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What’s Wrong with Transportation Stocks?

The major averages barely snuck into the green on Thursday as investors continue to digest the idea of new all-time highs.

Meanwhile, gold is on the cusp of a major breakout early this morning. Gold is punching above a tight, three-week consolidation today as it flirts with $1,450 and new six-year highs.

Overall, there’s not too much to complain about in this market environment — unless you’re trying to make a buck off transportation stocks.

As the major averages darted to new all-time highs, the transports lagged woefully behind. While the Dow Jones Industrial Average has extended more than 2% above its April highs, the Dow Jones Transportation Average remains well below its 2019 highs.

INDU

CSX Corp.’s (NASDAQ:CSX) disastrous earnings report isn’t helping the transports’ cause.

CSX plummeted more than 10% Wednesday after missing second-quarter earnings expectations and slashing guidance.

Instead of the originally estimated rise in revenue this year, management now expects revenue to fall about 2%. Earnings and revenue were down pretty much across the board for the railroad. Everything from the loss of Philadelphia Energy Solutions as a customer to the trade war could be to blame for CSX failing to meet expectations.

To make matters worse, the CEO doesn’t quite know what to make of his company’s predicament.

“The present economic backdrop is one of the most puzzling I have experienced in my career,” commented CSX CEO James Foote, via CNBC.

I’m no train expert, but these don’t seem like encouraging words for shareholders…

CSX

In a matter of days, CSX stock has gone from a potentially powerful breakout to a total meltdown. Shares cratered 10% after releasing its lousy earnings report. The stock is now stuck back near its March lows.

From the future files, the latest dystopian tech advancements will have you tossing your computer in the garbage and moving off the grid for good.

Neuralink is the next harebrained scheme from our favorite Twitter follow and multi-billionaire, Elon Musk.

After initially dropping hints in 2017, Musk talked about his kooky new startup idea earlier this week. In a nutshell, Neuralink wants to embed small smartphone compatible processors in people’s brains through a “minimally invasive” procedure.

The processor would then assist brain function in people with brain injuries, reports CNBC. Musk also says Neuralink will allow patients to communicate with other Neuralink units.

What could possibly go wrong?

Believe it or not, Musk hopes the FDA will approve these devices so it can move onto human trials by next year. That’s fair. When your company’s entire business structure revolves around brain implants, it might be a good idea to have the FDA look it over.

There’s no real timeline for the completion of Neuralink and when we’ll be able to telepathically communicate with each other, but Musk says it won’t happen anytime soon.

That’s a relief. I don’t want cyborgs stealing my trade ideas before I get the chance to log into my brokerage account…

Finally, let’s break down a key earnings miss…

By now, I’m sure you’ve read more than your fair share of hot takes on the Netflix Inc. (NASDAQ:NFLX) earnings debacle.

Netflix stock tanked 10% Thursday after the company reported a major decline in subscriber growth. Netflix reeled in just 2.7 million new paying customers during the previous quarter, MarketWatch reports. That’s less than half of what the company forecast. International subscribers were also weak point for Netflix.

Critically acclaimed original shows like Stranger Things may be able to turn the tide, according to some analysts. After all, the service is losing The Office and Friends it needs good content to not only draw more subscriptions — but also keep the ones it currently has.

With a new streaming services being announced almost daily, Netflix will have to work even harder to remain visible. The Netflix growth story is now on pause at the very least…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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