Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of movie maven Netflix
So what: It's almost funny how predictable it is that when Netflix reports earnings there's going to be some superlative interpretation of some aspect of the report and shares will either rocket up 10%-plus or take a double-digit plunge. Today, in the wake of the company's first-quarter earnings release, the superlative seems to be the movie pioneer's second-quarter guidance (worst ever!) and the stock move is a double-digit drop.
From a more sober vantage point, the numbers for Netflix in the first quarter looked good and the explanation for the light subscriber adds in the second quarter -- namely, seasonality -- seems reasonable.
Now what: Investors can expect more of the same from Netflix down the road. This is a company on the leading edge of a rapidly changing industry -- media delivery -- it's a closely watched stock, it's richly priced, and the investors who tend to hang around the stock have hair triggers. The investors who will "win" with Netflix, then, are those who can cut through the blare of big stock swings, extreme financial media commentary, and other day-to-day noise to figure out how much the company is likely really worth and when it's really time to buy, sell, or just hang on for the longer term.
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