POST OF THE DAY
Netflix
What a Surprise...

Related Links
Discussion Boards

By AceInMySleeve
January 26, 2010

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!

...this stock turned out to be. I followed it from 2003 to 2008 and it never broke out of the high it set in Jan 2004, until there was a once-in-a-lifetime nationwide depression. Gotta love it.

Initially I was merely impressed with the service and the niche it had opened up, then I became enamored by the quality of Netflix management. Ultimately, I got out because I was concerned about the profitability and competitive issues with streaming and I thought that the traditional business growth had stagnated. Obviously, growth continues as 12M subs was my predicted upper limit and they are blowing through that.

I think in retrospect, the difficult NFLX stock of the 2004-2008 era was principally because Netflix just never appeared to be in control of their destiny. Rather they were a small fish in a pond with giants and trying to cautiously make a living without drawing too much attention to themselves. Various intrusions by Walmart and Blockbuster set the stock agenda, and fears of Amazon, Apple, Redbox, Comcast, Youtube, etc. contributed. If you were to ignore all that fear and just look at growth metrics, it is astoundingly smooth in comparison.

I can recall articles at the Fool back in the day that talked about the 3 big new consumer entertainment niches: Netflix, Tivo, and Satellite radio. Back then they would say 'if I had to get rid of any one of these services, the first one would be Netflix.' This company has been a scrappy underdog it's whole life.

But no one ended up coming close in the movie mailing business, and no one appears to be competing well in subscription streaming at this early stage either.

I haven't been looking at things all that closely so I can't do much analysis. I still find it intriguing what they could do to their income sheet if they raised prices by 1 or 2 dollars.

Good luck to those who are holding the stock, though I wouldn't mind a dip back to 40 or so. :p