What to Watch This Week: Funds, 'Flix, Photocopies and Freshmen
Let's go over some of the items that will help shape the week that lies ahead on Wall Street.
1. Streaming along: Netflix (NFLX) kicks off a busy week of earnings with its first-quarter financials on Monday night.
The video-service giant had a rough summer last year. Its July pricing increase was poorly received, and the mercifully short-lived Qwikster fiasco fueled cancellations. However, the company's overall subscriber count bounced back during last year's fourth quarter after a horrendous third-quarter slide.
We're not talking about more consumers waiting at home for mail carriers to drop off DVDs in red mailers; Netflix expects disc-based accounts to shrink with every passing quarter. The company is counting on global growth of its video-streaming service. At $7.99 a month for unlimited streams, it's a pretty good deal, though critics have a problem with the quality of the tens of thousands of titles Netflix offers digitally.
The first quarter won't be pretty. Netflix already braced investors for a rare deficit. Costs to flesh out its digital library and the start-up expenses of international expansion will take their tolls in the near term. As long as Netflix's subscriber counts are improving, the bulls are likely to outshout the bears.
2. Kicking the tires of your mutual fund: Mutual funds continue to be a popular way for consumers to buy into the appreciation potential of equities without having to purchase individual stocks.
Many of the industry's big names will be reporting this week. Janus (JNS), T. Rowe Price (TROW), Invesco (IVZ), and Ameriprise (AMP) will all be stepping up for the quarterly snapshots.
Investors will want to make sure that inflows of capital continue to be positive. All of the fund families should post sequential improvement in total assets under management. The stock market posted double-digit returns in both the fourth quarter of last year and the first quarter of this year. Capital appreciation alone will boost those metrics. The key is to see whether purchases are coming in faster than redemption requests.
Another related company reporting this week is Morningstar (MORN). The Chicago-based company is best known for its in-depth mutual-fund research. Marketing materials for individual funds will often brag about Morningstar ratings -- if they're good. Morningstar has made the most of its fund-analysis stronghold to be a major player in equity analysis, too.
3. Grumbling at the gridiron: The NFL kicks off its annual draft of college football players on Thursday night.
A few decades ago, no one seemed to pay a whole lot of attention to the players teams were picking. All of that has changed with the arrival of Disney's (DIS) ESPN to break it all down and make it seem relevant.
Sports bars and draft parties see the event as big business. Naturally, this will also mean big business to the players selected early. Stanford's Andrew Luck and Baylor's Robert Griffin III are locks to be the first two college stars selected on Thursday night. Beyond the big contracts they will sign for Indianapolis and Washington, celebrity endorsements will inevitably follow.
Somewhere along the way, one would hope these millionaire athletes realize that none of this would be possible if not for the success of ESPN in raising the global scope of the NFL.
4. Making copies: If you're interested in a sight that only investors will find amusing, check out what analysts see in Xerox's (XRX) report this week. Wall Street figures that the copy-machine pioneer will earn $0.23 a share. What did it earn a year earlier? You got it -- $0.23 a share.
That's right. The pros see the company "Xeroxing" its earlier profitability.
Lame novelty humor aside, the street is forecasting flat earnings growth on the bottom line for a few other companies too. Wireless carrier AT&T (T), content-delivery network leader Akamai (AKAM), and Post-It Notes inventor 3M (MMM) are just some of the companies expected to match their prior-year quarterly profitability.
All three of the companies are expected to post increases in revenue. Akamai is eyeing a healthy 13% top-line boost. However, margins in the cutthroat world of providing speedy downloads will probably keep earnings growth in check.
5. Hazing the freshmen: Several companies that weren't trading publicly a year ago will also be reporting this week. Angie's List (ANGI) is a subscriber-based provider of local service-provider reviews. Zynga (ZNGA) is the social-gaming leader behind Words with Friends and now Draw Something. HomeAway (AWAY) -- through its namesake site and VRBO.com -- offers travelers the opportunity to rent available houses instead of staying in cramped hotel rooms.
It's been an intriguing year for debutantes -- and that's before we even get to next month's likely Facebook IPO.
Zynga and HomeAway are both expected to post modest profitability. Angie's List is still a few quarters away from turning that corner.
Longtime Motley Fool contributor Rick Munarriz does not owns shares in any of the stocks in this article, except for Disney and Netflix. The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services have recommended buying shares of Walt Disney, Morningstar, HomeAway, 3M, and Netflix. Motley Fool newsletter services have recommended creating a diagonal call position in 3M.