Layoffs aren’t just for technology companies right now. Disney (DIS) has begun the second round of a projected three rounds of job cuts that will add up to a total reduction of 7,000 employees this year.
The rally on February 15 sure looked like a speculative blowout of the kind that often signals a market top. For me, it was the last straw and I’m selling into the rally. This post tells you what I’m selling and how I arrived at these decisions. But first, a few words on Wednesday’s move.
After a big week of tech earnings news, stocks and investors will move onto fourth quarter 2022 earnings for consumer stocks, health care, and a little taste of fintech.
The stock market action last week provided a very pointed reminder, if you needed one, that the stock market isn’t the economy. (At least not in the short run.) Companies that threw in the towel on revenue growth for 2022 (and maybe 2023) were among the big gainers for last week. Companies that slashed staff? Up big time even when the cuts raised questions about the company’s future products. Explain to me, if you can, what the long-term positive story is in a company slashing staff and admitting that it doesn’t have a clear path to revenue growth. In the short-term, the stock market was willing this week to reward companies for cutting costs in the near term–even at the cost of future growth. But in the long term, these “rewarded” companies are going to have to figure out a growth strategy or the stock market will take back its enthusiasm. And there are implications for the stock market as a whole.
Okay, quarterly revenue and earnings reported yesterday after the market close stank up the joint. Revenue at Facebook’s parent, fell 4.5% in the quarter, a second consecutive drop in quarterly revenue to $27.7 billion. Wall Street forecasts called for $27.4 billion. Earnings per share tanked to $1.64 versus the $1.87 a share that Wall Street had expected. The stock closed lower by almost 25% today, October 27. But the big problem is that everything that CEO Mark Zuckerberg and his team said yesterday points to the continued pursuit of the same strategies and tactics that got the company to this point.
In this post let me take another step back to look at the one of the larger economic forces revealed by the Netflix miss. I’d argue that the Nexflix miss should put pricing power and questions of what price increases will hurt demand up near the top of your stock picking check list. Especially since the streaming service’ loss of 200,000 subscribers this quarter and the ported loss of 2 million subscribers next quarter qualifies as just the first shoe to drop.
Shares of Netflix (NFLX), fell 25.73% today, April 19, in after-hours trading after the company announced first quarter earnings. (In regular trading the shares had gained 3.23%.) The stock was already down 42% for 2022 before today’s after-hours plunge. The bad news: In the first quarter of 2022 Netflix (NFLX) lost 200,000 subscribers. That was a bit short of the company’s guidance for the addition of 2.5 million subscribers for the quarter. And to put a cherry on top of the bad news in the company’s earnings report, Netflix forecast that it would lose another 2 million subscribers in the second quarter of 2022.
To get to my 10 picks for my Special Report: A New Core Portfolio for a New Market, let me start with the second half of that title, the new market part. Why do I think we’re headed into a new market–and what kind of stock is this new market likely to reward with gains? And then onto my 10 picks for a New Core Portfolio.
So much for fears the Disney (DIS) would follow the disappointing course plotted by Netflix (NFLX) and report disappointing numbers for new subscriptions to its Disney Plus streaming service. For the December quarter, the company’s first quarter of fiscal 2022, Disney Plus added 11.8 million subscribers, easily beating analyst projections for 7.3 million new subscribers.
Take a look at Peloton Interactive (PTON) and Netflix (NFLX) just in case you need a reminder of one of the essential characteristics of this stock market. One that makes it so hard to tell where the market as a whole is going, and what individual stocks are headed up or down (and often down big time.) What growth rate should an investor use in trying to value the stock? Who knows? Which is exactly the point and not a problem limited to Peloton in this economy. I’ve found a handful of stocks with reliable internal growth stories that make them great buy-on-the-dip candidates for over performance in the second half of 2022. I’m making three of those stocks–Apple (AAPL), Disney (DIS), and Chipotle Mexican Grill (CMG)–my last 3 picks for my Special Report
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My ninetieth YouTube video “3 Picks on Tech Stock Guidance” went up today.
After a huge rally like we’re had this year, it’s easy to fall into one of the most common buy on the dip traps. Just because a stock is cheaper than it was, it’s not necessarily a bargain. There’s nothing that says a stock has to return to its previous price after a dip. And especially that it has to return to that former price on your schedule. Let me use Disney (DIS), one of the stocks I’m tracking in my Dip-O-Meter, as an example.
