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Price hikes pummel Netflix, Tumblr pressures Yahoo

The Republican National Convention dominated headlines duringthe week ended July 22, but for media and communications investors all eyes wereon earnings reports.

The week kicked off a fresh round of quarterly disclosures thathelped to drive some big swings in industry indexes. A disappointing report fromNetflix Inc. helped dragdown the SNL Kagan Media & Entertainment Index by about 1.3%, for instance.Meanwhile, gains from companies like Yahoo!Inc., Microsoft Corp.and eBay Inc. pushed theSNL Kagan New Media Index up by about 2.3%.

Netflix clocked one of the largest share price changes duringthe week, with its stock cratering after a disappointing earnings release in which user numbers came in even lowerthan the company's tempered guidance for the period. Netflix added 1.7 million membersin the second quarter, well below its guidance of 2.5 million for the just-endedperiod and below the 6.74 million users it added in the first quarter.

At issue was the company's recent price hikes, which increasedchurn more than executives anticipated. Long-time members who would have to payhigher monthly fees dropped their subscriptions at an alarming rate for investors,and executives warned that the process would continue into the fourth quarter, withthe upcoming Olympic Games adding additional headwinds to new sign-ups.

The company still outperformed its financial guidance, reportingsecond-quarter EPS of 9 cents, compared to guidance and consensus expectations of2 cents. Even so, Netflix's stock plummeted by 12.5% for the five trading days endedJuly 22.

Digital investors found something to celebrate later in the week,however, as eBay saw its momentum turn positive. Shares of the company had tradeddown for much of the year, but in late June sentiment started to turn around. EBayadded over 21% to its market cap in the month leading up to its second-quarter , and the July 20disclosure added further upward momentum to the stock.

The e-commerce company beat guidance and consensus expectationson several financial metrics and raised its full-year expectations in a sign ofsuccess for eBay's recent strategic repositioning. Sentiment had earlier souredon eBay's core e-commerce assets following a spinoff of the company's Enterprisesegment and its online payment processor PayPalHoldings Inc.

"This quarter gives us confidence that we are on the rightpath," said CEO Devin Wenig during an earnings webcast.

Investors seemed to agree, catapulting shares up by 16.3% forthe week.

SNL Image

Meanwhile, immersive theater company IMAX Corp. saw second-quarter earnings come in soft comparedto previous quarters, but still managed to deliver a beat on consensus and add toits stock value.

The company wrestled with weak attendance at many of its late-springand early-summer exhibitions. Besides "Captain America: Civil War" and"Jungle Book," there was not much else to prop up earnings, and the companydelivered gross box office revenue on its digitally remastered movies at $260.8million, compared to $343 million a year prior.

But investors seemed to be expecting the weak results, and thecompany beat EPS expectations by a penny, 18 cents compared to an S&P CapitalIQ consensus estimate of 17 cents. Shares jumped 12.7% for the week.

Yahoo also delivered earnings,but there was no hope of a clean result as a massive impairment charge and M&Arumors added noise to the investment picture.

The digital search and advertising company reported a loss of46 cents per share after recording impairment charges of $482 million on its socialmedia asset Tumblr. On an adjusted basis, EPS came to 9 cents. But both the GAAPand adjusted EPS results were below S&P Capital IQ consensus estimates.

Rumors continued to swirl around Yahoo's M&A prospects asthe company wraps up an auction for its core Internet assets. Reports indicate thatVerizon Communications Inc.is close to signing off on a deal.

In the end, the market favored Yahoo, and shares closed the weekup 4.7%.

Lastly, the New Media Index got some support from one other legacyInternet company. Microsoft also reported earningsduring the week ended July 22, and it caught an updraft on its cloud business.

Microsoft saw GAAP revenue compress and GAAP net income missthe consensus estimate, but non-GAAP adjusted results beat expectations, and executivecommentary on cloud growth helped drive some bullishness.

Microsoft shares climbed after the earnings report to end theweek up 5.4%.