The Dow is Quiet as Markets Anxiously Await Netflix Earnings

The Dow Jones Industrial Average was quiet Monday as the markets look to Netflix after the bell.

Apr 21, 2014 at 1:00PM
Take The Long View

Seventeen of the 30 Dow Jones Industrial Average (DJINDICES:^DJI) companies were up in early afternoon trading Monday as the index itself was up 25 points.

The quiet session came at the markets prepare for the heart of earnings season. A host of blue-chip stocks release earnings this week, and investors spent Monday morning catching up from the long weekend in anticipation of these results.

$100 billion megamerger
A British newspaper attempted to steal some of the day's earnings thunder, though, reporting that Pfizer (NYSE:PFE) had approached AstraZeneca (NYSE:AZN) to propose a potential acquisition valued at over $100 billion. 

The London Sunday Times report caught the markets off guard. While the report said talks have ended, the fact that these executives considered the deal with any seriousness is a positive sign for corporate capital markets.

Pfizer moved 1.2% higher this afternoon on the news. AstraZeneca's cancer drug pipeline, plus cost synergies and a favorable capital structure, could immediately boost earnings at Pfizer. Many in the industry expect Pfizer to return to the table to make a deal work, so this is a story that we'll likely hear more about over the coming weeks and months.

Netflix On Iphone

All eyes on Netflix

Netlfix (NASDAQ:NFLX) is scheduled to release first-quarter earnings today after the closing bell. Netflix has long been a darling of those bullish on Internet technology disrupting existing industry, and in recent years a bet on the video streamer would have paid off handsomely (so long as you are comfortable with the occasional roller-coaster ride).

The big-picture bet is that Netflix can successfully compel traditional cable TV subscribers to "cut the cord" and turn to the Internet for all of their video entertainment. This requires Netflix to defeat not only other online outlets, but also entrenched industry players in the cable and television programming business.

NFLX Chart

NFLX data by YCharts.

To win on all of these fronts, Netflix has created a slate of original programming to distinguish its service from the other players. 

Season two of its original show "House of Cards" was released in February, and the Street is particularly looking at first-quarter earnings and new subscribers as validation of this award-winning hit.

The market will be watching new subscribers
Analysts in one survey said they expect Netflix to add 2.25 million new subscribers in the quarter. That number, likely more than any other, will dictate how the market reacts to the release. If new subscribers come in low, expect Netflix to take a dive.

However, over the long term this outcome could be just another buying opportunity. Netflix is deadlocked with YouTube as the leading online video sites. Together, according to a study by RBC Capital Markets, these two outlets control 87% of this market (44% for Netflix, 43% for YouTube). 

What's perhaps even more impressive is that YouTube is free, while Netflix is accessible only by subscription. That Netflix can control that much viewership via an exclusive group of users indicates the quality of its product and an uncanny ability for retain subscribers. 

Netflix is a volatile stock (check out the chart above again, in case you forget). However, the data makes clear its product resonates with viewers. Given the high profile of the stock, it is critical to step back and make sure you consider the long term. 

Cable subscriptions are declining. Eyeballs are increasingly moving to online channels. Netflix and YouTube rule online video. Can Netflix's original programming continue to drive people away from the cable box and to the Web? Only time will tell, but this Fool is optimistic.

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Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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.

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