahead of Donald Trump’s inauguration, as the Dow Jones Industrial Average and the S&P 500 had their best week since the November election amid signs that inflation was easing.
For the week, the Dow and S&P 500 rose 3.7% and 2.9%, respectively, while the tech-heavy Nasdaq Composite climbed 2.5%.
Source: Investing.com
The coming week is expected to be another eventful one as investors continue to gauge the outlook for the economy and interest rates.
US markets will be closed on Monday for the Martin Luther King holiday. President-elect Trump will also be inaugurated on Monday, with the incoming president expected to issue executive orders on the first day.
Source: Investing.com
Meanwhile, fourth-quarter earnings season turned into a high, with reports expected from several high-profile companies, including Netflix (NASDAQ: NFLX ), American Express (NYSE:AXP ), Procter & Gamble (NYSE: PG), including Johnson & Johnson. (NYSE:JNJ), Verizon (NYSE:VZ), GE Aerospace (NYSE:GE), 3M Company (NYSE:MMM), United Airlines (NASDAQ:UAL), and American Airlines (NASDAQ:AAL).
Bitcoin and cryptocurrencies will also be closely watched.
Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another that could see fresh downside. Remember though, my timeline is only for next week, Monday, January 20th – Friday, January 24th.
For investors looking to allocate capital this week, Netflix stands out as a strong growth opportunity. The streaming giant’s shift to monetizing popular content like advertising, live events, and the ‘squid game’ are key tailwinds that could lift the stock over the next week.
The Los Gatos, California-based Internet television network is scheduled to release its fourth-quarter update after the US market closes on Tuesday at 4:00PM ET. A call with co-CEOs Ted Sarandos and Greg Peters is set for 5:00 pm ET.
Market participants expect a big swing in NFLX stock after the print drops, with a potential move of about 9% in either direction, according to the options market. The stock gained 8.8% since the last earnings report came out in mid-October.
Source: InvestingPro
Earnings estimates have been revised 27 times in the past 90 days, reflecting rising confidence among analysts. Only four downward revisions were noted, underscoring Wall Street’s bullish sentiment toward the entertainment powerhouse.
Netflix is seen earning $4.21 per share, representing a 99% increase over the previous year. Meanwhile, revenue is projected to grow 15% year-over-year to $10.1 billion.
The company has shifted its focus from net customer growth to operating margin and revenue expansion. This pivot includes a strong advertising model, which is forming the basis of its growth strategy.
On the content front, the blockbuster release of ‘Squid Game Season 2’ and other high-profile projects ensures a steady stream of engagement. Netflix is also venturing into live events, including NFL games and boxing matches, expanding its appeal to a wider audience.
NFLX stock ended last Friday at $858.10. At current levels, Netflix has a market cap of $366.8 billion. Shares are down 3.7% for the start of 2025 after scoring an annualized gain of 83% last year.
Source: Investing.com
Notably, Netflix has an excellent InvestingPro Financial Health Score of 3.1/5.0, reflecting its strong finances, strong growth prospects and innovative strategies.
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On the other hand, Procter & Gamble faces operational challenges and rapid growth, making it less attractive in the current market environment. The global consumer products company is scheduled to report its fiscal second quarter earnings before the stock market opens at 6:55 a.m. ET on Wednesday.
The expected move in the options market is about 3.4% up or down. Shares fell 1.6% after the last earnings report in October.
Reflecting the challenges facing Procter & Gamble, 18 of 19 analysts surveyed by InvestingPro cut their sales estimates ahead of print, citing soft consumer demand and a challenging outlook.
Source: InvestingPro
P&G sees earnings of $1.86 per share, up just 1.1% from EPS of $1.84 in the year-ago period. Meanwhile, revenue is projected to increase 2.2% year-over-year to $21.6 billion. These modest growth projections indicate growing challenges for the company.
The consumer goods giant recently faced operational disruptions, including a ransomware attack on one of its shipping vendors. An attack can weigh on distribution efficiency and hurt margins in the short term.
Further, increasing competition in key markets and inflationary pressure on raw materials are expected to limit profitability.
Thus, CEO John Moeller could strike a cautious tone and give soft guidance to reflect supply chain disruptions and weak margins.
PG stock closed last Friday’s session at $161.13, not far from its lowest level since April 2024. At its current valuation, the Cincinnati-based consumer goods company has a market cap of $379.5 billion. Shares are down 3.8% to start the new year.
Source: Investing.com
Although P&G remains a major player in the consumer goods space with strong brands like Tide and Gillette, its growth rate is slowing, and the stock looks overvalued. Trading at a forward price-to-earnings (P/E) ratio of 23.7, the shares may not offer much upside at current levels.
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Disclosure: At the time of writing, I am long the S&P 500, and the Nasdaq 100 through the SPDR® S&P 500 ETF ( SPY ), and the Invesco QQQ Trust ETF ( QQQ ). I’m also long the Invesco Top QQQ ETF (QBIG), the Invesco S&P 500 Equal Weight ETF (RSP), and the VanEck Vectors Semiconductor ETF (SMH).
I regularly rebalance my portfolio of individual stocks and ETFs based on an ongoing risk assessment of both the macro-economic environment and the companies’ financials.
The views expressed in this article are solely the opinion of the author and should not be construed as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv For more stock market analysis and insights.
