Netflix's Reports Earnings Stock Soars Again In After hours Trading

In this tough stock market it is good to see there are still a few winners... Netlfix stock symbol NFLX reported stellar earnings today and boosted their quarterly and yearly guidance. How high can this one go? Well as long as they don't disappoint this stock could easily go way higher, if they do though it could fall rather sharply.

Don't get me wrong, overall the picture for Netflix is looking pretty bright with it's recent major deals and increase in subscribers as well as gross margins.  The shorts certainly are getting cooked on this one that is for sure... I would find it hard to bet against them with the kind of increase in subscribers quarter over quarter over quarter and I think many people are still covering their positions.

Here are the highlights of the quarter...

“Q3 represents our fourth consecutive quarter of more than one million net subscriber additions. This growth is clearly driven by the strength of our streaming offering. In fact, by every measure, we are now primarily a streaming company that also offers DVD-by-mail,” said Reed Hastings, Netflix co-founder and CEO. “At the same time, the introduction of our streaming offering in Canada in late September has provided us with very encouraging signs regarding the potential for the Netflix service internationally.”

Third-Quarter 2010 Financial Highlights
Subscribers. Netflix ended the third quarter of 2010 with approximately 16,933,000 total subscribers, representing 52 percent year-over-year growth from 11,109,000 total subscribers at the end of the third quarter of 2009 and 13 percent sequential growth from 15,001,000 subscribers at the end of the second quarter of 2010.

Net subscriber change in the quarter was an increase of 1,932,000 compared to an increase of 510,000 for the same period of 2009 and an increase of 1,034,000 for the second quarter of 2010. Gross subscriber additions for the quarter totaled 4,101,000, representing 88 percent year-over-year growth from 2,180,000 gross subscriber additions in the third quarter of 2009 and 34 percent quarterover-
quarter increase from 3,059,000 gross subscriber additions in the second quarter of 2010. Of the 16,933,000 total subscribers at quarter end, 94 percent, or 15,863,000, were paid subscribers. The other 6 percent, or 1,070,000, were free subscribers. Paid subscribers represented 98 percent of total subscribers at the end of the third quarter of 2009 and 97 percent at the end of the second quarter of 2010. Revenue for the third quarter of 2010 was $553.2 million, representing 31 percent year-over-year growth from $423.1 million for the third quarter of 2009, and 6 percent sequential growth from $519.8 million for the second quarter of 2010.

Gross margin for the third quarter of 2010 was 37.7 percent compared to 34.9 percent for the third quarter of 2009 and 39.4 percent for the second quarter of 2010. GAAP net income for the third quarter of 2010 was $38.0 million, or $0.70 per diluted share compared to GAAP net income of $30.1 million, or $0.52 per diluted share, for the third quarter of 2009 and GAAP net income of $43.5 million, or $0.80 per diluted share, for the second quarter of 2010. GAAP net income grew 26 percent on a year-over-year basis and GAAP EPS grew 35 percent on a year-over-year basis.
Percentage of subscribers who watched instantly more than 15 minutes of a TV episode or movie in the third quarter of 2010 was 66 percent compared to 41 percent for the same period of 2009 and 61 percent for the second quarter of 2010. In Q4 a majority of Netflix subscribers will watch more content streamed from Netflix than delivered on DVD. With that transition in the business from mostly DVD to mostly streaming, this will be the last quarter the company will report this metric. Subscriber acquisition cost for the third quarter of 2010 was $19.81 per gross subscriber addition compared to $26.86 for the same period of 2009 and $24.37 for the second quarter of 2010. Churn for the third quarter of 2010 was 3.8 percent compared to 4.4 percent for the third quarter of 2009 and 4.0 percent for the second quarter of 2010. Churn includes free subscribers as well as paying subscribers who elect not to renew their monthly subscription service during the quarter.

Free cash flow4 for the third quarter of 2010 was $7.8 million compared to $25.5 million for the third quarter of 2009 and $34.2 million for the second quarter of 2010. Trailing twelve-month free cash flow for the third quarter of 2010 was $109.8 million compared to $117.9 million for the third quarter of 2009 and $127.5 million for the second quarter of 2010. Cash provided by operating activities for the third quarter of 2010 was $42.2 million compared to $78.3 million for the third quarter of 2009 and $60.3 million for the second quarter of 2010.

