We see some gems right now in the Communication Services sector, and we also like the sector overall. Argus rates Communication Services as Over-Weight. After Information Technology, Communication Services is expected to deliver the strongest earnings growth in 3Q, with a forecast of 12%, according to Refinitiv. The sector has many well-known names and is considered a 'barbell' group, with high-growth, low-income social media stocks on one end and low-growth, high-income telecom services stocks on the other. The style mix is approximately one-third "value" and two-thirds "growth." The sector is competitive, so companies in it need to be nimble and innovative, constantly assessing their clientele and staying current. Some of the names -- like Netflix, Alphabet, and Meta -- were at the top of the growth charts in the past five years or so. But like other growth sectors, even the leaders have been outshined by the glitz of artificial intelligence (AI). Market breadth has been recovering, though, and the companies listed below are among those starting to get re-recognized. The S&P 500 Communication Services Index is up 28% year-to-date, compared to the 22% gain in the broader S&P 500 Index. We see more runway for the industry. In our list this week, we look at leaders in Communication Services and sort them by those that are furthest from their 52-week high. All are BUY-rated at Argus and some are included in our Focus List and Model Portfolios.

Netflix is a video-on-demand distributor of movies and television shows over the internet worldwide (except China and a few other countries). Subscribers have access to the Netflix content library for a fixed monthly subscription fee. The company offers several service tiers, including a discount advertising-supported service. Netflix derives 59% of its revenue from outside the U.S.

Monday Tee Up: Here Comes Tesla The flood of earnings continues this week, while the U.S. presidential election and the next Fed rate meeting draw nearer. Last week, the Dow Jones Industrial Average was higher by 1.0%, while the S&P 500 and the Nasdaq both gained 0.8%. For the year, the DJIA is higher by 15%, while the S&P 500 and the Nasdaq have both gained 23%. The earnings calendar is packed this week, with companies reporting from a wide range of sectors. On Tuesday, General Electric, General Motors, Lockheed Martin, 3M, Philip Morris, Texas Instruments, and Verizon all report. On Wednesday, Tesla, IBM, AT&T, Coca-Cola, and Boeing. On Thursday, Honeywell, UPS, American Airlines, Southwest Airlines, and Northrop Grumman. And on Friday, Colgate-Palmolive. So far, 71 of the S&P 500 companies (14%) have reported. Earnings are coming in 4% higher than in the prior-year quarter. That follows a strong 13% rise in earnings for 2Q. We expect 5%-7% growth in earnings this quarter. For full year, we forecast high single-digit growth, so roughly a 7%-9% gain. For 3Q, we expect Information Technology, Communication Services, and Healthcare to be the sectors that shine. On the economic calendar, Wednesday features Existing Home Sales and the Fed Beige Book. Thursday brings New Home Sales, while Friday includes Durable Goods and Consumer Sentiment. Argus Chief Economist Chris Graja is highlighting Durable Goods orders as his 'Call of the Week.' Chris expects September Durable Goods to fall 4.5% year over year, this based on a tough year-ago comparison. Durable Goods orders, which include the huge-ticket civilian aircraft and defense categories, are probably the most volatile of the 40 or so economic indicators we forecast and will have increasing importance to our outlook in the coming months. In the 2Q GDP report, the Equipment category jumped 9.8% and added one half point to the economy's 3% growth. Equipment could be a strong performer again in 3Q based on the Atlanta Fed's GDP Nowcast. We also analyze shipments of nondefense capital goods excluding aircrafts, this for a less-volatile look at core trends in manufacturing. We expect more modest growth in 4Q and in 2025. Last week, Retail Sales came in higher than expected at 0.4% for September compared to expectations of 0.3%, and 0.1% the month before. Removing gas sales (which were down sharply as the price of gas declined) and car sales (which were flat), overall Retail Sales were even higher, rising 0.7%. Food remains a category on which people are spending a disproportionate amount of money. Both Food and Beverage Stores and Food Services and Drinking Places were up 1%, though both were much lower than a year ago. Mortgage rates jumped again and are now at 6.44% for the average 30-year fixed-rate mortgage. Gas prices rose three cents to $3.17 per gallon for the average price of regular gas. The Atlanta Fed GDPNow indicator is forecasting for 3Q and calls for expansion of 3.4%. At Argus, we recently raised our 3Q growth forecast and expect 3.0% this quarter, up from our prior forecast of 1.6%. The Cleveland Fed CPINow indicator for October is at 2.6%. Looking ahead, next week is jammed-packed with economic reports, including the October jobs report, inflation indicator PCE, and GDP. As well, there will be another rush of earnings reports. The next Fed rate decisions come on November 7 and December 18. For November, odds are at 90% for a 25-basis-point (bps) rate cut, according to the CME FedWatch tool.

Netflix’s relatively simple business model involves only one business, its streaming service. It has the biggest television entertainment subscriber base in both the United States and the collective international market, with more than 280 million subscribers globally. Netflix has exposure to nearly the entire global population outside of China. The firm has traditionally avoided live programming or sports content, instead focusing on on-demand access to episodic television, movies, and documentaries. The firm recently began introducing ad-supported subscription plans, giving the firm exposure to the advertising market in addition to the subscription fees that have historically accounted for nearly all its revenue.