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Netflix surges on earnings; Investors cheer AMC's debt deal

During a momentous week in Washington, earnings and other events fueled movement for technology and entertainment stocks.

The S&P 500 notched gains for the week ended Jan. 22 as Joe Biden was sworn in as the 46th U.S. president and Kamala Harris made history as the first woman to be sworn in as vice president. Meanwhile, shares in beleaguered cinema chain AMC Entertainment Holdings Inc. soared by as much as 27% this week after the company signed a multimillion-dollar debt deal to remain afloat amid the ongoing pandemic.

In a recent SEC filing, AMC noted it has issued $100 million in debt with an interest rate of 15% to Mudrick Capital Management LP, an investment firm specializing in distressed credit. The interest payments are due semiannually, with the first one due on July 15.

The coronavirus has wreaked havoc on the movie theater industry, prompting global cinema closures and leaving major operators in a precarious financial state. AMC in 2020 warned investors it could soon exhaust its cash holdings as a result.

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In the tech space, Netflix Inc. shares surged after the streaming company beat expectations for paid subscriber additions and improved its cash position in the just-ended quarter.

Netflix surpassed 200 million global paid members in the just-ended period, adding 8.5 million net paid subscribers versus its 6.0 million guidance. The streamer also reported positive cash flow of $1.9 billion in 2020 its first-ever year of being cash flow positive and guided for a break-even year in 2021. The company will also no longer depend on third-party financing to fund its day-to-day operations.

Wall Street cheered Netflix's latest earnings results, with several analysts issuing price-target hikes on the stock. Jefferies analyst Alex Giaimo, for instance, upped his price target on Netflix shares to $650 from $610, calling the company's future capital independence the "most important positive takeaway" from its latest earnings results.

Wendy Johansson, global vice president of experience at digital business consulting firm Publicis Sapient, said in emailed comments that Netflix's improved cash position will enable the company to focus on investing in new algorithms to deliver the right kinds of content that provide users with fresh viewing experiences.

"Netflix finally has the conditions to flex its core strength: innovation," she said.

Netflix shares closed Jan. 21 trading up 16.44% for the week, at $579.84 apiece.

Social network owner Snap Inc. also got a stock boost following an analyst upgrade.

MoffettNathanson analyst Michael Nathanson on Jan. 15 upgraded Snap stock to "buy" from "neutral" while lifting his price target to $57 from $39. He noted there is much room for Snap to capitalize on broader trends in the internet space, including e-commerce and small and midsize business marketing.

"With an expected cyclical recovery in advertising spend in 2021, we estimate Snap's revenues will rise by +54% next year and continue to increase in the 30%+ range annually through 2024," Nathanson wrote.

Snap closed Jan. 21 up 8.13% for the week.

Spotify Technology SA, meanwhile, continued the upward trend, seemingly unmoved by a bearish note from Citi analyst Jason Bazinet regarding the company's podcasting efforts.

Bazinet on Jan. 15 downgraded Spotify shares to "sell" from "neutral," but raised his price target to $310 from $270. The analyst said the company's premium net subscriber additions and app downloads throughout 2020 did not show "any material benefit" from its latest podcast investments.

Though the analyst might reassess his views on the stock if such metrics improve, "our fear is that if podcasting doesn't provide a way for Spotify to shift away from music-label dependence, [Wall Street] may reassess the underlying value of the business," Bazinet wrote.

Spotify closed Jan. 21 trading up 8.91% for the week to-date, at $348.30 per share.