Business Outlook
The Company’s performance expectations for the fourth quarter of 2010 and full-year 2010 are as follows:
Fourth-Quarter 2010
 Ending subscribers of 19.0 million to 19.7 million, up from 17.7 million to 18.5 million
 Revenue of $586 million to $598 million, versus $580 million to $596 million
 GAAP net income of $32 million to $40 million, unchanged
 GAAP EPS of $0.59 to $0.74 per diluted share, unchanged

Odyssey Marine Down But Not Out

When the courts ruled the Odyssey Marine (OMEX) should return the sunken treasure to the Spanish government on June 4, 2009 Odyssey's stock price lost nearly half its value in a single trading day. Without a doubt this is a huge blow to Odyssey, but the fight is not over. Anyone in their right mind would realize that Odysesey Marine should at least be given a massive finders fee for discovering, recovering and preserving this historical find.

If you caught the program on the Discovery Channel called Treasure Quest you can see that this company is serious about finding treasure. There is a lot of different shipwrecks in the sea and it is only a matter of time before they discover another big find like the Black Swan. Sure this stock is risky, but not as risky as it was at $4. Think of buying this stock like a ongoing lotto ticket, you never know when you are going to strike it rich, but you have a chance and a pretty good one if you ask me at this bargain basement prices.

What do you think about Odyssey Marine's stock, are they a good buy at these levels or do you think they could sink even lower?

Google Is A Screaming Long Term Buy

As I watched Google fall over 5% today I couldn't help but think there was some force pulling it down. I mean with the market up so much you would think that beaten down GOOG would shine, but just the opposite. Now in after hours Google announces a major partnership with NBC Universal to run TV ads. This stock has come down from $747 hard to find itself at nearly $420. With just a 27 P/E ratio this stock has literally never been this cheap! It really boggles the brain to even think about it. They have almost 13 billion in cash and are still raking in the money. Sure they are not smashing the park out of the numbers from last year, but you have to consider the law of large numbers and the fact that Google is throwing money in a lot of different places. They have the money to burn and they are taking advantage of that so they can reap the benefits in the years to come. I don't know about you, but I am going to be buying some Google, these price levels are just an unbelievable entry point.

Appetite For Destruction Or Just Risk?

As an investor it is very important to realize where you are in your life, and what exactly your investment goals are. Generally, if you are a younger investor you can tend to take on more risk or more "speculative plays" if you will. Now, this doesn't mean you should go out and buy all risky stocks, you always need those stable dividend paying stocks.

In fact, one of the ways the rich get richer is that they just purchase a few high paying, stable, dividend paying stocks. Then take those cash dividends that you receive quarterly, and invest them into more speculative stocks. Once you make a bit of mad money on your speculative stocks, cash out some, or all of them, and re-invest into your high paying dividend stocks or other safer investments. Rinse and repeat...

Of course, this does take a lot of money/stock to generate much in the form of cash dividends, but it is none the less very possible. I am sure there are many rich investors out there taking advantage of it all the time. As a small investor though, you might just not be aware of this trick of the trade.

Now, if you are an older individual it is more important to have steady stocks that pay large dividends as you can use this as a source income. Not only this, but you should have a fair amount of bonds, mutual funds and even cds as a source of income. The most boring investments after all, are the safest, and that it what you need going into retirement.

So, before you invest make sure you know what your goals are... and be sure not to take on too much risk as you can get burned. Since this is Stock Picky, I will leave you with two long term investments. Google (goog) for all you young fellows out there... there's this new thing called the Internet perhaps you've heard of it, and Royal Bank Of Canada (ry) for all of you grey haired folks which pays out a hefty dividend and has always been dedicated to increasing shareholder value.

Good luck with all your investments and let me know if you have any questions...

Don't Buy All At Once!

It's weeks like these that remind me not to buy a stock all at once, and to focus on the long term and not to panic driven short term. You can get burned badly, especially when the market takes a dive right after you buy. Here is the proper way to buy a stock...

