The Day Tradette

Master the Stock Market

April 2014 Market Commentary

One of my favorite things in this world is a good sale.  Whether it’s shoes, clothes, or stocks, I hate paying more than I have to.  Luckily, I’m starting to think Amazon (AMZN) may have presented a post earnings sale opportunity.

As I predicted, Amazon stock did not respond well to its earnings announcement last night.  The stock has been trading about 10% below where it closed yesterday.  What I didn’t expect though is that Amazon actually beat analyst expectations last night.  Revenues increased 23% from the first quarter last year to $19.74B (analyst estimates were $19.4B).  Earnings per share rose 28% from last year to 23 cents a share, in line with analyst estimates.  And net income rose to $108B from $82B last year.

All in all, Amazon had a great earnings report. The revenue growth alone is very impressive, particularly for a company of that maturity.  And Amazon is going to continue to focus on revenue growth with the numerous new products it just announced, including Prime Pantry (grocery delivery service for Prime members), Amazon Fire (a TV streaming device), and a rumors of a phone debut.

With all this there’s little reason I can point to that the stock is down so much.  Granted, I was bearish going into earnings, but these reports have me changing my opinion.  The one negative piece of news was that operating income decreased 19% over last year, partially fueled by a 31% increase in shipping costs.  However, the increase in costs is understandable given the need to support the big increase in revenues (particularly the free shipping they provide for these increased sales), and I think the effect of shipping costs will stabilize as the Prime membership cost increase goes into effect.

Given that I can’t point to a good reason for the stock to drop today, I’m thinking it may be time to take advantage of the “sale” and get into Amazon.  Revenue growth has made me optimistic, particularly when paired with the new products they have coming out.  If the stock drops below $300 next week I’ll be picking up some shares.

Apparently I have been living in the dark ages.  Turns out there are two very cool, new(ish) apps that promise to make my trading life a whole lot simpler.  I’m getting on these stat and you should definitely check them out!

Robinhood

I fell down on the job this weekend.  My boyfriend asked if I was signed up for Robinhood yet and I had no idea what he was talking about.  Well, Robinhood may just be the most exciting trading app I’ve discovered since Stocktwits (which makes sense since the chairman of Stocktwits, Howard Lindzon, is an early investor).  It’s a mobile trading platform that will offer $0 trade commissions.  Yes, $0.   The platform is geared towards young investors for whom every dollar counts and the myriad of features on a typical brokerage account just aren’t appealing.  The platform hasn’t launched yet but you can sign up for the wait list – I only have 318,919 people ahead of me in line.

There’s no work yet on how they are going to make money without a commission and I’m assuming that’s one of the issues they are working out pre-launch.  I’d guess they’re capitalizing on low overheard costs (as opposed to a huge brokerage like Fidelity) and will make up the money on margin interest (the percentage you pay to trade on their borrowed money) and a premium up-charge for extra features.  Here’s to hoping those 318,919 spots are filled quickly!

CNNMoney Portfolio

Turns out CNNMoney isn’t just good for articles.  I check on my portfolio quite frequently and their portfolio tool, powered by SigFig,  makes that so much more fun.  It consolidates all of your stock market, IRA, and 401k accounts in one place, you just need to import your account with your normal brokerage login.  Plus, the way it shows your portfolio is great.  Not only does it show what the price is of your holding, it shows where the current price lays in the 52 week range, recent headlines for each stock, and other features.  Here’s a preview:

Plus, it will run a variety of analytics on your portfolio and let you know how risky you are, how your asset allocations compare to set norms, and whether it has any recommendations for improvement.  This feature seems a bit buggy but with a few updates it could be extremely useful, especially for a beginner investor.  Here’s one feature:

I highly recommend you check both of these programs out and let me know whether you find them helpful too!

Buckle your seat belts everyone, this is a massive week in earnings reports.  You can check out the full calendar here but names reporting include Netflix, Amazon, Apple, Ford, Visa, Under Armour, McDonald’s, Microsoft, Zynga, Baidu, Caterpillar, and Starbucks.  Phew, that was a mouthful and there are a bunch more I didn’t even get to mention.  Here are my thoughts on four of the biggest tech names reporting this week:

Monday – Netflix (NFLX) 

I like Netflix overall.  It is the leader in quality, original programming (House of Cards, Orange is the New Black) and continues to focus on more cost effective international expansion.  As more people become “cord cutters” (stop paying for Cable TV) and rely solely on streaming, I think Netflix will be an even more prevalent streaming preference for young consumers.  Plus, from a price perspective, now is a good time to get in.  Netflix is down nearly 25% from the all time high of $458 it posted last month.  The price drop gives it more upside room to move off of good earnings news tonight.  And given the strong positive reaction last quarter I think Netflix has another beat and upside swing tonight.  I’m getting in on this one.

Wednesday – Apple (AAPL)

I’m steering clear of Apple for a while.  They have yet to show they have any great plans with the treasure trove of cash they’re holding and have no new product launches coming up.  Until I see some innovation on the horizon (i.e. the cool fitness tracker that’s been rumored) I’m out.

Wednesday – Facebook (FB)

Facebook has been making big moves recently.  They just made two huge acquisitions, paying $19B for the mobile instant messaging service WhatsApp and $2B for the virtual reality company Oculus VR.  Last quarter Facebook showed it can make real money off of mobile (the new battle ground for the success of social media sites) and is taking hard steps to keep the mobile money tree flowing.  Last month Facebook brought all its mobile ad analytics in-house and soon it is supposedly unveiling its own mobile ad network.  I’m bullish on Facebook.

Thursday – Amazon (AMZN)

Amazon is another one I’m staying away from.  As I correctly predicted, their price increase on Prime hurt them and I’m not sure we’ve finished seeing the effect of that yet.  Recent earnings reports weren’t great and I am not hopeful this report will be any better.

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