Q4 Predictions: Kindle on Fire, iPhone a Hit, More Netflix Trouble, and Less S&P Turmoil
It's been a wild quarter and a volatile year, and we're not done yet.
The final quarter of 2011 promises to be just as exciting -- and frustrating -- as the first nine months of the year have been for Wall Street. I'm not afraid to go out on a limb and make a few calls, so let's go over a few things that I see playing out over the next three months.
1. The Kindle Fire will be a hit
Amazon.com (AMZN) introduced its new entry-level tablet this week, but Kindle Fire won't hit the market until mid-November. CEO Jeff Bezos has promised to put out "millions" of these, and consumers will buy them.
The $199 price point is the real driver here. Sure, it lacks many iPad 2 features -- there's no camera or microphone, and the screen is smaller. It's only Wi-Fi, and folks can't pay $130 more for a 3G version, like they can with the iPad.
However, between pricing it right in this iffy economy and Amazon's digital multimedia ecosystem serving up video, music, e-books, games, and apps, this will be the hot tech gadget of the 2011 holiday shopping season.
It won't kill the iPad. It may not even threaten the iPad. Kindle Fire will simply widen the audience of tablet users, and that's good for both companies.
2. The iPhone 5 will be a hit
Apple (AAPL) plans to pull the wraps off the iPhone 5 next Tuesday; it should be available in stores a few days later. This prediction may seem like a no-brainer, but there are a few reasons why some are skeptical.
Apple is already late with its annual update. The world's most valuable tech company typically puts out a new iPhone early in the summer. The Android platform has also taken over as the mobile operating system of choice since the iPhone 4 was introduced 15 months ago.
Apple also isn't perfect, even these days, when nearly everything it touches turns to fiscal gold. The Apple TV has failed to take off. iPod sales have been shrinking in recent quarters. And after Steve Jobs' surprising retirement this summer, Apple also won't have its charismatic co-founder marketing the magic.
None of this will matter. Consumers will still want the new smartphone. It reportedly will come with a better camera, more powerful processor, and beefed-up speech recognition. Sprint (S) will also likely become the third stateside carrier to offer the iPhone, giving consumers a cheaper wireless company and one that's still offering unlimited data plans to new customers.
3. Netflix will continue to shed domestic subscribers
Earlier this month, Netflix (NFLX) warned that it will have only 24 million stateside subscribers by the end of the third quarter, short of the 25 million it was originally targeting and the 24.6 million it watched over at the end of June.
The flick flinger's reputation has taken more body blows after that original announcement, so it wouldn't be a surprise to see the net defections continue during the current quarter -- translating into fewer than 24 million subscribers by the time Netflix announce its financials in late October.
I expect some of that weakness to carry over into the fourth quarter.
I should climb out a little more on the limb -- predicting that Netflix's net accounts will actually increase for 2012 -- but I do see back-to-back sequential quarterly declines to close out 2011.
4. Stocks will close out the quarter in positive territory
After a positive first quarter and flattish second quarter, stocks have taken a pounding in recent months. The S&P 500 is down by more than 8% year-to-date as the European debt crisis and stiff unemployment rates closer to home weigh down consumer confidence.
Longtime investors know the drill: The market is never as great as it seems when stocks are rising, and it's never as bad as it seems when share prices are falling.
Do I think the S&P 500 will surge by 9% this quarter, pushing 2011 returns out of the red? Not necessarily. I may be an optimist by nature, but I'm no Pollyanna. However, I see the contrarian allure of buying now, when so many are selling.
Stocks may not climb 9% over the next three months, but they are more likely to gain ground than repeat the third quarter's slide.
This would be an easier call to make if Europe were in better shape and there were more hiring than layoff announcements in this country, but consumers are due for a break as we head into the holidays. They will get it.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article, except for Netflix. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, Netflix, and Amazon.com, as well as creating a bull call spread position in Apple and a bear put spread position in Netflix.