Friday, July 23, 2010

First Move Friday Morning

Netflix (NFLX) dropped 13.45% or -$16.09 to $103.56 after the video-subscription service provider reported Q2 earnings Wednesday after the bell. NFLX added another million customers during the spring, boosting its second quarter revenues 27% to $519.8 million from $408.5 million a year ago. Net income in the quarter rose 34% to $43.5 million or 80 cents per diluted share compared to net income of $32.4 million or 54 cents per share a year ago. The problem was its revenue, which analysts were expecting to be at $524 million (was $519.8 million). I think this is a good opportunity to buy NFLX. This sell-off is a bit over done.

NFLX raised its FY 2010 expectations. The company expects revenue to be in the range of $2.11-$2.16 billion, up from $2.05-$2.11 billion, GAAP net income to be in the range of $132-$144 million, up from $125-$137 million and GAAP EPS to be in the range of $2.41-$2.63, up from $2.28-$2.50. I think that these numbers are a bit conservative. Companies are being cautious in their second half guidance; there is no reason to be too optimistic right now. NFLX slightly rose their guidance- I think this means they are fairly optimistic about the second half of the year, but they don't want to overexcite investors and then possibly disappoint later down the road.

I think you can start building a position at these levels. This stock is way over sold- buy some NFLX Friday.

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