Netflix Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of video maven Netflix (Nasdaq: NFLX  ) were putting on quite a show today as they gained as much as 14% in intraday trading after the company announced that it's expanding its video streaming service to Britain and Ireland.

So what: It really just goes back to Business 101. The more paying customers Netflix has, the more revenue it generates, the more it's able to leverage its costs, and the more profit it's able to earn for investors. As such, the larger the company's addressable market, the more paying customers it can potentially accumulate.

Thus, investors' excitement over the announcement that Netflix will now be selling to folks across the pond.

Now what: For Netflix's stock, 2012 has so far been quite a change from 2011. After enduring a dreadful 2011, the stock has soared more than 40% through the first five trading days of 2012. For current Netflix shareholders -- which includes many Fools since the stock is an active Stock Advisor recommendation -- this has been a great ride. Watching from the sidelines though, a surge like that simply makes me think that there is a heck of a lot of emotion around this company and Mr. Market is not really sure how to value it.

Getting back to the news from today, as noted above, expanding its market is good for the company. Is it 14% good? I'm not convinced. It would be nice to see some execution before considering the move a full-blown success.

Want to keep up to date on Netflix? Add it to your watchlist.

Motley Fool newsletter services have recommended buying shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 09, 2012, at 3:57 PM, ikkyu2 wrote:

    Wild ride, Mr Toad.

  • Report this Comment On January 09, 2012, at 4:43 PM, GordonsGecko wrote:

    I am tempted to take the 26% gain since I bought back in and then watch for a little bit while the market decides exactly what it all means....

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