Today after the bell, Apple (NASDAQ:AAPL) will report earnings just like Netflix (NASDAQ:NFLX) did on Monday after the market closed when it sank as much as 15% in after hours trading. So what's the problem at Netflix (NFLX) and should there be some worries for Apple (AAPL) investors?
What's Wrong With Netflix (NFLX)?
Starting with Netflix (NFLX), it reported decent earnings but the problem is that Wall Street does not believe the rosy stock forecasts coming from the company. Specifically, Wall Street does not believe Reed Hastings' prediction that Netflix (NFLX) will add 7 million customers to its US streaming video service in 2012 because that would be at the same growth rate the company had back in 2010 when its growth base was much smaller and there was little in the way of competition. Today, Netflix (NFLX) is facing stiffing competition from the likes of Amazon, Comcast and Hulu with more competitors on the way. Moreover, Netflix (NFLX) itself is predicting that the second quarter will apparently be slow due to a whole host of complicated reasons based on seasonality and not slowing growth.
Finally and after the 2011 debacle, Reed Hastings has become the emperor with no clothes so to speak as it was last year that he lost his oracle status in the eyes of Wall Street - an aura he will not likely get back unless his rosy stock predictions for this year actually comes true. In fact, the first question asked during the Q&A was:
Why are you so confident that gross add trends result from seasonality and not slowing growth? How can you be confident in 7 million net additions for the year?
While the second question asked was:
A follow-up question to that. What will be the earliest indicators that you can or can't achieve that 7 million net U.S. streaming subs goal for 2012?
In other words, Wall Street has gotten skeptical about any forecast from Netflix (NFLX).
The Case for and Against Apple (AAPL)
Meanwhile, Apple (AAPL) has become the world's most valuable company and it's a consistent earnings performer. Moreover, cheerleaders for Apple (AAPL) will point to its mobile and PC businesses where the company holds less than a 10% market share in both categories while the huge emerging markets of Brazil, China and India hold huge potential for growth.
However and as someone who has never owed an Apple (AAPL) product and is a long-time owner of a Samsung smartphone, I recently got a chance to see the new HTC One smartphone from HTC Corporation (OTC:HTCXF) based in Taiwan whose catch phrase is "Quietly Brillant." The phone looks absolutely amazing but I should note that HTC Corporation (OTC:HTCXF) has justreported a 70% drop in first quarter profit due to competition from both Apple and Samsung (The company does expect things to turnaround during the second quarter thanks to the HTC One)
Hence and when Apple (AAPL) releases its earnings later today, keep an eye out for any mention about whether or not Google's (NASDAQ:GOOG) Android, Microsoft's (NASDAQ:MSFT) Nokia (NYSE:NOK) smartphones or Samsung's (OTC:SSNLF) smartphones have impacted Apple sales abroad along with any indication that iPad margins have narrowed with the latest release.
My stock prediction for Netflix (NFLX) is that its best days are already behind it while Apple (AAPL) may soon reach or already has reached its apex. Then again, both stocks could just as easily confound all of the experts on Wall Street. For those reasons and for traders with a short-term horizon, keep an eye out for any news that can impact stock predictions about both Netflix (NFLX) and Apple (AAPL) plus keep a watchful eye on our NextCandle.com stock forecasts about both of them given that the former has already made sharp corrections and the later is either over due for one or is already in the middle of one.
NOTE: THIS PIECE WAS JUST POSTED ON THE NEXTCANDLE.COM BLOG.