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Bilifuduo (96.86)

Netflix and Crocs.



October 24, 2011 – Comments (9) | RELATED TICKERS: CROX , NFLX

NFLX: A stock that was once the darling of Wall Street a month or so ago now down more than 27% afterhours due to weak forecasts. This reminds me of a similar scenario that happened to Crocs Inc. (CROX) when their revenues started weakening, in part due to competition and overextension. This led to Crocs falling from around $70 per share to $3 per share before Crocs did some damage control and rebounded to $17.

Both Netflix and Crocs have carved out unique niches in their respective markets, and had seen their stock prices soar to stratospheric heights riding on a wave of bullish investor confidence. Both have faced/ are now facing increased competition and have been affected by a series of idiotic corporate moves to expand the company. Also, just as the reputation of Crocs started to falter under claims of product failure and the subsiding of overall appeal, Netflix has seen its reputation be completely tarnished by its price hikes and the failure of "Qwikster." 

Of course, Netflix is still extremely profitable and unlike Crocs Inc, it has a much more sustainable product that, as of now, is still ahead of all the other competitors.


But Netflix needs to do some damage control. 

9 Comments – Post Your Own

#1) On October 25, 2011 at 12:23 AM, 6L6 (< 20) wrote:

 I am stupid. I believed people who said Reed Hastings was smart. I should know better. I really can't tell if somebody is smart, or not, unless I meet them in person. Somebody who is smart and in business knows better than to raise peices 60% in one shot. Somebody who is smart and in business knows better than to make a customer's life more complicated by splitting one account into two. Everything that has happened after that makes perfect sense. I'm looking at it as a learning experience. It will make me a smarter invester in the future. Thanks Reed! 

 P.S. I love Netflix! I can watch King of the Hill, and American Pickers, with NO COMMERCIALS!! 

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#2) On October 25, 2011 at 12:29 AM, walt373 (99.90) wrote:

Of course, Netflix is still extremely profitable

Unprofitable starting from Q1. From the letter to shareholders:

"For a few quarters starting in Q1, we expect the costs of our entry into the UK and Ireland will push us to be unprofitable on a global basis; that is, domestic profits will not be large enough to both cover international investments and pay for global G&A and Technology & Development. After launching the UK and Ireland, we will pause on opening new international markets until we return to global profitability. We plan to do that by increasing our global streaming subscriber base faster than we increase our costs."

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#3) On October 25, 2011 at 2:21 AM, TMFUltraLong (99.38) wrote:

I've died and gone to heaven.... 2 companies I don't like dropping like a rock.


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#4) On October 25, 2011 at 8:51 AM, smeat (< 20) wrote:

Yeah but they beat earnings. The whole reason they did the price hike etc. is because they knew they'd lose people and make even more money with less subscribers. I'm still trying to figure out how this is at all a fail on netflix part aside from a PR issue.

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#5) On October 25, 2011 at 9:04 AM, cbwang888 (25.71) wrote:

Lots of downgrades rushing in ... I'll buy some NFLX below $50 ...

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#6) On October 25, 2011 at 9:35 AM, cbwang888 (25.71) wrote:

Cramer on NFLX


Go the opposite of him. So when he said, sell, Sell, SELL, you would know what to do ... 

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#7) On October 25, 2011 at 10:09 AM, russiangambit (28.86) wrote:

What bothers me is how big money or smart money (whatever) drives the stock up beyond any reasonable level and cannot see any wrong. And then also equally profits on the way down. NFLX is a darling of mutual funds. These funds abdicate any kinds of responsible investing in pursuit of their benchmarks just so that they can make a bonus.Just at look at Fidelity Growth fund, for example, - LULU, NFLX, FOSL, CRM and such.  Fidelity Contrfund is another frequent offender, albeit a little bit more conspicuous.

I would go even further and say that most likely thee mutual funds create short squeezes in these stocks, which drives these stocks into unreasonable territory. Due to their huge size it is pretty easy for them to squeeze shorts.

And this is where US 401K money is. People via 401K support the worst abuses in the Wall Street, and they don't even have a clue.


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#8) On October 25, 2011 at 10:20 AM, Teacherman1 (< 20) wrote:

I have them on my watch list with a buy trigger of $30.00.

I wonder how far into 2012 we will get before the trigger is pulled.

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#9) On October 25, 2011 at 11:55 AM, leohaas (29.47) wrote:

I no longer feel stupid for selling too soon (both CROX and NFLX, by the way). Got a nice profit on both (~60% and ~100% in under a year), less than it could have been, but now it feels good I did not hold on too long (like I did with a few others...).

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