Netflix, Inc. (NASDAQ:NFLX)
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Netflix delivers its comprehensive library of movies and TV shows online and through the mail in their ubiquitous red envelopes.
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Netflix delivers its comprehensive library of movies and TV shows online and through the mail in their ubiquitous red envelopes.
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I'll probably lose a ton of points on this but I don't care. Netflix has soared so high for so long that it's developed a mystique of invincibility. I wonder how many of the people upthumbing this are actually accumulating at these prices. The stock is overvalued according to virtually every single metric both technically and fundamentally. I struggle to come up with any potential catalysts that can keep this expansion going although knowing Netflix the stock will probably double again once Blockbuster goes into BK. The company recently spent a billion dollars on digital content rights. Assuming an aggressive 30% growth rate it'll take them 5 years just to break even (which, conveniently, is how long the deal lasts). I get that this is all part of their digital strategy and I still consider it a good move regardless of cost, but do people really think the movie industry is just going to roll over and let Netflix become a monopoly? If you think $1 billion is a lot, I can't wait to see how much the content acquisition costs will be for new releases in the future. You can't explain away any P/E with the word "growth", at some point you have to return to fundamentals.
Edit: Sorry, it will take them 4 years.
Oh and just to add, as a shareholder you'd be paying $7 billion for less than $200 million in equity. Just something to think about. I'll probably be eating lots of crow soon anyways might as well say everything I want to say.
I bought this stock at $20 and sold it last week for $140. I didn't want to sell but it was so far over priced I was afraid it was headed for the tank. your call is probably very good.
Jim
Been watching netflix this whole time, although i'm kicking myself for not buying at 45, I still believe the stock will fall as it readjusts. The stock is very overweight. I love the company netflix though, this is just not a stock i wanna be a part of yet. Remember your fundamentals kids, the market moves on greed and fear, well maybe popularity with netflix lol. Still i'll wait till it hits $90 again and buy in.
The problem with all of the competitors who are supposedly going to derail Netflix is that none of them are anywhere close to offering a better deal to consumers than Netflix does. They can't even compete on the streaming price alone, much less when you add in physical DVD's plus the ease of use and excellent value-added functionality of the website. Whether the movie companies want to create a digital distribution consortium of their own (REALLY bad idea) or partner with Amazon/Google/Apple/Whoever, nobody is going to gain one inch on Netflix until they can offer a better deal. If you know of anyone offering a better deal, I'd love to hear about it. $3.99 to watch one movie is not going to cut it anywhere outside of movie studio executive's dreams. Netflix market penetration is actually not that deep at this point, and the service is now being built into just about every consumer video product in existence. Until someone smarter who can actually offer a better deal comes along, there is plenty of room for NFLX yet to run. I wouldn't necessarily advise making a large purchase at $145, but I definitely would advise accumulating on significant dips.
The arguments for and against Netflix have been rehashed ad nauseum so I'm not going to repeat them here, all I know is right now at this point in time their stock is ridiculously overvalued. Part of this might be due to sour grapes (I bought at $50 and sold for $80), but the numbers are clear as day. Netflix must grow at least 30% year over year in order to maintain its multiple and frankly I think this is beyond unlikely. They already missed revenue projections once last quarter and I wouldn't be surprised one bit if they were to miss again.
Ridiculously overvalued is a serious understatement. There is no way this company is worth $150/share! Wow...
Does anyone recall the company "LA Gear?" The stock took off like a rocket and if you caught it early in the climb you made a lot of money. If, however, you kept insisting "this stock still has room to grow," and hung on, you probably lost even more money, Several years ago, when I added Netflix to my CAPS list the stock was just beginning its ascent. The stock remains my best CAPS selection to date, earning a 354% increase. At the time, NFLX was pretty much the sole player in the field and the "it's in the mail concept" pretty much decimated the brick and mortar competition. Since then, competition from Red Box and several key errors by their management team in adding a social networking function to their online site no longer make this an attractive holding.
over valued sure no one will argue but Netflix is the new leader in the market. With all the video stores going under netflix has no where to go but up. Also they have a huge lead in the on demand market also which is the way of the future. I predict Netflix will hit 200 by years end
Guilty as charged AC. I do have a thumbs up on it, and I'm not accumulating shares. That's one of the anamolies of CAPS. It's a game, and keeping NFLX is scoring points and charms. Before I finish responding it may well put me in the 600 club. In real money I'm holding my position in NFLX. I sold off half my shares back at $45 long after it had doubled. With nothing but house money, I'm letting this pony run. You and the others who agree that it's ridiculously over-valued may be right. It wouldn't surprise me to see it drop from this lofty perch, but it is run by a guy that instills a great deal of confidence.
There are plenty of catalysts that could drive it higher -- most notably the desire of a Google or Amazon to quickly gain a foothold in this space by acquiring or teaming with NFLX. Comparisons with companies like LA Gear are far more ridiculous than NFLX valuation. NFLX has driven its much bigger competitors to the brink of insolvency. I don't think Nike and Blockbuster have a great deal in common. The biggest threats to NFLX are mostly built on conjecture. Could AMZN put a dent in NFLX growth? Most certainly, but there is little to suggest that is actually happening. In the meantime Reed Hastings continues to build a foundation for continued success.
Just as I thought, lost a ton of points on this pick... good thing I don't short in my real portfolio. NFLX is nearing bubble territory (although nothing like OPEN jeeeeez) and if I were a NFLX holder I would be considering unloading some shares leading up to earnings. It's not going to be pretty if they fall short especially with those ARPU numbers still a big mystery.
I'm waiting for a 10% correction in the price. Then, I plan to ladder into NFLX. NFLX is going to expand overseas, which will provide continued growth opportunities for another couple of years.
Regarding the price, a lot of people like to buy stock in companies providing superior products and services that they use themselves -- it's an analysis method that cuts through all THE financial mumbo jumbo, executive spin control, etc. It appears there are many such people investing in NFLX.
Hi AlphaCenturion!
Assuming the bandwidth infrastructure has excess capacity, all Netfix has to do is embark upon an advertising/marketing campaign and not only will their revenues soar but their cash flow and earnings will tag along! Advertising will move the sales needle!!
And, now is the time to get going!!
Regards,
BogeyHacker