Let's say you have $1000 to invest in a stock that is trading at $100 per share, you should put in half or less of your investment and then if it drops to $90... it's a gift! Now you can purchase those same shares at a discount to what you paid earlier for them. If you would have put all your money in at once you would be down a quick 10%... ouch!

Now, of course this can work in the opposite fashion as well were a stock goes from $100 to $110, but all you are doing there is not making as much money as you could have if you would have thrown it all in at once. Buying in increments is the safest and most intelligent way to build a position in a stock. This rule will help you become a better more disciplined investor. Another thing that buying in increments can do for you is to lower your cost basis. Cost basis is basically your break-even price on a stock. Think of it this way, if you buy that same $100 stock and it drops to $90 like above, you can buy it again at $90 and bam! You just lowered your cost basis to $95. This means when the stock goes back up to $95 you have already broke even on your investment. This can be a great thing to consider when you have your stock takes a big unjustified hit, you just invest again at a lower cost and in turn lower your cost basis. This makes it easier for your stock to get back to the green, even if your stock never climbs back to the price you first bought it for!

Tough week, but I think things will begin to turn around next week... Remember when the market has a correction like this it brings out some fantastic buying opportunities. Stocks I think will do well next week are Goog, VDSI (calling a bottom), CECE (reports on Monday), and BA $94.21!

Good luck to all... and stay tuned to stock picky for more stock picks and tips!

Floating Your Way Into A River Of Cash

The float of a stock is another important factor that can help you make a proper decision when it comes to picking a winning stock. The float is simply how many shares there are available for trade on the open market. Most finance sites will give you this information if you dig just a little. The float is a crucial thing to consider, because it is part of the equation that gets you to the earnings per share. (Net Income/Number Of Shares Or Float = Earnings Per Share)

Remember how important the EPS or Earnings Per Share is too, as it drives the most basic stock equation (EPS * Stock's Multiple = Price). Generally, I believe that the smaller the float the better. It breaks down to simple supply and demand. If a stock has a small float and gets a piece of great news they will go up a lot faster then one with a large float, simply because there isn't very many shares out there to buy. Watch out though because this can also work the opposite way. Check out what happen to VDSI which has only 37 million shares of float after it missed earnings estimates, just painful!

This is also were buybacks and stock splits come into play. A company that has passed it's growth phase needs to increase it's EPS somehow, so it simply starts reducing it's float by buying back it's own shares. The less shares on the market the easier it is to raise your Earnings Per Share and keep the shareholders happy! Take a look at Boeing (BA), they just announced a big buyback and the stock was rewarded.

Now when a stock split occurs you are normally just increasing or rarely decreasing the float. Lets say you have a 2 for 1 split. If the float was 50 million before the split it is now 100 million or if it was 10 million before now it is 20 million... just that simple!

Here are a few basic companies to look at that have a small float...

Cogent (COGT) 94 million shares, Vasco Data Securities (VDSI) with 37 million shares, Ormat (ORA) with 38 million shares, Zoltec (ZOLT) with only 29 million shares of float!

Compare that to some of the bigger companies out there, Microsoft (MSFT) with 9.3 billion, Motorola (MOT) with 2.2 billion and General Electric (GE) with a whopping 10.2 billion!

Basically, it is a lot easier to move a stock that has a small float, not only that, but a stock with a small float has a lot of room to grow, which is always a good thing when you are looking for great long term investments...

Picture Taken By Paul Clos

Buy Evergreen Solar Ahead Of Earnings?

Well I certainly can't say that I would put too much down on the table before earnings on Thursday, but this certainly is a good stock to consider for the long run. Evergreen Solar (eslr) is small company that is quickly expanding it's manufacturing facilities not only here in the states, but in Germany as well with it's joint venture with Everq. Germany is arguable the leader in the world when it comes to Solar technology, so ESLR has it's eggs in the right basket. They are still operating at a loss though, so this play is not for the faint of heart. They are also very small compared to the other players out there with only a 960 million dollar market cap, but with great risk comes great rewards. Here is a look at their 1 year chart courtesy of Google Finance.


I believe things can only get better for this company as governments around the world begin to offer even more incentives for green energy. Climate change is becoming more of a reality ever day and I believe we are soon going to be scrambling to provide the world with cleaner forms of energy.

