A sputtering economy, implosions at financial institutions, or just plain bad management -- on any given day, investors can name a number of reasons to sell a stock. Yet while panic is never beneficial to investors, it's good practice to play devil's advocate with investments from time to time.
In Motley Fool CAPS, more than 120,000 members have weighed in on nearly 5,400 stocks, sharing bullish and bearish opinions alike.
In the case of movie subscription service provider Netflix (Nasdaq: NFLX ) , a total of 6,440 members have weighed in on its chances of success. I've already plucked out some of the bullish rationale backing Netflix today, so here are three counterpoints to consider, courtesy of CAPS:
Heavy competition: Netflix faces threats from not only Blockbuster's (NYSE: BBI ) Total Access, but also McDonald's (NYSE: MCD ) and CoinStar-owned RedBox DVD rental kiosks. Many investors see this competition, as well as online movie rentals from Amazon.com (Nasdaq: AMZN ) and Apple (Nasdaq: AAPL ) , posing a significant threat to future revenue.
Rotting core: Some see Netflix's core market of DVD delivery waning as the discs eventually become obsolete. Netflix isn't charging customers anything extra for the digital movie streaming service, yet is burdened with the costs of developing and running it. Digital cable companies like Comcast (Nasdaq: CMCSA ) or Verizon's (NYSE: VZ ) FiOS could potentially steal customers with more developed and integrated video-on-demand services.
Slowing subscriber growth: Even though financials continue to look good, Netflix finished off its third quarter with 8.672 million total subscribers, short of its target range. It also twice lowered its full-year 2008 subscriber target, which is the lifeblood of the company. And with no more used DVDs for sale come the end of the month, some believe customers might wander over to a competitor to purchase bargain movies.
Of course, Netflix has survived and thrived despite dozens of obstacles. But the question about whether the company will continue to do so is why CAPS is such a great resource to augment your own analysis.
To see what the very best CAPS members are saying now about Netflix, just click on over to Motley Fool CAPS and have a look. It's all free, and adding your own opinions will make the community better.
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Report this Comment On November 15, 2008, at 1:56 AM, dividendgrowth wrote:
Blockbuster is going out of business within six months.
Report this Comment On November 17, 2008, at 5:21 PM, foolishbroker68 wrote:
I almost reported that comment about Blockbuster but evidently stupidity isn't a reason to report a comment. Blockbuster is not going out of business any time soon. On the lat conference call Mr. Keyes made a comment that they were not going to refinance the debt coming due next year at this time. They could refinance the debt but the covenants would be too burdensome. Instead it is smarter to wait until later next year when terms will get better as credit markets loosen up. Companies that generate free cashflow don't usually go out of business!
Report this Comment On November 17, 2008, at 7:33 PM, user5701 wrote:
Allow me to fix this article for you Dave. Please see the Stock Advisor recommendations, one of which is Netflix. There has been no sell recommendation at all on that front. If you say to sell, and they say not to, who is right? If only TMF could present a unified front instead of each person who works for them saying something completely different from the other, your service would be much better and slightly less confusing.
Competition is nothing new. Every Blockbuster around my area within a 45 minute drive has closed down as of about two years ago. Redbox is cool but it still has its issues, including them delaying their IPO for who knows what reason. Besides, video rental stores (or kiosks for Redbox) have been around for a long time and Netflix's subscriber base continually goes up. They didn't originally charge extra for Blu-ray discs either but they do now. Oh, and they now have a deal with the Xbox 360 platform. I don't see them going under, but they may continue to change their strategies to meet customer demand in whichever platform the industry moves to. Physical media will continue to be around for a long time. There is still a substantial population who happen to like movies, but may not have broadband, or may not want to watch movies on their computers, whether they be connected to something else or not.
Report this Comment On November 17, 2008, at 7:39 PM, user5701 wrote:
In reply to dividendgrown and foolishbroker68, how could Blockbuster go out of business when they are going to be bought out by Circuit City? Oh wait...
Seriously though, I think Blockbuster will still stay around for a while, but I do have a feeling they will close more physical stores and move more to online rentals or on-demand downloading to better compete with the shift in video rental technology. They should just leave the B&M renting to Family Video, their prices are much more reasonable.
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