The Dow Jones Industrials (^DJI +1.14%) looked poised to start off the second half of 2014 with a gain, rising 48 points in pre-market trading. Japan's Nikkei index finished up more than 1%. European stocks had more modest gains, with major markets rising about a quarter-percent to a half-percent. Meanwhile, shares of Netflix (NASDAQ: NFLX) and GoPro (NASDAQ: GPRO) were off to strong starts early this morning, as investors continued to feel optimistic about the high-flying stocks and their future prospects.
Netflix jumped 3.5% in pre-market trading, eclipsing its previous record high, as the streaming-video specialist got an analyst upgrade from Goldman Sachs. The bank believes that Netflix's efforts to boost overall subscriber numbers should keep benefiting from the big push by broadband Internet providers to have customers buy faster-speed connections, with streaming video being the single most important driver of demand for higher bandwidth among most consumers. Moreover, with international expansion efforts going well, Netflix and its scalable model have the potential to push margins higher as more people sign up. Despite ongoing competition from both streaming-video rivals and cable providers offering on-demand video of their own, Netflix has the opportunity to boost profits significantly if it can keep its content costs down.
Image Source: Matjaz Klemencic, GoPro.
GoPro continued its impressive run this morning, gaining another 10% in pre-market trading to add to its 13% rise Monday and bring its overall gain from its $24 IPO price just last Thursday to about 80%. Investors are increasingly optimistic about the wearable-camera manufacturer as they consider the potential for social-media applications that the technology makes possible. Indeed, GoPro itself hopes to transform itself from a hard-core hardware maker into a media company by tapping into its customers' desire to do extraordinary things with their purchases. GoPro is only now starting to figure out a strategy to maximize the revenue it can earn by providing video content to distribution channels. Until the details become available, it'll be tough for investors to put real numbers on the potential for income from the media side of the business. For now, though, hype from its initial public offering should keep investors' attention focused on its stock, with the potential for big downdrafts and future gains along the way.
Investors in the Dow Jones Industrials should keep in mind that stocks often rise on the first day of a new quarter, as new money floods the market. On a holiday-shortened week, though, important news could lead to bigger moves than usual for the Dow, so don't be surprised by market volatility.
