With the inflation beast still tamed, leaving the Federal Reserve without a reason to hike interest rates, traders found cause to reignite last week’s rally effort on Thursday. Although one bullish day doesn’t make or break a trend, all trends start with that first small step.
Here’s what happened.
Seagate Technology (STX)
The headwind that computer-memory maker Seagate Technology and its peers have been facing of late hasn’t exactly been a veiled secret.
Nevertheless, the extent to which that headwind is crimping the top and bottom lines did catch STX owners off guard today, sending the stock more than 13% lower.
The damage was done by a preliminary report of Seagate’s fiscal first quarter results. As it turns out, revenue should roll in right at the lower range of previous guidance of between $2.9 billion and $3.1 billion. And, gross profit margins were likely 24% last quarter, rather than the expected 27%.
The demise of STX also sent shares of peer and competitor Western Digital Corp. (NASDAQ:WDC) lower on Thursday.
Is the honeymoon finally over for Netflix, as investors start to question whether or not NFLX is ever going to be able to grow into its frothy valuation?
One has to wonder.
On Thursday morning, Netflix announced it earned seven cents per share on $1.74 billion worth of revenue. Problem: The pros were calling for a bottom line of eight cents per share and $1.75 billion in revenue.
It’s only a small miss, but another set of data poured fuel on the fire of doubt — the number of new subscribers (net) that signed up for the service last quarter was well short of the company’s guidance. Netflix only added 880,000 new users during the third-quarter, missing the 1.15 million target it had set for itself.
NFLX blamed the introduction of credit cards with embedded computer chips for slow domestic growth, which would have theoretically meant many subscribers needed to update their credit card information to maintain their subscription.
It’s a flimsy excuse, though, especially for a stock trading at 315 times next year’s anticipated earnings.
NFLX fell 8% for the day.
HCA Holdings (HCA)
Seagate Technology wasn’t the only name to warn its shareholders that the previous quarter wasn’t as hot as originally expected. HCA Holdings pre-warned shareholders that its upcoming third-quarter results would be lackluster, and the stock dipped 5% lower on Thursday.
All told, HCA now plans on reporting a per-share profit of $1.17 for Q3, vs. analyst estimates of $1.22.
While the lowered guidance was alarming, the bulk of the damage the stock suffered today may have stemmed from a significant cut in the target price that Jeffries has previously suggested.
While it maintained its “buy” rating for HCA Holdings, Jeffries still dramatically lowered its target on HCA from $112 to $88.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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