There continues to be strong growth in technology names that are offering products that consumers can use to save money and drive productivity. Whether the products are geared towards commercial or household use this seems to be the constant and a trend we envision continuing over the next few years. No longer are consumers going to pay up for new versions of software or products that do not offer anything new, so we think it will be even more important for companies to continue to innovate on the product side and provide new pricing models for their offerings.
We noticed last night that the data out of China was a bit disappointing, but we think that the swing is more indicative of the numbers being Chinese than there being a larger macroeconomic situation out there. It is something to watch moving forward though, however we would use the weakness to accumulate rather than sell.
Chart of the Day:
It certainly looks like we have reached a bottom in the initial claims numbers, however we think that this level has been reached not because companies are necessarily hiring right now but because they are operating so efficiently. Any jump in the numbers could be due to people leaving jobs in search of better opportunities as there are some states with employee friendly laws that could enable this.
We have economic news today and it is as follows:
- Initial Claims (8:30 a.m. EST): Est: 327k Act: 326k
- Continuing Claims (8:30 a.m. EST): Est: 2900k Act: 3056k
- FHFA Housing Price Index (9:00 a.m. EST): Est: N/A Act: 0.1%
- Existing Home Sales (10:00 a.m. EST): Est: 4.90M Act: 4.87M
- Leading Indicators (10:00 a.m. EST): Est: 0.2% Act: 0.1%
- Natural Gas Inventories (10:30 a.m. EST): Est: N/A Act: -107 bcf
- Crude Inventories (11:00 a.m. EST): Est: N/A
Asian markets finished lower today:
- All Ordinaries -- down 1.07%
- Shanghai Composite -- down 0.47%
- Nikkei 225 -- down 0.79%
- NZSE 50 -- down 0.749%
- Seoul Composite -- down 1.16%
In Europe, markets are trading lower this morning:
- CAC 40 -- down 0.37%
- DAX -- down 0.64%
- FTSE 100 -- down 0.30%
- OSE -- down 0.83%
Netflix Surprises To The Upside
There will be a lot of talk today regarding Netflix (NFLX) and their spectacular numbers from last night. Even better for investors is the fact that the company had a great quarter and arguably an even better conference call and guidance. The key figure that we took away was the 2.3 million new subscribers that were added in the 4th quarter and the fact that Netflix anticipates adding more subscribers in the 1st quarter than they did last year.
With foreign markets proving to be fertile grounds for expansion and strong growth continuing in the company's initial foreign endeavors it does appear that the company has further growth avenues ahead.
We might see Netflix move above $400/share in the near future after the most recent quarterly report. It looks like the momentum from 2013 is carrying over into 2014.
Source: Yahoo Finance
The item which excites us moving forward is the pricing of different plans and what this could mean for Netflix moving forward. We have been looking into the new plans which have multiple streams for our family's vacation rental homes as an added amenity and like what we have seen thus far during our research. It does appear that the move to offer a different number of streams at various price points positions Netflix as a true competitor to traditional cable and satellite companies as people in the same household could watch different content offerings in different areas of the home.
Netflix has now set the foundation for another solid year in 2014 so long as they can continue moving forward and not lose momentum in the next couple of quarters.
While everyone seems to be thinking that the latest news cements Netflix's grasp on the streaming service in American households with the only similar offering coming from Amazon (AMZN) we tend to disagree. We heard numerous times yesterday from various media sources that there were no other companies other than Amazon that were willing to lose the money each quarter that would be required to build out a similar service. We think that thinking like that is problematic as there are plenty of names which could easily mount a viable product offering and have the means to do so.
The first name which comes to mind is Apple (AAPL) which has Carl Icahn agitating for the company to do something with its cash in order to increase returns to shareholders. If Apple ever comes out with an offering in the television market it would only make sense to begin offering a streaming service to drive usage of the device and would fit with Apple's history of inventing devices that utilize great software to change consumers' consumption habits; in this case an a la carte offering could be possible via app-like offerings through a channel store. It would make sense for Apple and also be somewhat pleasing to quiet Icahn while also hitting him in the pocket book.
And one should never forget Google (GOOG) which continues to experiment with ways to deliver increasingly fast internet service at cheap prices and invest in new businesses. So far the Google TV offering has not caught on, but with large portions of ad budgets devoted to television it seems reasonable to believe that Google might find it necessary to offer a streaming service with an ad algorithm to sell ads via Adsense. Google has the deep pockets necessary to pull off a move such as this and potentially the need for growth down the road. One should not forget that the company has relationships with advertisers and could sell targeted ads to the demographic advertisers wanted, and that demographic only based on customer information. That could be a game changer in how content is monetized and allow companies to better utilize their ad dollars.
Icahn At It Again ...
We have already discussed two companies that Carl Icahn is involved in with Netflix and Apple, but yesterday was a rather interesting day even for Mr. Icahn. First he was on CNBC discussing the fact that he increased his stake in Apple and still believes that it is a buy and continues to push the company to increase their buyback. His stake remains small, but lately he has been accumulating smaller stakes and taking on larger companies; something that continued after the closing bell.
With eBay shares essentially flat over the last decade and range-bound in the past year, the company made itself an easy target for Carl Icahn.
Source: Yahoo Finance
Once the markets closed it was announced that Icahn had purchased less than 1% of eBay (EBAY), a move that sent shares higher immediately. Mr. Icahn wants eBay to split the company into two separate entities, the online retail operations and the online payment system. It is no secret how valuable Paypal is, nor how much it has driven growth in recent years, and this is not lost on Icahn. It does seem that he is in for a fight though because this morning eBay management was on CNBC discussing the proposal and essentially said that it makes little sense to split the two companies as they help each other move into new markets. That may be the case, but we think that this shall be a prolonged battle for both sides and would not be surprised to see Icahn increase his ownership over the next year.