The market pushed new highs on the open but the action has simmered as we head into the second half of trading. Economic news has been light and all has been quite on the zombie from although there was some political rhetoric today on Obama’s upcoming speech on the economy. Yawn.
For the most part, we said earnings would take center stage this week, and they too, have been mixed for the most part.
Shares of Netflix (NFLX, $249.96, down $12.03) are taking a hit following a “disappointing” earnings report after the close on Monday. The stock has been on an amazing run since its breakout in January from $97 to $169 in 3 trading sessions and had reached $270 last Thursday before today’s pullback. As always, Wall Street wanted more.
To be clear, the numbers were great but the slick talking pros wanted to see more growth in their subscriber base. The company reported 2Q profits of $29.5 million, or $0.49 share, versus $6.2 million, or $0.11 a share, in the the year ago quarter. Wow. The suit-and-ties were looking for profits $0.40 a share on revenue of $1.09 billion which was matched.
The company gave a wide range for 3Q earnings of $0.35-$0.60 a share for a midpoint of $0.48 a share but they were higher than current forecasts. Analysts on average have penciled in $0.45 a share for the current quarter. Netflix added 630,000 U.S subscribers for the quarter but traders were looking for numbers north of 800,000. Global growth was decent and the company is going after new markets so we still think shares can reach $300 at some point this year as long as $200 holds.
Meanwhile, Apple (AAPL, $424.18, down $2.13) will report their numbers after the close today. Estimates are all over the map and we have no idea where shares could trade in after-hours or on Wednesday’s open. What we do know is Mac sells are rumored to have dropped off a cliff but iPhone sales and activations could surprise to the upside. If we had to flip a coin, we would say heads up and the possibility of shares moving higher but any pullback to $400-$380 should be viewed as a buying opp.
As far as the major indexes, the blue-chips have shown some strength and are up 14 points to 15,559. More importantly, the Dow has triggered 15,600. The S&P 500 is down 3 points to 1,692 after peaking at 1,698.78. The Nasdaq is down a dirty dozen to 3,587 and is holding 3,575. The Russell 2000 is off a point to 1,052.
We mentioned this morning we would have a New Trade and after watching the action beyond the open, we are taking a position in call options as shares could move from a current $10.34 to $12.50 over the next few months. Subscribers, check the Members Area for the current updates and our latest recommendation. We could have a few New Trades for the Weekly Wrap in the next hour so stay locked-and-loaded.