Stocks

These 2 Nasdaq Stocks Led Markets Higher Wednesday

Investors finally got the boost of confidence they had hoped to receive, but it didn’t come from this side of the Atlantic. Instead, it was the Bank of England that decided to intervene in the bond market, offering to buy sovereign debt to stem the plunge in the value of the British pound.

That sent the message to investors that central banks would at least act to avoid systemic threats to the global financial system, and that was enough to send the Dow Jones Industrial Average (^DJI 1.88%), S&P 500 (^GSPC 1.97%), and Nasdaq Composite (^IXIC 0.00%) up roughly 2%.

Index

Daily Percentage Change

Daily Point Change

Dow

+1.88%

+549

S&P 500

+1.97%

+72

Nasdaq

+2.05%

+222

Data source: Yahoo! Finance.

The Nasdaq led the way higher, and the best performer there was Biogen, which announced a game-breaking study in its candidate treatment for Alzheimer’s.

However, another two Nasdaq stocks were also instrumental in helping to boost investor sentiment. Below, you’ll learn why Netflix (NFLX 9.29%) and MercadoLibre (MELI 7.52%) moved higher Wednesday, along with whether their gains look likely to hold up over the long run.

Much ado about ad-supported Netflix

Shares of Netflix were up nearly 9% on Wednesday. The streaming video giant got a vote of confidence from analysts at Atlantic Equities, who believe that rolling out a new ad-supported subscription tier could be a game-changer for Netflix.

Atlantic upgraded Netflix stock from neutral to overweight. It also boosted its price target on the stock by more than a third to $283 per share. As customers threaten to leave the service due to its perceived higher cost, the analysts believe that making it possible for subscribers to pay less, in exchange for agreeing to watch advertising, might go beyond simply stemming concerns about rising churn.

In Atlantic’s eyes, Netflix could get a huge revenue increase from advertising, with an estimated $6.7 billion in incremental sales helping to increase average revenue per user to $26 per month. Given that Netflix’s non-ad-supported subscription plans cost less than that, the implication is that the streaming video service will then have a huge incentive to push all of its viewers into taking ads.

That said, there are some hurdles that Netflix will have to overcome. It might have to renegotiate its revenue-sharing licenses with content providers, some of which don’t provide for the right to show ads. Moreover, early estimates suggest that even an ad-supported Netflix tier won’t be free, leaving lower-priced alternatives for viewers to consider. Nevertheless, given how far the stock has already fallen, further gains for Netflix shares are possible if the company moves forward with the plans that everyone’s talking about.

MercadoLibre climbs with Latin America

Meanwhile, MercadoLibre shares rose nearly 8%. The Latin American e-commerce giant has struggled with rising global economic tension, but signs of a potential resolution gave investors more confidence in its longer-term prospects.

Emerging markets like Brazil are sensitive to the recent strength of the U.S. dollar. With many Latin American economies carrying substantial amounts of sovereign debt that are tied to the greenback, falling foreign exchange rates make it harder to repay their borrowings. That in turn puts additional pressure on emerging economies, threatening to hurt standards of living and hold back consumer-facing companies like MercadoLibre.

However, the Bank of England’s move today suggests that central banks will intervene as necessary to prevent volatile markets from damaging the global financial system. That bodes well for MercadoLibre, given its impressive growth in offering consumers across Latin America the ability to shop, make payments, ship products, and do a host of other things online through its e-commerce platform.

MercadoLibre has a lot of potential in a proven space. That currently makes it even more attractive than Netflix in some ways, but both stocks have room to rebound in the months ahead.

Dan Caplinger has positions in MercadoLibre. The Motley Fool has positions in and recommends MercadoLibre and Netflix. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.



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