Netflix expands to Latin America in three languages
goo.gl#netflix #nflx
Netflix, the Web’s top video rental service, is branching out into 43 new countries in Latin America and the Caribbean later this year….
News of the expansion sent Netflix’s stock soaring. In midday trading, shares of the company’s stock were up 6 percent, or up $16.95 to $284.89. That was good enough to top the company’s previous 52-week high of $283.50.
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Subscribers will be able to access Netflix in Spanish, Portuguese, or English. Netflix said the streaming offer in Latin America and the Caribbean will work the same way it does in the United States. Customers will pay a monthly fee for unlimited access to the company’s streaming-video library.-C
Cnet: http://goo.gl/EFcJG
Commented on Blockbuster Video’s Liquidation: Boon for Netflix?
http://blogs.wsj.com/marketbeat/2011/03/10/blockbuster-videos-liquidation-boon-for-netflix/
What I said:
We’ve paid a lot of attention Blockbuster, Netflix, and Coinstar-Redbox over at ProofTrader. I am bullish on both Netflix and Coinstar and I successfully predicted last April that Blockbuster would file for bankruptcy by the end of summer 2010, which they did. At any rate, a liquidation of Blockbuster, which seems inevitable, will probably be a nice boost for both, but this is really just continuing along the trend we’ve already been seeing, since Blockbuster has been closing hundreds of stores.
That Blockbuster prediction, in case you missed it ;)
http://www.prooftrader.com/symbol/BLOAQ.PK/468/Polishing-deck-chairs-on-the-Titanic
Netflix Earnings - Subscriber Losses, Weak Forecasts and High Turnover
Netflix (NFLX:NASDAQ) has been in parabolic free fall since mid-July some what like the ATRAC did during its hay days (see chart below). The words “Subscriber Growth” were not in today’s script for Reed Hastings, the company’s CEO. Major items to note were as follows:
1. Domestic users fell to 23.8 million, down 800K from three months earlier. A much bigger decline than originally projected.This result should blatantly suggest to investors that they will not be hitting the street’s original forecast of 24.9 domestic subscribers for the current quarter.
2. Fourth quarter forecasts are in a range of 36 to 70 cents per share. Falling very short of the street’s estimate of $1.10. Once again, another red flag for investors to reconsider NFLX in their portfolio. Gross margin for the quarter fell to 34.7% from 37.7%
3. NFLX still has a wide lead over the competition and thus has much more potential to expand their product overseas. However, this will require a great deal of marketing spend that the company cannot afford if they don’t grow or at least stabilize their domestic customer base.
4. Domestic customer churn rates jumped 50% from 4.2 to 6.3. For a company that basically created the industry not long ago, this doesn’t bode well. This is likely due to the fact that prices over the summer increased 60% on their video and DVD packages from $10 to $16 per month.
5. The company’s DVD by mail spin off Qwikster was announced earlier in the summer to only be scrapped three weeks later. This for me shows that the company is having lefthand righthand problems and doesn’t have a clear cut vision. A possible CEO change might be in order if things don’t change for this -32% YTD company.
How to Trade It
As I write this, NFLX is down 27% in after-hours trading. While normally I would say this is an overreaction, it’s not. When you have 50% customer churn rates resulting in 800K disgruntled former customers, 40 cents off estimates on the high end of your forecast and CEO who doesn’t connect with the customer, I would Run to the Hills and continue to buy shorts/puts with long expiry dates.
Netflix bounce
Two days ago someone asked me how low Netflix would go and I said it could go below 190 on a bad day but not a whole lot lower. Well it fell from upper 190s and then was at 188 in the morning - so I started thinking I was wrong. Well now it’s at 204, strong bounce in spite of a bad day. This kinda proves I was right, at least for now.
Moral of the story, I guess, popular stocks turn on a dime. Good reason to have triggers in place.
Goldman: Netflix to Reach $300
Goldman Sachs analysts have set a new target for Netflix at $300 a share. At time of writing NFLX is up +7.70 (3.83%) at $208.90. Here is Goldman’s reasoning:
“(1) NFLX benefits from rapid growth of online video consumption, driven by the proliferation of connected devices
- 27% of US consumers now stream TV shows/movies, up from 16% [year-over-year] according to our GS Internet Usage Survey;
(2) Netflix now has sufficient scale to make it difficult for new entrants given low price points and expensive content costs; and
(3) Competition to date has been underwhelming and we believe that demand for streaming online content could be large enough for multiple players
“While we do expect each of these businesses to evolve and become more competitive with Netflix over time, we view the potential impact on Netflix as more muted than we first feared, and perhaps on a longer time horizon. We believe that the demand for video streaming could be big enough to sustain multiple business models and competitors and that these models can co-exist.”
how low will $NFLX go?
