I've looked at a couple of valuation metric's and have tried to figure out what a realistic valuation is for NFLX? I sure there's a lot of shorts scratching their heads right now trying to figure out the same thing. I'll bet there's even more shorts sitting back waiting for the media to jump in and start hammering NFLX because it's the right thing to do. I just don't see how this stock went over $200 without being driven by short covering? This is a $50 stock at best. Not just because of the P/E that's over 700, but because the market cap of 12 Billion is somewhere near Mars.
The intriguing question: why are smalltimers compelled to put the kid's college money in this stock? There are hundreds of other stocks.
Shorties have been absolutely hammered since NFLX @ $53. Longs are giddy, oblivious to Netflix's thin cash, poor margin and earlier stock crashes.
NFLX is spectacular for intraday, the occasional short-term breakout and option volatility plays, but going short or long with a conventional position? Smalltimers are not diversified like Funds.
Longs want to say 'I got in early.' They remember the go-go days. They fear missing a run-up. They've made money and want more. Shorties are stubborn (almost irrational at times) citing bad fundamentals. Shorts want to say "I told you so." They fear missing a righteous crash. Both sides blame the company or MM's when their hopes are dashed.
FEAR and GREED. It is always fear and greed.
90% of trader wanabees fail - victims of their Fear/Greed emotions. Those of us who survive do so because we have Rules trying to take our own Greed/Fear out of decision-making.
It is hard for me to see why anyone would take more than a token conventional position (long or short) in Netflix now.
In order to justify the current valuation, you would have to assume that in just a few years, Netflix will have cornered the market in delivering streaming entertainment to consumers and all the content producers will be begging Netflix to carry their product at whatever price Netflix feels fair to pay. All the other streaming competitors (Amazon, Apple, Google, Hulu, Redbox, etc.) will have given up and surrendered. This is not likely to happen, since content producers will continue to have a stronger and stronger position at the negotiating table, and the other streaming competitors have tons more cash than NFLX. NFLX is currently priced beyond perfection.
If you think along the lines of companies like MSFT, AMZN, GOOG, PCLN and of course AAPL. You'll see the value here. You need to think outside the box here. NFLX has very unique product delivered to your home, car, phone, office and about everywhere else you want to watch movies. Massive unlimited growth and unlimited resources to fund the unlimited growth. What more would you want in a undervalued company like NFLX? For the life of me I can't believe anyone would short this stock.
Sentiment: Strong Buy
MSFT makes something that every computer needs. Amazon distribtes an extremely wide variety of physical goods. Google was highly financed by the government during it development stage and still collects data for the government and sells it to them. Priceline is close to Netflix in most respects EXCEPT THAT IT DOES NOT HAVE TO COMPETE IN THE PURCHASE OF CONTENT and has a PE of 25. And of course Apple, makes things (sort of) and iTunes helps sell what it makes.
I am really, really, really trying to think out of the box here. However, NFLX still looks like a scam stock to me. All of the signs are there. Articles by The Fool, Forbes and people you have never heard of using superlative after superlative to describe pretty #$%$ results. People on message boards doing the same thing... saying things like infinite potential, think our of the box and clicks are more important than profits ... there are 20% jumps after hours on #$%$ results. The CEO makes lame excuses about why income and growth are light and the media repeats the mantra, The CEO converts bonds to stock, gives away $300 million for no reason and no one in the media says anything, so called analysist simply up their targets with no rational explanation, the media ignores potential cash traps and competition... It smells like a scam. Some people love a scam.
Rainbows and unicorns you guys. We have a $300-$400 stock here. Based on the strong fundamentals and perfect business model. NFLX has unlimited growth potential. You have to realize this is a one off business with virtually no competition in this sector. This is a must own stock for fund managers and institutional investors on all levels. That's why the run Bean. Not short covering. Now get with the program, and no more negative BS.....NFLX Is a Strong Buy You 2........
Sentiment: Strong Buy
It's hard to tell if you're being sarcastic. No competition, really?
But if you're serious, here's some advice:
When it looks like "it doesn't get any better than this!", then there's a distinct possibility that it doesn't get any better than this (and it's time to get out).
The only thing that could push this stock higher from here is manipulation.
Oh, and saying that NFLX has unlimited growth potential is stupid. The potential is clearly limited and it may not even be good because of competition, substitutes and the inability to get enough cash to buy content.
Just FYI ... NFLX has #$%$ fundamentals. Reed did not tell the truth about $0.26/sh being caused by refinancing the debt ... or maybe it does if you include thei nterest that was owed on the old debt and the additional $300 million borrowed ($500 million in total) as part of the cost refinancing.
Who trusts their money with someone who stretches the truth for money? Those who do not care about the truth, obviously.
And who to and why did Reed unnecesarily give $300 million of shareholder value to when he converted the convertable bond holders?
Ok you two, I would expect an email when you do what you do. With our history and the fact I put you two on Apple, means you owe me pal. I know about the whole disclosure thing so I don't really care about particulars. I just would just like hang on your coat-tails here. Peace!
The 12 billion MC is small compared to the market potential. The PE is high because profit growth is high so you have to use PEG to determine the valuation. Netflix is trading at 160 x this years estimated earnings of $1.37. They earned $0.29 last year so growth is 372%. So the PEG is 160 /372 = 0.43. A PEG of under 1 is considered good value.
Please. Are you really that dumb? You don't use 1 year numbskull. What if you go from $.01 to $.29? That's 2,800% growth. Now your PEG says it's a screaming buy dummy. Only it isn't/
Also use many metrics if you actually know how to do any fundamental analysis.
Sentiment: Strong Sell
How to evaluate a company by wall street is the way to learn in the tech investment world. like how RIMM (now BBRY) performed and why AAPL went down from 700 to 400. With your module, or metrix, you must be a big buyer of AAPL at 700. So, I wouldn't say you are wrong or right. Most possibly, you used the wrong module for NFLX. That's pathetic.
Unfortunately, you waved all the qualitative tools leading to imperfect and inadequate measurement and management of technology risks. You can use a " Technology Investment Matrix " to better relate the role of any technology investment to the business processes it supports. Use of this matrix leads to a better appreciation of key risk issues and risk management strategies, I sure you took this into consideration with your well thought out posting? I knew you would being trying to fish out another short, Bean. Are you on your own or would this be an institutional venture? Are you free to say? I sure could use the money. TIA....