Thursday, January 24, 2013

Netflix Amazes, Apple Disappoints

The stock market is all about expectations; not just what is achieved but what is determined by analysts to be the results.  Meet or exceed and get rewarded, miss and watch the stock price drop.  For Netflix, a company that changed its business model from DVD to streaming, the turnaround  has achieved results far greater than analysts projected.  "That bold outlook comes at a day when Netflix beat market expectations by ending 2012 in black as well as with more than 33 million worldwide subscribers."  With a push toward original content and managing subscriber growth, consumers are once again enjoying the Netflix business. To rebound from a bad business decision and end the year with solid revenue growth.  Still the numbers demonstrate what expectations do to market sentiment.  "The company booked a net income of $8 million. That may look low when compared to $35 million in Q4 of 2011, but is above its own Q4 guidance, which topped out at $2 million."

Apple may have had record sales and huge earnings, but compared to analyst expectations, they under delivered.  Does it make Apple a less successful business, no.  They have in fact been growing market share.  But in a growing competitive marketplace, it is that expectation that they can continue to grow at an outlandish pace.  Unfortunately, that is an impossible task to achieve on a continual basis.  Apple, like Netflix, will rebound, as long as it focuses on the business and grows as an innovator in the marketplace.

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