One of the things that separates Evergreen Solar from the rest of the solar industry is the fact that they manufacture wafers, cells and panels all under one roof which will allow them to more efficiently control costs, and perfect the manufacturing process. They also produce panels that have the smallest carbon footprint of any panels on the market today, and with their revolutionary quad furnace I think Evergreen has a leg up on the competition.

Is Evergreen the best solar play out there right now? Maybe not, two others to consider are SunPower Corp (SPWR) and Suntech (STP) but I think that a year or two down the line Evergreen will be vastly outperforming both of these stocks... What are your thoughts?

NASDAQ ESLR is trading at $9.60 as I write this...

The Importance Of A Good Dividend

While a lot of people are in the market just for growth stocks, there is a safer, less exciting way to build your fortune. Just look for stocks that pay a hefty dividend and that have consistently raised their dividend over the years.

A dividend is simply a payment that is issued to stockholders normally every three months. Most brokerages allow you to either take the dividend in cash or you can re-invest your dividends directly back into the stock. My favorite personally, is to re-invest those dividend payments. Think of it this way, you put $1000 into a stock that pays a 4% dividend. Three months or less later you get your first dividend of $40. As I stated above, you can take this in cash or simply re-invest it automatically.

This way you are technically buying stock every three months automatically without even raising your finger! As you can imagine this will really end up paying off in the long run. Plus, if a company is raising it's dividend it is always a sign that business is good so stocks like this tend to go up naturally as well! It is a win-win situation!

For me though, the idea is to eventually have so much stock that you can simply live off of the dividends as well. This way no matter if a stock goes up or down you still receive that dividend.

Yet another advantage of dividends is that in a market like we had on Friday, which was terrible in case you missed it, stocks that have high dividends tend to not be hit as bad as ones that do not. So while it is great to have growth stocks that shoot straight up there is nothing wrong with a good steady stock that pays a nice dividend. A couple that I would suggest looking at include Royal Bank of Canada (ry), Yum Brands (yum) or any other stock that has been increasing it's dividend consistently.

Find out more about why I like Yum brands here, or you can learn even more valuable information about the stock market here!

Google Beat's The Street Again

Nothing new here, Google (goog) blows past analysts estimates posting $3.91 earnings per share (eps) vs the estimated $3.78 that analysts were predicting. They also beat on revenues with 3.01 billion which is 70 million above what the analyst were looking for. Mind you this beat was already after many analysts had raised their estimates prior to the release, so the bar was already very high, and Google still had no problem beating!

The only blemish on the quarter was continued hiring by the company that spooked investors a bit in after hours trading. If you listened to the conference call though, they explained that some of that was due to the acquisition of Postini and some due to an overhang of people that were hired in the second quarter that didn't start till the third quarter. The management said that they would keep a watchful eye on hiring in the future as well.

Overall, this looks like another great quarter from the company that never seems to stop growing it's impressive bottom line. They have introduce serveral new ad formats for adsense and have just begun to start making money off of Youtube with the new overlay ads. Also, with the release of the I-Phone, mobile Internet use has only begun to hit and Google just released adsense for mobile which will pad the bottom line a bit next quarter! Basically, with the seasonally strong forth quarter coming up it is hard to find another stock out there with this much potential.

You might be thinking I can afford to buy a $600 stock, but don't forget that you don't have to buy a full share of a company like this and others with such a high price tag. You can buy partial shares though places like sharebuilder and other brokerages. Don't think you missed the boat either, because as grows the Internet grows Google. This is a worldwide play on the growth of the Internet and the push from traditional adverting into Internet advertising which is much easier to track through services like Google Analytics. Plus, with the Summer Olympics coming up in China and the presidential election next year things are only going to get better for this company.

For more information on how I see the Google Story check out these past posts...

Cramer Goes Ga Ga Over Google
Google Should I Stay Or Should I Go?
Putting A Value On A Stock
Evolution Of Traditional Advertising

Google Train And The Forming Tech Alliance

Tearing Down The Microsoft Monopoly

Can Vasco Data Securities Continue This Run?

