Tuesday, July 24, 2012

QE3, AAPL, NFLX, XHB and more ...

Well, as we kept saying, there had to come a time (as we have seen numerous other times) that magic QE3 rumor begins circulating again.  It certainly happened during the last hour of trading today as the regular 'rumor-villain', Jon Hilsenrath posted another story about another discussion going in among Bernanke and his pals regarding the seriousness of current downturn and the necessity of another QE.  The story can be found here: Fed Sees Action if Growth Doesn't Pick Up Soon.

The blog post helped the market pare some of its losses, but S&P 500 still closed below that 1340 level we discussed this morning.  It had gotten as low as 1329.  Given the not so great earnings reports of Apple (AAPL) and Netflix (NFLX), the 1310 level we touched on appears more realistic.

Regarding AAPL:
  • Missed on top and bottom-line in Q2.
  • Announced quarterly dividends of $2.65/sh, a 1.8% annual dividend yield based on the stock price in AH.
  • Q3 guidance for revenues and EPS were both significantly below consensus.
  • AAPL is down 4.7% AH.

Regarding NFLX:
  • When NFLX CEO, Reed Hastings, posted what appeared to be good news on Facebook a few weeks ago, saying that streaming content by subscribers had exceeded expectations in June, NFLX shot up and was on its way to the moon.  We called and tweeted many times saying that more streaming does not mean more subscribers given NFLX's subscription model.  In addition, we tweeted that such high streaming may have been driven by the very hot weather which kept many indoors.  But the stock kept going up.
  • Based on the Q2 results which came out this afternoon, it appears that we were right.  Subscriber count was nearly 400K below expectations.
  • EPS of $0.11 was much higher than the $0.05 estimate; revenues of $889MM were inline.
  • Although it beat on bottom-line, gross margins showed continuing decline, Y/Y and sequentially.
  • NFLX's top and bottom-line guidance were below consensus.
  • NFLX is down 14.5% AH.
  • By the way, the unusually warm weather which may have kept many inside, may have impacted Coinstar's (CSTR) Redbox volume negatively.  For the same reason, demand of VOD for cable companies such as Comcast (CMCSA), Time Warner Cable (TWC) and Cablevision (CVC) may have gone up a bit.  CSTR will report this Thursday, while the cable companies mentioned are scheduled to report next week and the week after.

Three more companies which are a part of the XHB ETF reported this afternoon:
  • iRobot (IRBT), beat nicely both on revenues and EPS.  Q3 and FY estimates were in line with guidance provided by the Company.  IRBT is flat in AH trading.
  • Tempur Pedic Intl. (TPX) also beat both on revenues and EPS; both were down Y/Y.  FY top and bottom-line guidance fell short of estimates.  However, the stock is up nearly 12% AH.
  • Aaron's Inc. (AAN) reported inline EPS, and beat on revenues.  Q3 revenue guidance was above estimates.  FY revenue and EPS guidance were in line with consensus.  The stock is down slightly AH.
  • As a reminder, two other companies within the XHB ETF, WHR and LII, reported disappointing results this morning.  They ended the day down 7.5% and 4.1%, respectively.  XHB was down 2.1%.


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