The market is up going into the second half of trading but the major indexes are off their highs with Tech turning negative as we go to press.
Netflix (NFLX, $87.84, down $14) fell hard in last night’s after-hours session after the company reported earnings which carried over into today’s session. Shares are down 15% after Netflix reported a loss for the quarter of $4.58 million, or 8 cents a share, on revenue of $870 million. This was ahead of an expected loss of $866 million, or 27 cents a share, analysts had penciled in.
The problem with the report was the company’s streaming video forecast which came in at 500,000 subscribers, which was much lower than the 1.2 forecast.
The May 80 puts (NFLX120519P00080000, $2.00, flat) opened at $2.94 and traded up to $3 but the options are flat as the premiums deflated. We profiled these puts last week near a buck but we didn’t feel comfortable with the risk/ reward for the trade. Although it would have been a nice return, we decided to sit on the sidelines.
We would love to play Apple (AAPL, $572.98, down $14.46) which reports earnings after the close but the option premiums are also very expensive on this stock as well.
We mentioned Sunday night there were 44 Wall Street analysts who follow Apple and on average, they are looking for earnings of $10 a share, on revenue of $36.6 billion. The low estimate is $8.48 a share on revenue of $32.8 billion while the high numbers are $11.80 a share on $41.1 billion in sales.
Apple might have to do $12 a share and top $42 billion in revenue just to blow away whisper numbers or there could be a serious selloff. If they miss numbers, which we seriously doubt, Tech will get a major correction.
The whisper numbers are 33 million iPhones, 12 million iPads and 4 million Macs. Cash reserves could top $110 billion. The new iPad only had 2 weeks of sales in the March quarter and many consumers are holding out for the iPhone 5. This causes us a little concern but we will also be sitting this one out.
We have some action to take on our current trades so we have to roll. The Dow is up 84 points to 13,011 while the S&P is higher by 5 points to 1,372. The Nasdaq is down 10 points to 2,960. Subscribers, please read all trade instructions carefully and we will be back in the morning with our next update.