The market is trying to tell you something very important, but few investors will notice it.
This week was a huge week.
Not because of Greece, China, Puerto Rico or anything like that though.
Those were the headline-makers. The real news there’s something big coming -- and you should buy it -- are buried much deeper, yet they’re probably far more important.
The Market is Telling You Something...
This week was the start of earnings. It’s one of four times a year we get to see hard numbers. No hope or hyperbole. Just numbers.
Most of it’s a big charade. Companies report earnings. They normally beat -- historically as many 86% of companies -- artificially lower estimates set for them by Wall Street. Everyone moves on.
For us though, who are focused on the big trends, this time allows us to see what’s really going on with companies and how the big trends are playing out.
This week we got two reports which showed something big is going on.
First was the earnings report from Netflix (NFLX).
The headline numbers for the media powerhouse (I think we can call it that now) got all the attention.
Netflix added 3.3 million subscribers to take it’s global subscriber base past 65 million. And it added 900,000 subscribers to push its domestic total past 42 million.
Netflix also said it’s moving to Japan next. It’s a natural market which will adopt Netflix very quickly and add millions of subscribers very quickly.
So all that was great news and pushed Netflix shares up more than 10%. But those headline numbers are missing a much bigger trend investors should be watching.
Netflix also revealed it set a one-day record for streaming video downloads.
Although they haven’t released hard numbers (it probably will be released when full quarterly report is filed with SEC), it’s going to be bigger than it was before and that’s the real big deal here.
Consider this. Back in 2012 Netflix users passed the one billion hours of viewing mark. In the first quarter of 2015 the monthly viewing hours passed an average of 3.3 billion hours. This quarter should be another record.
If you’ve been reading along the past few days, that’s a huge amount of data that needs to be processed for users to view it. And Netflix’s latest numbers proves that total is going much higher in the years ahead.
It doesn’t end there though.
In the just released quarterly letter to shareholders, Netflix further added, “We are also placing a greater emphasis on optimizing for mobile, which is the main means for Internet access in many emerging markets where we will be expanding in the future.”
I repeat, “optimizing for mobile.”
That’s probably the biggest news of all for investors watching the mobile data boom right now.
But it’s just half of the big news this week.
The other major report was from Intel (INTC).
On the surface, Intel’s numbers appeared good enough for Wall Street. The company reported a 4.6% drop in revenues and a 3.4% drop in profits.
Below the headline numbers looked, it didn’t look nearly as good. Intel lowered its revenue forecast for the next year. It also announced it was going to cut its capital investment budget from $8.2 billion to $7.2 billion.
The problem Intel is facing is directly tied to the ongoing decline Intel’s bread and butter business in PC’s.
IDC, a tech industry research firm, reported global PC sales dropped to 69 million in the first quarter of the year.
It’s a 6.9% drop from the year before and the lowest quarterly PC sales since the first quarter of 2009 at the height of the credit crisis.
Intel’s core business is getting hit very hard for that.
But again, there’s more to the story here.
The one bright for Intel was two of its fastest-growing operating segments.
ZDNet reports, “Intel CEO Brian Krzanich credited the results to growth in three departments -- memory, data centers and the Internet of Things -- altogether of which he noted accounted for more than 70 percent of operating profit.”
Without the data center and Internet of Things, Intel’s revenues were actually down 14% from last year.
Instead, with them, Intel’s revenue decline was a much more manageable 4.6%.
After the report, Intel’s shares jumped 5%. If it had posted a 14% decline in revenues, the likely result would have been a drop of 5%, 10%, or more.
...Will You Listen?
These two high-profile examples show everything that all investors should be paying attention to.
The headline numbers aren’t much to sweat over. They will be good sometimes and they will be bad other times.
The underlying numbers reveal the real trends where investors should be putting their money.
These are two perfect examples of the ongoing mobile data boom and just a taste of how big it’s going to get in the next few years.