Netflix Drops, Yahoo! Pops: Tech Winners & Losers

NEW YORK (TheStreet) –– Netflix (NFLX) shares fell 4.5% to $431.66 in response to a mixed earnings report.

In its second quarter earnings release yesterday, Netflix reported that its total membership base grew 33% year-over-year, with 570,000 new domestic subscribers (despite a fee hike of $1 per month) and 1.12 million new international subscribers added this quarter. This increase of 1.69 million streaming customers was well above Netflix’s own estimate of 1.46 million. Netflix’s total streaming subscriber base is now 50.05 million, 13.8 million of which are outside the United States, with expansions into Germany, France, Austria, Switzerland, Belgium, and Luxembourg planned for September.

However, earnings were shy of estimates. Netflix’s profits rose to $71 million, or $1.15 per share, from $2.95 million or 49 cents per share in the same quarter last year. Revenue rose 25% to $1.34 billion from $1.07 billion. Analysts polled by Thomson Reuters expected earnings per share of $1.16 per share on revenue of $1.34 billion. Despite missing analysts’ estimates, the company’s results were more than double those of the same quarter last year.

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“Fifteen years after launching our subscription service, we have over fifty million members enjoying Netflix in over 40 countries. As we gain new members, we are investing to further improve our content and member experience, and to expand the global availability of our service,” CEO Reed Hastings and CFO David Wells said in a press release. “We have a huge global opportunity ahead and a lot of challenges too.”

Analysts remain bullish on Netflix after the release. Citigroup reiterated its “neutral” rating on the stock and raised its price target to $453 from $410. Piper Jaffray maintained its “neutral” rating and price target of $434, citing concerns about domestic saturation despite the positive results. JPMorgan reiterated its “overweight” rating and raised its price target to $550 from $500, noting the quarter’s international subscription strength. One notable exception, Bank of America analyst Nat Schindler, kept an “underperform” rating on the stock, but raised the price target to $294 from to $246. He noted that the solid quarterly report, in line with analyst estimates, contained “nothing to change the minds of bulls or bears.” Jefferies also reiterated its “underperform” rating, citing rising costs in original content, but raised the price target to $350 from $300.

Despite sanctions and negative analyst coverage, America Movil (AMX) shares rose 2.7% to $23.85 after yesterday’s earnings beat expectations.

The telecom giant controlled by Mexican billionaire Carlos Slim reported profits of 66.6 billion pesos, or $5.1 billion, an increase of 2.4% from the same quarter last year. Analysts expected an average of 65.8 billion pesos. Profit margins in Colombia, Brazil, Ecuador, and Peru expanded, which will mitigate the breakup of the Mexican unit due to new antitrust regulations. Net income rose to 18.8 billion pesos, or 27 centavos per share, from 14.2 billion pesos and 19 centavos per share a year earlier. Sales rose 4% to 202.6 billion pesos, above analyst expectations of 198.7 billion pesos.

Earlier this month, the company was deemed a “preponderant economic agent” by Mexican regulators and ordered to reduce market share in Mexican landlines and mobile phones to below 50%. The company did not disclose which assets would be sold, but indicated that they were looking for a “strong carrier willing to invest and compete in the Mexican market” for a buyer.

Analyst opinion on America Movil’s future is mixed. Morgan Stanley analysts Michel Morin and Diego M. Aragao downgraded the stock to “sell” from “hold” and maintained their $19 price target. “We struggle to see how a break-up can produce a more valuable outcome than what we have been projecting,” they wrote. “Although planned asset sales may help protect some value, this would reduce AMX’s scale advantages and may also alter the market structure in a way that would likely produce lower prices, higher costs and investment and thus generate less FCF and lower returns for the sum of the parts vs. the integrated business.” However, analysts at Barclays last week upgraded the stock to “equal weight” from “underweight,” citing improved visibility on carrier plans to address regulations.

Yahoo! (YHOO) shares rose 1.0% to $33.61 following another acquisition.

Yahoo! announced yesterday that it had reached a definitive agreement to acquire Flurry, a mobile analytics company. The financial terms of the deal were not disclosed.

Flurry, based in San Francisco, says its applications are used by more than 170,000 developers.Yahoo! said it would use Flurry’s data collection to better target digital advertising on smartphones. In its second quarter earnings last week, Yahoo! reported that both mobile display and search revenue more than doubled year-over-year and mobile monthly active users grew 36%.

“Our agreement to acquire Flurry is a meaningful step for the company and reinforces Yahoo’s commitment to building and supporting useful, inspiring and beautiful mobile applications and monetization solutions,” Yahoo! said in a press release. “By joining Yahoo, Flurry will have resources to speed up the delivery of platforms that help developers build better apps, reach the right users, and explore new revenue opportunities.”

“As part of Yahoo, Flurry will continue to serve the application developer community in the way we always have, only better,” said Flurry CEO Simon Khalaf in a blog post. “With Yahoo, we will have access to more resources to speed up the delivery of great products that can help app developers build better apps, reach the right users, and explore new revenue opportunities.”

This is the latest in several recent Yahoo! acquisitions. CEO Marissa Mayer, who took the helm in 2012, has said that mobile is a key part of her plan to turn around the company.

Shares of Verizon (VZ) rose modestly, up 0.5% to $50.97 after reporting better-than-expected earnings this morning.

Verizon’s results just exceeded consensus targets. Its sales were $31.5 billion, up 5.7% from a year ago. Adjusted earnings rose 25% year-over-year to 91 cents per share. Analysts polled by Thomson Retuers expected $31.1 billion in earnings and 90 cents per share. In the second quarter 2013, earnings per share was 73 cents. This is the sixth consecutive quarter of double-digit operating income and earnings growth for the telecom giant.

This quarter, Verizon added 1.4 million net retail subscribers, bringing their total subscriber count to 104.6 million. The company also added 139,000 new FIOS broadband customers, 100,000 of which were video customers. FIOS revenues rose 14.4% year-over-year. The company’s full-year revenue guidance is unchanged.

“We have great momentum heading into the second half of the year,” said Verizon CEO Lowell McAdam in a statement. “We remain focused on profitable growth and on meaningful network investments that provide our customers with the best, and with a continuously improving, overall experience.”

In February of this year, Verizon gained full control of Verizon Wireless by buying out British cell phone company Vodafone’s 45% stake in the carrier for $130 billion.

--Written by Laura Berman in New York

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