The Stock Market Appears To Be Gearing Up For A Big Rise

The Stock Market Appears To Be Gearing Up For A Big Rise

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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN NETFLIX AND APPLE

It would seem the current scenario in the stock market is improving rapidly. And the uncertainty I had yesterday is easing.  I think the S&P 500 is now well on its way to 2,690 and potentially to 2,800. 

S&P 500 (SPY)

The S&P 500 jumped today at roughly 2:30 when a perfectly placed and perfectly timed headline crossed that the US was considering lifting tariffs on China. I mean it was perfectly timed, likely almost purposely placed. As if Sec. Mnuchin and Pres. Trump are reading the charts and know where support and resistance levels are, placed. Maybe they are reading my commentary, ok probably not, but look at the chart below. 

The market was dead all day, just struggling to get its bearing, struggling to rise above 2,630, then the headline.  Look at how the index punches through resistance at 2,630. It even retested the breakout and managed to finish the day higher at 2,635. 

spx, s&P 500

Russell 2000

The Russell 2000 also broke out and the next level to watch for here is 1,492. 

netlfix

Housing

The housing index looks like it getting ready to breakout too, with the bullish flag forming.

housing index

NASDAQ (QQQ) 

The NASDAQ is on the cusp of a break out too now. 

nasdaq, ixic

Netflix (NFLX) 

Netflix threw a nasty splitter that the market just completely whiffed at. Without warning they just decided to they were no longer going to report total net addition, but only total paid additions. When the company said it added 8.9 million new subscribers, it seemed as if the company missed its guidance by about 500,000. But no, the 8.9 million was the total paying subscribers added, and their guidance was for 7.6 million. So what looked like a miss was a beat, a giant 1.2 million subscriber beat.

It isn’t entirely clear to me at the moment how the trial subscribers in the appendix equate to the old total membership. I shall have to see what the 10-Q says. 

So why is the stock down? The company reported revenue of $4.187 billion versus estimates of $4.207 billion. Additionally, the company is guiding first quarter revenue to $4.494 billion versus estimates of $4.612 billion. Also, Netflix said free cash flow next year is expected to be around the same level as this year, at -$3 billion. It likely means they will need to do another debt offering. 

There is one problem that I realized following these results which could have a negative drag in the future. As the company continues to add more international subscribers in countries that pay less per month, it will drag the overall ARPU for the business down. It is likely why the company is now raising prices in the US.  With all the additions this quarter in the international segment ARPU in the fourth quarter fell to $10.02 versus $10.22 in the third quarter, but is still up from $9.90 in the fourth quarter of 2017.  

The stock is trading down to around $337 in the after-hours filling the gap that was created following Tuesday’s significant increase.   I do think that the stock trends higher in the weeks to come. 

netflix

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Nothing is disappointing about this quarter. 

Apple (AAPL)

Apple managed to rise above $155, and I think that may be a big deal. It was just yesterday I was concerned that Apple could not increase above that price. Here we are a day later and the stock trading above $155. That is just how it goes sometimes. The next level to watch for is $160.

That’s it. Sorry I got thrown off schedule. Sometimes your life is not your own.

-Mike

Photo From Flickr

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results. 

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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

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