Why Netflix, RadioShack, and Dangdang Plunged Today

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The stock market made impressive gains again Tuesday, with the S&P 500 rising to yet another all-time record high as even a poor report on September employment wasn't enough to hold back bullish investors. But Netflix (NASDAQ: NFLX  ) , RadioShack (NYSE: RSH  ) , and E-Commerce China Dangdang (NYSE: DANG  ) all took big hits in their respective share prices today, missing out on the market's overall gains. Let's take a closer look at why those stocks dropped so much today.

Netflix dropped 9% despite releasing impressive results in its third-quarter earnings report last night. Yet after initially soaring higher in after-hours trading, comments from CEO Reed Hastings pointed to "momentum-investor-fueled euphoria" as a reason for concern among long-term shareholders. Arguably, the comment had the desired effect of sending short-term traders to the sidelines while giving longer-term investors a better opportunity to buy shares at slightly less expensive prices. Netflix is far from a sure thing, with costs of content production likely to rise and with the company expecting a potential drop in a key profit-margin figure. But the streaming giant raised its reputation among many long-term-minded investors today.

RadioShack's 18% loss was less encouraging, as the retailer posted a loss that was more than triple what investors had expected to see. A drop in same-store sales of 8.4% was particularly disappointing, although the company confirmed that it successfully obtained $835 million in debt financing from a group of lenders. That capital should allow RadioShack to keep operating even if its turnaround doesn't produce results as quickly as CEO Joseph Magnacca hopes, but until the losses turn into gains, it'll be hard for investors to get behind the company.

Dangdang fell 13% after warning that its third-quarter revenue would fail to meet its previous projections. The company reduced its expected revenue range by around 4%, and its preliminary earnings figures for the quarter came in at a loss of between $4.4 million and $4.8 million. With the stock having gained almost 50% just since the beginning of September on hopes for a better quarter, Dangdang's news threw cold water on the ultra-bullish view for the Chinese e-retailer.

What's next for Netflix?
Despite today's share-price drop, Netflix still has huge potential to reap profits from the insatiable appetite for video content around the world. Find out just how big the company's opportunity is in The Motley Fool's new free report titled "Will Netflix Own the Future of Television?" The report not only outlines where the future of television is heading, but offers top ideas for how to profit. To get your free report, just click here!


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