Everybody Loathes Netflix - But is it Justified?

4/22 - "NFLX (Netflix) is a good example of a stock that can change from a long to a short setup on the turn of a dime. Apparently the street did not like the earnings call, as the stock gapped down and broke major support levels. I may short in a few days on a low volume pullback."

4/22 - "Piper Jaffray removes Netflix (Nasdaq: NFLX) from its Alpha List, saying "our near-term catalyst, the Q1 earnings report, is now in the rearview mirror." The firm maintains its Buy rating and $45 price target on shares of Netflix."

"For Netflix shareholders, Piper called the "bottom line" the Company's ability to continually gain market share. The firm also believes Netflix will benefit from the adoption of Blu-ray. Piper said, "even with the lower gross margin, we expect 30%+ EPS growth in '08...Finally, Piper points out that Netflix has yet to dip into its $150 million buyback which was announced on March 6. The firm estimates that if Netflix were to buy $150 million in stock at current levels, it would add about $0.05 to its CY08 EPS estimate."

"Stockmasters, this could be a great buying opportunity for Netflix, especially in light of their $150 million buyback plans. NFLX shares have had an incredible run in the last 6 months and the Street won't accept any thing but solid growth...In spite of that, we recommend waiting on the sidelines until the dust settles, find a good entry point once the stock stops bleeding, and go from there."

4/21 - "It has been the case time and again in recent memory: Wall Street is less about “what you’ve done for me lately” than about “what you plan to do for me next.” That was a lesson served anew today to Netflix which reported decent earnings after the close of markets but disappointed with their forward projections...Revenue is now forecast at $1.35billion to $1.39billion, up from a range of $1.345 billion to 1.385b), (but) the company lowered projections for per share earnings to a range of $1.16 to $1.29 (emphasis on the midpoint of $1.23). Analysts had been expecting about $1.25 a share."

"The market’s reaction may prove excessive over a longer time horizon. Part of the earnings shortfall is likely due to future investment that could bring positive results. More specifically, Netflix has been in the process of building a next generation delivery system (Internet streaming instead of DVDs) for more than a year. Today, that streaming service (called "Watch Now") makes more than 9,000 titles available for instant viewing. Content licenses for these titles come at an increased cost (how much so hasn’t been disclosed)."

"The prospect of this streaming service displacing the core DVD business is a long way off, but the company’s goal is “to be a great Internet movie service by combining DVD by mail with Internet streaming and to grow subscribers and EPS every year.” The aim is to prepare for the future and anticipate an eventual decline in DVD interests...The result of these efforts may not positively effect the bottom line for several years but for long term investors it could prove significant."