Happy Friday, friends! As usual, here’s a recap of some of the biggest business and market happenings from the past week.
The Underwoods Always Win
Netflix (NFLX) announced their first quarter earnings Wednesday evening. And as I predicted that morning, it’s been a wild ride since. Shares jumped about 12% right after the announcement and are up a total 20% in price in the past two days, sitting at $570 from $475.
The price jumped on news of better than expected subscriber growth. Netflix added 5 million new subscribers last quarter – a whopping 1 million more than Wall Street anticipated. I guess people are really excited for the new season of Orange is the New Black. (I can’t wait!)
In reality, I think investors are also buying Netflix in anticipation of a stock split (e.g. for every 1 share you own at $570 you now get 10 shares at $57 each). The move worked very well for Apple investors (AAPL), after all.
Almost always though, there’s a catch. While subscriber growth was explosive, profits weren’t so hot. Netflix only reported earnings per share (EPS) of 38 cents, well below analyst estimates of 69 cents per share, and less than half of last year’s Q1 earnings of 86 cents per share. The profit hit is mostly due to the high cost of content and a weak dollar (which means you earn less when you bring money from international sales back to the US).
But apparently the market doesn’t care about such silly things like profits, so the stock wasn’t affected at all by the poor EPS showing. I like Netflix as a long term investment, but I’m thinking that this recent price jump isn’t sustainable in the short term.
Brooklyn Sells Out
Yesterday was a big day for crafters. Etsy (ETSY), the online marketplace for small vendors, went public with great results. The initial public offering (IPO) price had been set at $16 on Wednesday night, and by the market open Thursday the stock opened at $31 a share – nearly double.
Hold up, if that’s true then where’s the $16 on Google finance…
An IPO price jump upon open is a bit fishy, because the original IPO price was never available to average Janes like you and me. That $16 price was only available to institutional investors in the primary market (think Fidelity, Charles Schwab). By the time it got from the institutions to us in the secondary market the price already jumped.
My advice? Don’t fret. Tech IPOS have had a long history of spiking on IPO day only to crash and burn over the next few months (see: Facebook, Alibaba). In general, I’d stay away from a tech IPO for a few months until the price has a chance to stabilize.
Need more proof? Etsy is already trading down 8% from yesterday’s close.
WikiLeaks Rubs Salt in the Sony Wound
Because Amy Pascal hasn’t suffered enough already, WikiLeaks published every hacked Sony document in a searchable database. While the original hack was blamed on North Korea to retaliate against their movie, The Interview, and WikiLeaks thought it would be fun to resurrect the PR disaster.
[TDT note: A better retaliation would have been forcing Sony executives to sit through the entire movie. My poor brain cells.]
WikiLeak’s editor in chief, Julian Assange, claims that the documents were newsworthy and belong in the public domain. Sony’s lawyers think otherwise.
In April consumer confidence improved to the second-highest level since 2007 – before the recession. This is thanks to a University of Michigan index that shows consumers were optimistic about both the economy and their current financial situations. This is another positive step in feeling that the American economy is back on track.
Interesting Articles of the Week
For Retirement or Any Savings Goal, Try Being Lazy and Self-Centered
For some TDT advice that appeared outside the blog.
The New Kings Of Pop: How Kidz Bop took over the music industry
Because cute kids. And business.
And that’s a wrap. Have a great weekend, everyone!