These 2 Nasdaq stocks drove markets higher on Wednesday

Investors finally got the confidence boost they were hoping for, 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 fall in the value of sterling.

This 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&P500 (^GSPC 1.97%)and Nasdaq Compound (^IXIC 0.00%) up about 2%.


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Data source: Yahoo! Finance.

The Nasdaq led the way higher, and the best performer was biogenicwhich announced a groundbreaking study of its candidate treatment for Alzheimer’s disease.

However, two other Nasdaq stocks also helped boost investor sentiment. Below you will learn why netflix (NFLX 9.29%) and MercadoLibre (MELI 7.52%) rose on Wednesday, as well as whether their gains look likely to hold up over the long term.

Lots of noise about ad-supported Netflix

Shares of Netflix rose nearly 9% on Wednesday. The streaming video giant has won a vote of confidence from analysts at Atlantic Equities, who believe the rollout of a new ad-supported subscription tier could be a game-changer for Netflix.

Atlantic moved Netflix stock from neutral to overweight. He also raised his price target on the stock by more than a third to $283 per share. As customers threaten to quit the service due to its perceived higher cost, analysts say allowing subscribers to pay less, in exchange for agreeing to watch advertising, could go beyond simply mitigating concerns about rising churn.

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

That said, there are a few hurdles Netflix will need to overcome. It may have to renegotiate its revenue-sharing licenses with content providers, some of which do not include the right to run ads. Additionally, early estimates suggest that even an ad-supported Netflix tier won’t be free, leaving viewers with cheaper alternatives to consider. Still, given how far the stock has already fallen, further gains for Netflix shares are possible if the company goes ahead with the plans everyone is talking about.

MercadoLibre climbs with Latin America

Meanwhile, MercadoLibre shares rose almost 8%. The Latin American e-commerce giant has struggled with rising global economic tensions, but signs of a potential resolution have given investors more confidence in its longer-term outlook.

Emerging markets like Brazil are sensitive to recent US dollar strength. With many Latin American economies carrying substantial amounts of sovereign debt tied to the greenback, falling exchange rates are making it harder to repay their borrowings. This in turn puts additional pressure on emerging economies, threatening to hurt living standards and curb consumer-facing businesses like MercadoLibre.

However, today’s decision by the Bank of England suggests that central banks will intervene if necessary to prevent volatile markets from damaging the global financial system. This bodes well for MercadoLibre, given its impressive growth in offering consumers in Latin America the ability to shop, make payments, ship products and do a whole host of other things online via 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 bounce back in the months ahead.

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

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