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| Fellow Investor,
Earnings season has been a success so far, with roughly 70% of the S&P 500 companies that have reported so far beating expectations. But the last couple of days have sure made it seem like earnings are terrible.
First, there was IBM (NYSE:IBM) and 3M (NYSE:MMM) missing expectations and getting smacked. But those declines were nothing compared to what happened to Netflix (Nasdaq:NFLX) yesterday and Amazon (Nasdaq:AMZN) today.
Netflix was off an amazing 35%, or $41.50 yesterday after it missed earnings and reported a loss of 800,000 subscribers. And Amazon looks poised to lose at least 15% off its stock price after its miss last night.
Not only that, but leading solar company First Solar (Nasdaq:FSLR) got whacked for 25% when it was reported that its CEO was leaving. It would appear that the CEO's decision to expand manufacturing capacity at a time when sales were falling is the cause of his ouster. No investor, or Board member, can be happy with the stock's fall from $175 back in February to the recent lows of $52.
But this latest news has knocked the stock down even further, to $43 and change.
So the question is: are these companies being treated unfairly? Or rather, do these sharp declines resent buying opportunities? Perhaps they do. But there's a bigger point here, one that concerns the old "catch a falling knife" analogy.
When bad things happen to a stock, it's likely that more bad things will happen. When Netflix fell from above $200 to the $125 range, well, that was only the first shoe to fall. As it turns out, the situation was even worse than investors thought. Same goes for First Solar.
Things can always get worse, and in some weird application of Murphy's Law, they usually do. When a stock is broken, it usually takes a long time for the damage to heal.
Today is the day we're supposed to hear from the EU. But it doesn't look like we're going to get any concrete plans. Italy is apparently the new roadblock. The EU wants Italy to agree to budget plans to reduce its deficit before it makes any firm on the ESFS bailout fund.
It's pretty clear the EU is worried that once Greek gets debt forgiveness, Italy will be next in line. By forcing austerity on Italy, the EU is likely hoping that Italy won't attempt to tap bailout funds.
Bottom line though, is that... [continue reading at WyattResearch.com]
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