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September 21, 2011 – Comments (3) | RELATED TICKERS: NFLX

Okay, so I totally biffed the late August pick of Netflix but how was I to know that Netflix management would put on two left shoes, tie the laces together and then try to dance?

I have been a loyal and enthusiastic Netflix customer for at least four years and I only flinched a bit when the 60% price hike was announced a few months ago.  But when I got the email announcing the split of the streaming business and the DVD business I was downright PO'd.  Now I am planning to cancel my Qwapster account and have been actively researching DVD delivery alternatives. If for no other reason than to share my disdain with Reed Hastings.

For background, I bought a bunch of Netflix stock a long time ago, sold a bit last fall and then sold the lot of it March/April of this year. This was by far the best investment ever for me and I pocketed a lot of cash that has financed a major home renovation this summer.  

Thus, I find myself in this crazy love-hate relationship with Netflix at the moment and with the massive sell off recently I started getting interested.  On the downer side, Netflix has a lot of PO'd customers who will surely be cancelling subscriptions and shifting to competitors.  Also, the unimpressive management performance over the past six months leaves me shaking my head.  However, on the upside the stock is now much more reasonably valued.  Also, there is supposition that Netflix is pursuing this split so that they can sell off the DVD business.

http://boards.fool.com/1081/my-jack-bauer-analogy-29554528.aspx 

At first blush, it seems crazy to get out of DVDs since it is a cash cow that can finance the streaming business as it builds.  But on the other hand, unless these guys are complete dopes I have to think that there is something else planned.  Perhaps Netflix wants to raise a large stockpile of cash to purchase/secure some big-time content.  Who knows, but I think I'll give CEO Reed Hastings the benefit of the doubt on this one.

Balancing the plusses and minusses I have decided to get back in and I bought a chunk of NFLX this morning.  I am nervous about it but in the end the competitors have a long way to go to catch up and I am betting on Netflix management knowing what they are doing. Fingers crossed!  

3 Comments – Post Your Own

#1) On September 21, 2011 at 10:26 PM, chancesr62 (< 20) wrote:

I find it disturbing that you can jump in on Netflix with your fingers crossed at this point.

Too many assumptions on possible  directions Hastings could take to stave off competition and regain lost and disqruntled customers for me right now.  I find it difficult that anyone could possibly know or predict what Apple, Facebook, Amazon, Microsoft, etc.  are planning or possibly rolling out in the near future for online streaming.

Apple is a genius at never showing us their cards untill they are ready to play them - not to mention a huge worldwide following and loads of cash at their disposal. Of course, I could also add Microsoft and Facebook  to this very short list as well that could get into this business without an acquisition. 

 Obviously from the Starz debaucle, Netflix is in an open barrier "sellers" market where content soon will be purchased by the highest bidder with the deepest pockets. 

Netflix's stock didn't fall by more than half because of some analyst that downgraded them. We did this!  The ability to stream video, to watch while alone, and rent DVD's with family and friends to view at one low cost was why we loved using Netflix --- Loyality was vastly over estimated.

Motley Fool should not recommed this stock until these major unknowns are made clearer. Loyalty should never be taken for granted!!!

 

 

 

 

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#2) On September 22, 2011 at 12:05 AM, walt373 (99.88) wrote:

I believe Netflix is in financial trouble and that has been at the root of their seemingly strange behavior recently. I go into more detail in my blog post. They needed to raise cash and hence the price hike and separation of DVD/streaming in order to prep the eventual sale of the DVD business. They will use that cash to continue funding streaming content costs for a couple more years, but the fact remains that unlimited streaming at $8/month/user is uneconomical and will most likely remain so in the future.

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#3) On September 22, 2011 at 7:58 AM, truthisntstupid (81.96) wrote:

http://caps.fool.com/Blogs/is-nflx-still-a-buy/483874?&mrr=1.00

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