Im no longer long as I took my 180% profit yesterday so I have no dog in the fight as of today. However, with a large dip I may enter back into the game as I see Netflix being a strong competitor, among others.
Who are their clear competitors? Hula, YouTube, Comcast, Amazon, Apple? Who among them has the model in place to best take down Netflix to the levels you describe? They are growing their customer base and I believe they will be a major player, among others as no one winner will rule here. The winner will be the one who best negotiates with the studios. Netflix has in place with Level 3 a strong database and it is growing. With their deal with Level 3 I believe they will be well suited to enter the streaming market, albeit the costs of doing business with comsat has yet to be resolved.
Here are some responses to your "competition" Challenges:
Netflix is doing everything it can to get away from the logistics-heavy and costly DVD by-mail part of its business. As the company has plowed more and more resources into its streaming business, it has yet to encounter a direct competitor, says an executive.
According to Steve Swasey, Netflix’s VP of corporate communications, the company faces some rivalry from Amazon, HBO and Hulu, but none of these are considered direct competition. Says Swasey:
“There will be [competition] at some point–Netflix won’t run without pure competition for long . . . Right now, there are three models, and Netflix is running uniquely with the subscription model.”
The others fall into the pay-per-view (Amazon, Apple, etc.) or ad-supported (Hulu, YouTube) models, says Swasey.
Discussing what Netflix’s next moves would be as it acquires more direct competitors, Swasey is coy but offers a few tidbits:
“[The subject of ads] “has been broached but “every time we shoot it down.”
Swasey also implies that Netflix will remain focused on having a deeper streaming catalog rather than offering as many new releases as possible:
“We’re not so optimized for new and fresh, as much as we are for complete . . . We like to have complete seasons of the series rather than day-after broadcast.”
You people need to look at INTC, CSCO, QCOM charts from 1995 to 2010.
The explosion from 1998 to 2000 was constantly justified by exploding growth with seemingly no end. Well, it ended and the stocks are still down 40-80% from 10 years ago. Funny thing though, those companys never stopped growing. They did succeed just like the bulls thought, but the stock price is still trying to catch up to the insanity. Same thing will happen here. NFLX will grow for a while and make great money, just not enough to justify 13 billion in valuation. Good night NFLX. DO NOT try and catch this falling knife when it starts. This is act II and the crooks make more money on bottom pickers then they made on shorts.
Your reesponse says netflix has deeper library and sub based business model, so thats the moat you talk about?
What about Hulu? Amazon is no stranger to sub model, witness their prime sub.
No room for growth as more competition comes and market saturates, this is basically a distribution company that will geta distribution multiple, a PE of 15 or so and with proper accounting it will earn about $3 a share. Thats when the music stops.