Even though Netflix, Inc. (NFLX)’s stock is worth $300 less than Apple Inc. (AAPL)’s stock, current market conditions have valued it more highly than Apple for several reasons, all of which simply boil down to how investors feel about the companies at any given moment.
Netflix, Inc. (NASDAQ:NFLX) is now worth more than Apple Inc. (NASDAQ:AAPL), if you can believe it. Yesterday’s earnings reports were the perfect example of how a single event can change things completely around. Netflix smashed earnings expectations, and shares rose 40 percent and kept rising. The stock was worth around $100 per share during trading on Wednesday, and less than 24 hours later it is now worth almost $150 per share.
Meanwhile Apple’s earnings report was nothing to write home about, and investors started dumping it. Yesterday the stock was worth over $500 per share, and now it’s worth less than $460 per share.
Even though Apple Inc. (NASDAQ:AAPL)’s stock fell significantly, its price is still worth more than $300 more per share than Netflix, Inc. (NASDAQ:NFLX)’s stock. So how is Apple worth less than Netflix? MarketWatch’s Nigam Arora explains the issue very well.
He starts by saying that Netflix is in strong hands, while Apple is in weak hands. That basically means that investors are buying Netflix on the ask, but they’re buying Apple at bid.
Then he goes into whisper numbers, which are the numbers that usually become available only to a select few investors. Investors who truly understand the markets know that stocks are bought and sold according to the difference between the actual numbers of the stock and the whisper numbers.
And there are factors other than what Arora describes. For example, investors have certain expectations for various companies. The general consensus on Netflix, Inc. (NASDAQ:NFLX) was that it would fall short of expectations, so when it beat the consensus, the result was a magnificent spike in price.
However many investors have become bullish over the past year on Apple Inc. (NASDAQ:AAPL). They routinely expect the stock to beat expectations. So when the company issues an earnings report that’s not really bad but not really great either, investors are upset, so they sell.
There’s also the fact that while surface indications seems to show that Apple’s numbers were flat from last year’s holiday quarter, we have to take into account the fact that there was an extra week in that quarter last year. So basically in four weeks, Apple sold roughly the same amount it took five weeks to sell last year.
So this just goes to show that a company’s valuation in the markets is really based on how investors feel at the moment. Investors are excited about Netflix right now and less thrilled with Apple Inc. (NASDAQ:AAPL), so Netflix is worth more.