For now I would say a bad market day could push it to a little below 190, but it’s going to take a real sentiment shift to make it substantially cheaper. Like I’m not talking about the sentiment among analysts or financial bloggers - they are mostly very bearish citing valuation concerns. Not bearish outright but they believe the stock is priced for perfection.
What I mean is a sentiment shift on main street - it has become one of those stocks, like Apple has been, that people say ‘I have to have this in my retirement portfolio.’ And that trumps what professional analysts think, if enough ‘retail investors’ believe the stock will go up, then it will.
The Market's Response to the Netflix, DreamWorks Deal
marketwatch.comMe, yesterday:
I expect $NFLX stock to raise a bit after the announcement of this deal. The market opens again tomorrow morning, so we’ll have to wait until then to see for sure.
$NFLX opened this morning at $136.22. It peaked at $137.88, which it hasn’t been that high in about a week. The small increase means the market was fairly happy with the DreamWorks deal. Unfortunately, right now it’s back down to the $128 area as I type this. So clearly, the market isn’t happy enough.
Mr. Market does not know how to price long tail options
Look at Salesforce.com (CRM):
This a good company, to be sure, but their stock price has a P/E of 631 at the closing price of $127.81. I would suggest that this is pretty rich. If the P/E was cut in half, to only 315, the stock price that reflected that, still lofty multiple, would be in the $60 range.
What if we bought a put option on that eventuality. Let’s look at a December 80 put.
You can plainly see that an $86 bet would payoff almost $2,000 if the stock went to 60.
I picked the $80 put because that is around 2 standard deviations from the mean. Mr. Market does not know how to price options that are 2+ deviations. If we went to 3 standard deviations the cost would be cut by more than half.
How likely is it that CRM will crash in December? Not very. But it could. Placing this bet, though, is a very small amount of money. You could place this bet every month (more on why you would do this rather than a long term bet in a later post) for quite a while and still not be out a significant amount of money relative to the payoff.
And for anyone that does not understand what happens when a growth stock disappoints and crashes, I leave you with this chart of NFLX:
Netflix Drops Qwikster, Keeps Prices
blog.netflix.comReed Hastings, CEO of Netflix:
It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.
This means no change: one website, one account, one password… in other words, no Qwikster.
Props to Reed for admitting the company fucked up, though he technically didn’t need to. One look at $NFLX over the course of about three months would have led you to that assumption.
Still, I’m not paying $16 per month just for content when I already have cable. Right now I’m on the DVD plan because of the larger selection of movies. I plan on getting an Apple TV soon (I’m holding out for a product refresh hopefully by Christmas) and once I do, I’ll probably switch over to the streaming plan. Either way, it’s $8 per month.
Mr. Market does not know how to price long tail options
Look at Salesforce.com (CRM):
This a good company, to be sure, but their stock price has a P/E of 631 at the closing price of $127.81. I would suggest that this is pretty rich. If the P/E was cut in half, to only 315, the stock price that reflected that, still lofty multiple, would be in the $60 range.
What if we bought a put option on that eventuality. Let’s look at a December 80 put.
You can plainly see that an $86 bet would payoff almost $2,000 if the stock went to 60.
I picked the $80 put because that is around 2 standard deviations from the mean. Mr. Market does not know how to price options that are 2+ deviations. If we went to 3 standard deviations the cost would be cut by more than half.
How likely is it that CRM will crash in December? Not very. But it could. Placing this bet, though, is a very small amount of money. You could place this bet every month (more on why you would do this rather than a long term bet in a later post) for quite a while and still not be out a significant amount of money relative to the payoff.
And for anyone that does not understand what happens when a growth stock disappoints and crashes, I leave you with this chart of NFLX:
Netflix Q3FY11 Earnings: 800,000 Subscribers Lost Because of Qwikster
Netflix ($NFLX) has plunged from a high of $295 on July 12th down to its most recent low of $118. The company’s stock price has been on a downward spiral ever since Reed Hastings announced that Netflix would be splitting its DVD business from its streaming video business.
Less than a month later, on October 10th, Netflix reversed course and announced that Qwikster was headed for the deadpool — before the service even launched. This did not help the company’s stock price, which has been in a steep decline ever since.
Today Netflix held its Q3FY11 earnings call with investors. The company reported $822 million in revenue and earnings of $1.16 per share, but it does not matter. Netflix announced that they lost over 800,000 subscribers as a result of the Qwikster debacle.
Ouch. That hurts. (see above)
