And now, airing exclusively on Netflix: The drama of a company with a skyrocketing stock price, but facing split opinion about whether it’s an investment gamble going forward.
More accurately, it’s a story exclusively about Netflix stock (ticker: NFLX), which is trading at all-time highs after the company reported second-quarter earnings on Wednesday that trounced Wall Street’s lofty expectations. That pushed NFLX stock — already fresh off a gaudy 7-for-1 split — past $115 on Thursday, up more than 18 percent. And keep in mind that this is a stock that more than doubled just this year, running its stock price from $350 to better than $700 per share before Netflix executed its extraordinary stock split.
Netflix announced Wednesday that it added nearly 3.3 million streaming subscribers in the second quarter — better than expected, though less than the 4.9 million it added in the first quarter — and posted profit of 6 cents a share post-split. On the one hand, that’s not nearly as high as the 16 cents a share NFLX stock paid in the second quarter of 2014, or the 19 cents per share it paid in the fourth quarter last year. But Netflix still stands as the top performer in the Standard & Poor’s 500 this year.
The company forecasts a profit of 7 cents per share for the third quarter, but is it still a good bet? “With Netflx, there’s a huge risk,” says Jay Sukits, a clinical assistant professor of business administration finance at the University of Pittsburgh’s Katz Graduate School of Business.
For starters, co-founder Reed Hastings holds many of the top positions, including CEO, president and chairman of the board. “The bigger issue, though, is market risk because their technology is being copied — and easily copied — by big players. Amazon (AMZN) is doing it. Comcast (CMCSA) is going to start a streaming service. And when you look at a compilation of Wall Street analysts, their opinion is almost universally to sell,” Sukits says.
But Michael Wall, president and founder of Retire Well, remains confident in NFLX stock: “Netflix will continue to be a game changer over the next three to five years,” he says. “The service has already spread to 50 countries and continues to expand,” making it a formidable rival for other streaming services.
Whether the Netflix news makes your heart flutter or keeps you jittery, the company has some company in Wall Street’s stratosphere. Here are eight stocks that have had fabulous run-ups over the last 12 months, and could potentially continue bull runs through the rest of 2015. (Note: Prices are rounded to the nearest dollar.)
1. Skyworks Solutions (SWKS)
Mid-July 2014: $47
Mid-July 2015: $101 (up 115 percent)
File under: “What Would Steve Jobs Do?” You can attribute the Skyworks success in large part to its role in making components for Apple products, says Carolyn E. Dunlavy, owner of Jade Tree Advisors in Los Angeles. It also makes semiconductor components and connectivity chips — an exploding market. “But they’re also doing a good job with following the technological trends, which will more than likely keep them and their stock in a favorable spot,” she says.
2. Apple (AAPL)
Mid-July 2013: $61
Mid-July 2014: $95 (up 56 percent)
Mid-July 2015: $126 (up 33 percent)
File under: “The House That Jobs Built” — which you might as well call a fortress as technology companies go. Apple’s stock just continues to hum year after year. “Apple is really good at coming out with new products, marketing those products and expanding into new markets such as China and the Pacific Rim,” Sukits says. The one possible hiccup, if any, are gadgets that don’t resonate with the technology crowd: “The jury is still out on the Apple Watch,” he notes, “but the iPad Air is a wonderful product and very cutting edge. I was just looking at it, and I think I’m going to buy one.”
3. Fitbit (FIT)
Mid-June 2015: $20
Mid-July 2015: $47 (up 135 percent)
This San Francisco company is in great shape, literally, thanks to its fitness wristbands and products that track activity, exercise, food, weight and sleep. It’s doing it with style, too, as it’s just released swank Tory Burch bracelets that connect to mini Fitbit trackers. But having just become a publicly traded company a month ago with a wildly successful initial public offering, “there is not enough data to support what the stock will do going forward,” says Hank Parrott, registered investment advisor and president of Estate and Financial Strategies Inc. “When it comes to IPOs, there can be an initial run-up, and it’s a big-time bet.”
4. Eagle Pharmaceuticals (EGRX)
Mid-July 2014: $14
Mid-July 2015: $91 (up 571 percent)
Talk about a prescription for wealth: Eagle’s fantastic climb actually began in January, meaning that most of its growth has taken place this year. The product line isn’t sexy — injectable products primarily used for critical care and oncology — but it certainly attracted the attention of Teva Pharmaceuticals (TEVA). Teva entered into an exclusive licensing agreement with Eagle in February for the drug bendamustine, used to treat leukemia and lymphomas. “And it’s not just a one-drug company,” says Tim Lugo, an analyst with William Blair & Co. “They will have significant launches in 2016 that should drive pretty meaningful earnings.”
5. Tesoro Corp. (TSO)
Mid-July 2014: $60
Mid-July 2015: $98 (up 64 percent)
This San Antonio petroleum refinery giant (part of the Fortune 100) has somehow sidestepped the woes that have dogged much of the industry. “As oil prices collapsed last year, investors sold everything even remotely oil,” says Tim Rudderow, chief investment officer at the macro investment firm Mount Lucas Management. “But lower oil prices inside a growing economy is a positive for refiners, as demand remains firm for the end product.” Along with other strong oil performers such as Marathon (MRO) and Valero (VLO), Tesoro fits the profile that Mount Lucas looks for in its mutual fund, U.S. Focused Equity (BMLEX), Rudderow says.
6. Depomed (DEPO)
Mid-July 2014: $12
Mid-July 2015: $31 (up 158 percent)
Depomed markets and develops products to treat pain and other central nervous system conditions. “It’s a high-flyer,” says Timothy Hooker, founder of Dynamic Wealth and a portfolio manager on Covestor. “The current FDA-approved drugs Lazanda, Zipsor and Cambia have been the key catalysts to this growth.” He adds that market capitalization is working in Depomed’s favor: “It’s only $1.8 billion and could easily increase to $3 billion as acceleration in revenue continues,” Hooker says.
7. Ultragenyx Pharmaceutical (RARE)
Mid-July 2014: $43
Mid-July 2015: $126 (up 193 percent)
Ultragenyx, which focuses on treating rare and ultrarare diseases, went public in January 2014 “and has been on fire ever since,” says David Twibell, president and founder of the Custom Portfolio Group in Englewood, Colorado. That’s in part because biotech stocks are all the rage, but as Twibell notes, “Ultragenyx is a clinical-stage company, meaning it doesn’t have any commercially available products — and has not generated any material revenue.” That could be irrelevant if it’s scooped up by a larger company, “but the stock has a long way to fall if investors start focusing on antiquated concepts like revenue and profits,” he says.
8. Insys Therapeutics (INSY)
Mid-July 2014: $12
Mid-July 2015: $40 (up 233 percent)
By some accounts, cannabis represents the fastest growing industry in the U.S., and Insys has a stake in cannabis-based therapies, says Leslie Bocskor, founder and managing partner of Electrum Partners. Last month, INSY completed a 2-for-1 stock split, partially driven by sales of the generic dronabinol, a THC capsule used to treat nausea caused by chemotherapy and loss of appetite caused by AIDS and anorexia nervosa. “They have done incredibly well over the last year, and companies like Insys present an opportunity like no other,” Bocskor says.
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8 Stocks Joining Netflix in Sky-High Territory originally appeared on usnews.com
