According to Fast trader Joe Terranova, Netflix earnings present the fundamental shift that could signal the beginning of the end of the momentum trade.
After parsing over the latest earnings results, which disappointed the Street, Terranova says “this may finally be the moment short sellers have been waiting for. Fundamentally you can look at these numbers and say the story has changed. The growth projections are now called into question.”
Looking at the numbers, the company said quarterly earnings rose to $68 million, or $1.26 a share, from $38 million, or 70 cents a share, in the period a year ago.
Revenue rose 52 percent to $788.6 million, but fell short of the average analyst estimate of $791.5 million, according to Thomson Reuters.
However, perhaps most noteworthy for traders, Netflix cautioned that it would add fewer U.S. subscribers in the third quarter than it did in the period in 2010 - that's what called growth into question.
In fact, Netflix estimates ending the third quarter with the same number -- or only slightly more -- subscribers as it had at the end of the second quarter. (The company blamed the development on a recent price hike, which investors took to mean that any new subscriber additions would be offset by customers canceling over the prospect of paying more for movie rentals.)
”These results show it’s costing more money to get subs in the door and they’re get fewer of them,” adds Option Monster Jon Najarian.
