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By Jason Stipp and Jeremy Glaser | 01-25-2013 02:00 PM

The Friday Five

Five stats from the market and the stories behind them. This week: Apple's steep 12% drop, Netflix's 2 million subscribers, and more.

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to The Friday Five.

We've got a different format for you this week, five stats from the market and the stories behind them.

Joining me here with the numbers is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for being here.

Jeremy Glaser: Jason, my pleasure.

Stipp: What do you have for The Friday Five this week?

Glaser: We're going to look at a steep 12%, a surprising 2 million, a respectable 4.2%, a manageable 5%, and finally a scant 0.1%.

Stipp: That steep 12% refers to Apple's really bad day in the market on Thursday after they reported on Wednesday. What's the story with the stock?

Glaser: Not a good day for Apple investors. After the firm reported their fiscal first-quarter results on Wednesday night, on Thursday, the stock tumbled over 12%, as investors were starting to get very nervous about their iPhone business and about their projections of what that business is going to look like in the future.

And a lot of the concerns stem with the growth of lower-end smartphones, of cheaper smartphones, and of those with bigger screens, and worries that Apple just doesn't have the products to compete in those areas and that they are not planning on introducing products to compete in those areas--that they want to just go after those premium customers, even though the market is moving in a different direction.

Tim Cook even said on the earnings call that they are happy with the 4-inch screen on the iPhone 5. They think that's the right screen size. They are not looking at others.

I would say that you should take everything that Apple says often with a grain of salt. They said that 3.5-inches was the perfect screen until 4 was. Awhile back they said PowerPC processors are the best thing in the world, until they weren't and Intel was. They said they weren't interested in tablets until they were.

The company has a history of … talking about how happy they are with their current decisions until they very suddenly reverse course.

So, it wouldn't be shocking to see them come out with a larger format phone or a cheaper phone sometime in the future. The question mark is if they come out with those products, if they will be able to maintain the incredible level of profitability they have now.

They are seeing those gross margins already shrink. They are projecting an even bigger decline in those gross margins over the next couple of quarters. A lot of that is a product shift as people buy more iPad minis versus full-sized iPads. That really hurts the gross margin. And if you think that profitability is going to continue to shrink, that puts a lot of pressure on the valuation of the company, and could put some pressure on the shares.

I think it's going to be an interesting story for Apple to see if they are able to adapt to the changing smartphone market, particularly outside of the United States.

Stipp: If Apple was in the doghouse with shareholders, a former cellar-dweller or troubled child Netflix got a real boost with that 2 million number. How impressive was that?

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