I have to admit Vasco Data Securities (vdsi) has gone a lot higher then I thought it ever could in this time frame, but there are some fundamental reasons and major momentum moving this stock upwards this quarter and towards the next earnings release on October 25th. Vasco is a security company that is growing at an astounding pace, and judging by the recent additions of a few key contracts this company is poise to continue this growth in the future. It even opened up a new location in Brazil on October 1st to ensure it's growth prospects in the region. Vasco does the majority of it's business outside the United States, and therefore has a huge untapped market that is just beginning to embrace online banking.

As more people realize the convenience of online banking here in The States, customer's will demand higher security just as they did in Europe and the other over 60 countries that Vasco does business in. The only question I have is the growth already priced into the soaring stock price? It is currently trading at a 80 P/E ratio or multiple which is normally considered to be "expensive". Still there is only a couple analysist that even cover this stock, and it is only a 1.6 billion dollar company market cap wise so it certainly has breathing room still.

No matter what happens this earnings report it appears that the long term story remains, they are a small company (184 employees) that has hit the sweet spot of online banking industry and is leading in almost every place but the united states, which they are beginning to penetrate with their recent agreements with The Royal Bank Of Canada and Az-lan Tech Data which both have a very extensive reach!

Just to be clear though this pick is not for the faint of heart is has been on a crazy run, I would personally wait till after earnings or buy some now and buy some after earnings if all continues to go well...

Traveling The World With Boeing

Just today it was reported that Boeing (ba) would have to delay delivery of it's Dreamliner series for at least 6 months. Incidentally, the stock fell by 3% almost immediately. This looks to me like a good entry point. The stock has pulled back from it's 52 week high of $107.83 and is currently traded at around $98.

The long term story with Boeing has not changed at all. Boeing doesn't just get orders from companies it gets orders from entire countries! It trades at a reasonable 21 PE and has a dividend of $.35 per share or dividend yield of 1.42% which should provide support for the stock.

As the developing countries progress they are going to need more airplanes and as the world becomes more aware of the problems that climate change is causing people are going to demand more fuel efficient planes. Boeing is already ahead of the game with it's Dreamliners which is much more efficient than the older planes that are on the market right now. Not only this, but Boeing is of course one of the largest defense contractors out there.

While this might not be the most exciting stock pick out there, it is certainly one of the safer picks that I would recommend. For more information you can always google Boeing and do some research yourself.

Yum Brands Continues To Grow In China!

This stock had a stellar performance today after releasing 3rd quarter earnings. Yum Brands beat analysis estimates by a full $.05 and the stock took off in after-hours trading to hit a new 52 week high.

In case you are not familiar with Yum Brands, they own a series of restaurants including Taco Bell, Pizza Hut, A & W, Kentucky Fried Chicken (KFC), and Long John Silvers and is a company that is quickly spreading itself across the globe. One little statistic I just love is the fact that they are opening up a new KFC at least every single day this year in China! Now that is what I call growth...

I realize that this company is already pretty huge though and therefore their stock could be hard to move, but the company just announced an addition to their buyback plan which should be a good support for this stock. Plus just shows the confidence the management has in the future of Yum Brands.

Overall, I would have to say that this is a pretty safe bet even at it's 52-week high. If that wasn't enough they also pay a dividend which is yet another reason to own this stock.

What does everyone else think about this massive restaurant chain? They seem to trade at a reasonable multiple and are looking better and better with all this global growth, so how far do you think this stock can run?

For more information you can always visit their website here.

Welcome To Stock Picky!

This blog will be dedicated to finding stocks that are actually worth investing in and have the potential to make you large amounts of money. We will try our best to find the best value stocks and growth stocks in the entire stock market!

Some of our favorite picks right now include Google (goog), Vasco Data Securities (vdsi), Royal Bank of Canada (ry), Yum Brands (yum), Boeing (ba), and Ormat Technologies (ora)! All of these stocks will be featured in detail in the coming posts, so stay tuned to this sites for more info on these great companies...

Remember though it is very important that you do your own research or contact your stock broker before making any investments. It is also important that you consider were you are in your life. Generally, the younger you are the more you can take risks in your stock picks. If you are nearing retirement you should be much more conservative with the stocks that you choose.

Be sure to bookmark us and feel free to give us your feedback on the stocks that we feature here at Stock Picky!