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Why Netflix, Sirius XM, and InvenSense Are Dropping After Hours

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Markets went into a tailspin today, with the S&P 500 down 1.44% while the Nasdaq saw its own 0.88% drop. Earnings were a big reason for the fall, as stalwarts such as DuPont and United Technologies showed weak earnings. 

Yet the tech sector is the one seeing most the news after hours. Let's check in with three different companies to see why they're heading south tonight. 

  (Nasdaq: NFLX  ) is down a heady 16% after hours on earnings news. The big number everyone's looking at is a gain of 1.2 million members, which came at the low end of previous company guidance. Overall, streaming added 1.85 million members, but DVD subscriber defections brought down growth. Next quarter came in a bit lighter than expectations, with midpoint sales guidance at just north of $930 million compared with expectations from Wall Street of $943 million. 

Does such a slight miss deserve such an outsized movement? Probably not. Missing sales expectations a quarter from now by 1% and falling 16% doesn't make sense in isolation. 

However, the unfortunate reality for Netflix is that 28% of its shares are sold short and investors are skittish that it continues to underdeliver. That'll mean outsized moves whenever the company disappoints. One interesting storyline around the company is how cheap it's become relative to its huge subscriber base, even if that base isn't growing as rapidly as hoped for. Yesterday,  (Nasdaq: ACOM  ) -- a company with 2 million subscribers -- sold to a private equity firm for $1.6 billion. Netflix, which has 29 million streaming subscribers alone, will probably be valued at just $3 billion after the market opens tomorrow. 

That's about 14 times the subscribers at just double the price. You have to wonder at what price interested parties start look into buying Netflix. 

(Nasdaq: INVN  ) , a maker of MEMS gyroscopes whose use is exploding in consumer electronics such as tablets and smartphones, saw its shares fall 19% in after-hours trading after it reported earnings. 

Were its earnings that bad? Not really. InvenSense is small and underfollowed, but last quarter looked relatively in-line. Instead, the big news was that the company's chairman and CEO, Steven Nasiri, is stepping down immediately. Nasiri founded the company back in 2003, so the suddenness of his departure was a shock. 

Wall Street hates uncertainty, and you have to wonder what's going on behind the scenes at the company. In any case, InvenSense will be under a cloud short-term while investors digest the founder's sudden departure. 

Sirius XM
Speaking of departing CEOs, Mel Karmazin is leaving Sirius XM  (Nasdaq: SIRI  ) effective next February. Unlike the unexpected CEO exit at InvenSense, it's widely been expected that Karmazin might exit stage right as Liberty Media's John Malone angles for control of the company. 

Sirius hasn't fallen too far on the news; it was down about 3% in early after-hours trading but has settled back to just a 1.4% loss. A big part of the tempered reaction is the expected nature of the news. Malone is just awaiting FCC approval to take control of the company and has made known he's looking at big changes at the satellite-radio service. 

Investors don't seem overly concerned about Malone's plans for the company, as its shares rallied across the summer, long after Malone made his intentions for full control known.

Guidance for the road ahead
Looking for guidance on Sirius XM as it changes hands? Fool analyst Rick Munarriz recently put out a 
premium report on Sirius XM Radio, detailing the challenges and opportunities that await investors who are both long and short the dynamic media giant. A year of updates is also included with the report. Click here to check it out now.

Editor's note: A previous version of this article stated it was InvenSense's CFO on the company's conference call after earnings. The Fool regrets the error.

Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of, InvenSense, and Netflix. Motley Fool newsletter services recommend and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 23, 2012, at 10:31 PM, shakazoid wrote:

    where did you get the info that Nasiri's replacement was on the conf call ? . I listened to the entire conf call and the only 2 company officials there were Nasiri and the CFO. By the way if you are familiar with Nasiri , you would kmow he luvs creating new biz , so this action is not uncommown and besidss he is still gonna remain a board member.

    Reason stock is down is bcos of the slightly conservative lowered guidance due to the macro around the world.

  • Report this Comment On October 24, 2012, at 12:15 AM, TMFRhino wrote:


    Went back and checked the conference call and you're correct... Was the CFO that described the departure. Sorry for the error there, will correct tomorrow.



  • Report this Comment On October 24, 2012, at 3:41 PM, hermitinvestor wrote:

    Anybody taken a look at the Receivables? They've rocketed up in the last 2 quarters.

    I notice no deferred revenues. What are the chances there's some channel stuffing going on here?

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