Netflix, Inc. (NFLX) – Shares of Netflix, Inc. turned lower on Monday and traded into the $122’s. Netflix, Inc. (NFLX) – Netflix, Inc. (NFLX) was upgraded on Tuesday. Holdings, Inc. (AXL) – AXL received two price target upgrades Wednesday and right after the open, AXL trendy boutique surged yet again. In fact, the blame for the drop in stocks over the last four trading days has been placed primarily on the Fed bogeyman, with protectionism providing an assist on the last two days. GM – Our overall realised profit margins have averaged just over 20% for many years and we have maintained this rate. The only rate that the Fed sets directly is the Fed funds rate, and while it is true that the Fed’s actions on that rate send signals to markets, those signals are fuzzy and do not always have predictable consequences. On the other hand, we have shareholders’ equity, fed by contributions from shareholders and partners.
More ominously, regulators and politicians have also turned their attention to the company and that attention will be heightened, with Zuckerberg testifying in front of Congress. My interest in Facebook dates back to the year before it went public, when it was already getting attention because of its giant user base and its high private company valuation. User loss, in numbers and intensity, will be muted: It is still early in this news cycle, and there may be more damaging revelations to come, but I don’t believe that anything that has come out so far is egregious enough to cause large numbers of users to flee. The worst case scenario, and some have bought into this, is that the company will lose users, both in numbers and intensity, and that advertisers will pull out. If you are a value investor, it would easy to dismiss Facebook as another user-chasing tech company and deliver a cutting remark that you cannot pay dividends with users, but Facebook is an exception.