The Day Tradette

Master the Stock Market

January Stock Market Commentary

Today, the market is kicking off a blizzard of its own (hopefully with less travel disruption). Virtually every big tech company, including Facebook (FB), Apple (AAPL), and Alibaba (BABA) are reporting earnings this week. To top it off, the Fed is meeting on interest rates and GDP is being released.

I have a good feeling this will be a good week, with new records set. Either way, it should be an interesting one. Here’s a preview of what’s coming up this week:

Monday: Microsoft (MSFT)

Analysts expect Microsoft to report earnings per share (EPS) of 71 cents and revenues of $26 billion, with growth since last year expected for revenues but not EPS. That means their expenses are rising more than revenues are, which in this case may reflect their efforts to expand into new markets.

If Microsoft does report negative EPS growth it could drive the stock lower, but the company is expected to report on lots of new products that could temper the EPS effect. Overall, I wouldn’t be too worried about holding into earnings. While this is one of the least exciting of the tech companies reporting this week, it’s a very solid one, with the stock up 26% in the last year.

Tuesday: Apple (AAPL), American Airlines (AAL), Caterpillar (CAT), Pfizer (PFE), Procter & Gamble (PG), Yahoo! (YHOO), Federal Open Markets Committee Meeting

Apple is going to be the big story of the day, if not the week. Analysis expect Apple to report EPS of $2.59 and revenue of $67.50 billion (just compare those to Microsoft’s numbers for a minute). That’s also a big increase over last year.

It’s no secret that I love Apple, and it’s one of my big long-term positions. While I am optimistic about Tuesday, my one concern is that the huge expectations for strong earnings from Apple (the stock is already trading higher today) leave room for disappointment, and therefore a price dip. But I think any dip will be short lived and could even be a buying opportunity. This is a stock I’m holding, not trading.

I’m not as bullish on Yahoo. Much of Yahoo’s price increase this past year has been thanks to Alibaba, not operating improvements. That will show in an earnings report.

Finally, the Fed is kicking off a two day meeting on Tuesday, likely to focus on interest rate hikes. Most analysts are already expecting rate increases in mid-2015, so there likely won’t be any surprises out of the meeting. Hopefully there will just be additional clarification on the timing of the raises.

Wednesday: Facebook (FB)

Facebook’s stock price tends to struggle after earnings reports, even when the company performs well. I’d wait to pick up shares until after the report is out.

Thursday: Alibaba (BABA), Amazon (AMZN), Ford (F), Google (GOOG), Visa (V)

Alibaba is another of my long-term positions, and I’m expecting good things out of Thursday’s report. The stock has been trading down or flat in the past few months, which I think leaves more room for a positive reaction.

I’m avoiding Amazon. I’m not comfortable with its high valuation and the stock’s earnings reactions are always variable.

Friday: Chevron (CVX), MasterCard (MA)

Given the concern around falling oil prices, the reaction to Chevron’s report could be ugly.

I for one am looking forward to seeing how it all goes down this week. Stay warm, friends!

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Happy Friday, Friends! Now that we’ve entered a new year I’m trying out a new Friday theme – a take on a weekly roundup post. It’ll be a mix of key news stories for the week, links to interesting articles, fashion deals when they pop up, random things I’m loving, and a dash of my non-finance life.

European Markets Rally

There’s finally some good news for our friends in Europe, which in turn means good news for our own markets. The European Central Bank (ECB) announced a bond buying program starting in March, to stimulate growth in the region. This is similar to the Federal Reserve’s bond buying program (Quantitative Easing) which helped out the US after the recession. The government buying bonds drives up bond prices, thus driving down interest rates (the two move in opposite directions). Lower interest rates mean businesses and consumers can borrow money to invest in business expansion, houses, etc. and create economic growth.

The ECB plans to spend 60 billion euros a month on bonds through at least 2016. The news drove up the European stock market, as investors are optimistic about economic growth and higher future stock prices (when interest rates are low consumers tend to invest more in stocks and less in bonds).

