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Stock Market Wrap-Up: Netflix Hikes Prices; Apple Reverses Lower After Earnings Report

By Dan Caplinger – Oct 29, 2020 at 5:46PM

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Major market benchmarks were higher to recover some of their losses from earlier in the week.

Thursday brought some relief for stock market investors as major market benchmarks finally moved higher after a brutal opening three days to the week. Investors aren't any less concerned about major issues like the presidential election or the COVID-19 pandemic, but they got a dose of positive earnings data Thursday morning. By the end of the day, the Dow Jones Industrial Average (^DJI), S&P 500 (^GSPC 0.25%), and Nasdaq Composite (^IXIC) were all higher, with the Nasdaq leading the way.

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Data source: Yahoo! Finance.

Among the top stocks posting gains in Thursday's regular trading session were tech giants Netflix (NFLX -1.12%) and Apple (AAPL 1.37%). Netflix's move came after an intraday announcement that many investors had been anticipating for a long time. Unfortunately for Apple, however, its share-price gains reversed lower after the close of regular trading as the iPhone maker reported quarterly financial results that didn't live up to investors' high expectations.

Netflix finally hikes subscription prices

Shares of Netflix climbed almost 4%. That left the stock well short of its all-time highs, but it nevertheless marked a significant rebound from the pullback it saw last week.

Netflix boosted the price of its video-streaming subscriptions for U.S. customers. Those on the standard subscription plan will see a $1 boost to their monthly bill and will now pay $14 per month. Meanwhile, the premium tier plan got a bigger $2 price hike, bringing the total for four simultaneous streams to $18 per month.

It's been almost two years since Netflix last raised its prices in the U.S. back in January 2019. The move comes as the company has seen a boom in subscriber counts but has also invested quite a bit more in producing its own content and acquiring top-quality programming from third-party providers. Moreover, competition from Apple and a host of other streaming video services has put Netflix in a position in which it needs to make the most of its leadership position in the industry.

It'll be interesting to see how much pricing power Netflix has after its price hike. If the move spurs an exodus among subscribers, then investors will know that the video-streaming giant miscalculated.

An Apple a day

Elsewhere, shares of Apple closed the regular session up nearly 4%, but the stock gave up all those gains and more, falling almost 5% after-hours as of 5:15 p.m. EDT. The fiscal fourth-quarter report from Apple had some high points, but shareholders seemed to want more.

Four phones in different colors.

Image source: Apple.

Apple's revenue inched higher by 1% to $64.7 billion, which was the highest for any fiscal fourth quarter in the company's history. However, a boost in operating expenses, especially on the research and development line, caused net income to fall more than 7% year over year. Even a substantial drop in shares outstanding due to stock buybacks wasn't enough to prevent a slight decline from year-ago levels in earnings per share for the tech giant .

One problem is that Apple has the new iPhone 12 coming out, and so sales of its older iPhone models during the quarter ahead of that release were poor. iPhone revenue dropped more than 20% year over year. It took offsetting gains from the services division and Mac sales to boost Apple's overall top-line numbers.

Now, eyes will turn to the holiday quarter. If the iPhone 12 can surpass expectations, then all should be forgiven. But if problems plague the release, then the after-hours drop could be just the beginning of a longer downturn for the iPhone maker.

Dan Caplinger owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Netflix. The Motley Fool has a disclosure policy.

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