The Clash of Generations

The internet has been a-buzzing about President Obama’s YouTube interviews gone bad. Turns out, while YouTube stars can help you connect to a younger population, they don’t make the best White House journalists. [Note: This is not to be confused with Obama’s ‘Between Two Ferns’ interview, which was amazing.]

Yemen: It Gets Worse

Yesterday, Yemen’s President, Prime Minister, and Cabinet all resigned. This is pretty scary for the US, as our government had been counting on Yemen’s government for support in fighting al Qaeda in the Arabian Peninsula. Making matters worse, apparently ISIS is gaining ground in Yemen and the US has been pulling personnel from the Yemen embassy.

Turns Out Wine Is Illiquid

An interesting (and short) article on the business of investing in wine.

Netflix: It Gets Better

This has been a great week for Netflix (NFLX) – and subsequently, my portfolio. The company reported strong earnings and stellar international growth on Tuesday, boosting its stock price. And now, the trailer for Tina Fey’s new Netflix comedy, ‘Unbreakable Kimmy Schmidt‘ is out.

The show stars Ellie Kemper (‘The Office’) as the survivor of a doomsday cult who moves to New York. The show was originally supposed to air on NBC, but Netflix nabbed it instead and gave it a two season order. As a huge Tina Fey fan (fun fact: a fellow UVa alum), I’m excited for the series debut on March 6. And as a Netflix long-term fan, I’m excited to see the expansion of Netflix’s high quality original content. I think it’s the key to their subscriber growth.

I’ll let you know how it is on March 7!

The Chesapeake Bay Maritime Museum

My boyfriend and I spent this past weekend of the Eastern Shore of Maryland. One of the highlights was visiting this adorable museum. I’ll admit, it sounds boring, but it’s worth checking out if you’re in the area and need a beach break (or like us, don’t want to sit on the beach in 30 degree weather).

And that wraps up the inaugural roundup. Have a great weekend!

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As promised, I’m checking in with an update on Netflix’s (NFLX) earnings following yesterday’s preview. I must admit, I’m breathing a sigh of relief that I was on the con side of that Netflix short argument. Netflix stock is up nearly 20% since the company reported earnings figures last night.

In rare form for the market, Netflix gave investors exactly what they wanted. Netflix showed it can deliver big subscriber growth, particularly internationally, without sacrificing margins. And that’s why the stock price jumped this morning.

So you don’t have to dig through it, here are the highlights from yesterday’s earnings report:

Strong Subscriber Growth:

Ended 2014 with 57.4 million members. Aka, nailed their target. That’s 13 million new members in 2014, vs. 11.1 million in 2013.
The company added 1.9 million US customers last quarter, plus 2.4 million international memebers. That’s 8% more than the company projected for the 4th quarter.
Netflix’s goal is to offer at least some streaming services in nearly 200 countries by the end of 2016 (FYI, the UN counts 206 total nations) – all while staying profitable.

TDT Note: North Korea will likely be one of the missing 6, as Netflix is streaming The Interview starting Jan. 24.

Renenues and profits:

Revenues rose 27% year over year to $1.4 billion, slightly under analyst estimates of $1.48 million.
Earnings per share killed it though, at 72 cents per share vs. analyst estimates of 45 cents per share.

And best of all? Your Friends (and/or OINTB, House of Cards, Mad Men, etc.) binge watching marathon mattered:

Median hours watched continue to climb in every single market. That’s one of the main measures Netflix tracks internally

Netflix also outlined some of its strategy for the next few years. It plans to focus on international expansion until 2016, while maintaining profitability, and then aims to use its size to focus on profit expansion starting in 2017.

I for one, believe they can do it. I’m waiting to see how Netflix stock reacts after the earnings reaction dies down in the next few days, but I’m bullish on Netflix for the long term. As I outlined in this post, I think Netflix is in a strong position given the increasing preference for cord cutting (getting rid of cable).

[Final thought: think anyone else is as happy as Mark Cuban today? The 50,000 shares he bought after October’s dip gained more than $3 million overnight.]

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