Are Netflix Subscribers Underappreciated?

Netflix (NASDAQ: NFLX  ) bull Whitney Tilson believes the Internet streaming giant could be undervalued by a huge factor if you think about it in terms of the world of cable companies, where competitors trade at $1,000 per subscriber. At current levels, Netflix trades at about $440 per subscriber, inviting the possibility for more upside to come if investors follow this logic. However, to compare Netflix to competitors in this way may not be a sensible approach. In this video, Fool contributor Steve Heller weighs in on the issue and why he thinks that Netflix probably shouldn't be valued this way.

The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.


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  • Report this Comment On May 20, 2013, at 7:12 PM, Seesaw21 wrote:

    I have a question for everyone concerned since Netflix is such a great stock and is poised to go to $1000 then could anybody explain why all insiders are selling Netflix's shares

    Economics don't work out for Netflix till the time they can add millions f users every year or are able to raise prices this model is unsustainable due to rising content costs.

    Competition is rising in troves. Redbox already ate Netflix's DVD business which was high margin.

    Streaming business has redbox instant, Huluplus, Amazon instant, youtube subscription model and obviously torrents as business

    Check the sale of stocks by insiders below

    Netflix CFO David B Wells sold on the 16th of May 24,654 shares.

    Netflix Director Kilgor sold 6327 shares on 15th of may

    And please keep in mind the stock options don't expire for a long time.

    I am pasting below the exact note

    SOURCE: Form 4

    ISSUER: NETFLIX INC

    SYMBOL: NFLX

    FILER: WELLS DAVID B

    TITLE: Chief Financial Officer

    DATE TRANSACTION SHARES PRICE VALUE

    5/16/13 Exercise* 24,654 $67.21 $1,656,914

    5/16/13 Sale 24,654 $248.85 $6,135,148

    (10b5-1 Plan Indicated)**

    OWNERSHIP: 0 (Direct)

    * - 3,899 shares exercised 9 months, 15 days after vesting and 9 years, 2

    months before expiration.

    3,799 shares exercised 8 months, 11 days after vesting and 9 years, 3

    months before expiration.

    3,791 shares exercised 7 months, 15 days after vesting and 9 years, 4

    months before expiration.

    3,376 shares exercised 11 months, 15 days after vesting and 9 years

    before expiration.

    3,132 shares exercised 10 months, 14 days after vesting and 9 years, 1

    month before expiration.

    2,612 shares exercised 1 year after vesting and 8 years, 11 months

    before expiration.

    2,180 shares exercised 6 months, 15 days after vesting and 9 years, 5

    months before expiration.

    1,865 shares exercised 1 year, 1 month after vesting and 8 years, 10

    months before expiration.

    ** - A 10b5-1 plan enables an insider to establish a program to make trans-

    actions according to an advance plan. Such a program allows an insider

    to continue with planned transactions even if he or she comes into

    possession of material non-public information.

    The Form 4 is filed with the Securities and Exchange Commission by insiders

    to report transactions in their companies' shares. Open market purchases

    and sales must be reported within two business days of the transaction.

    Insider Data Source: The Washington Service

    (info@washingtonservice.com or 301-913-5100)

    (END) Dow Jones Newswires

    May 20, 2013 17:17 ET (21:17 GMT)

    052013 21:17 -- GMT

    SOURCE: Form 4

    ISSUER: NETFLIX INC

    SYMBOL: NFLX

    FILER: KILGORE LESLIE J

    TITLE: Director

    DATE TRANSACTION SHARES PRICE VALUE

    5/15/13 Exercise* 6,327 $80.21 $507,510

    5/15/13 Sale 6,327 $240.39 $1,520,940

    (10b5-1 Plan Indicated)**

    OWNERSHIP: 14,028 (Direct)

    * - 5,712 shares exercised 1 year, 6 months after vesting and 8 years, 5

    months before expiration.

    615 shares exercised 1 year after vesting and 8 years, 11 months

    before expiration.

    ** - A 10b5-1 plan enables an insider to establish a program to make trans-

    actions according to an advance plan. Such a program allows an insider

    to continue with planned transactions even if he or she comes into

    possession of material non-public information.

    The Form 4 is filed with the Securities and Exchange Commission by insiders

    to report transactions in their companies' shares. Open market purchases

    and sales must be reported within two business days of the transaction.

    Insider Data Source: The Washington Service

    (info@washingtonservice.com or 301-913-5100)

    (END) Dow Jones Newswires

    May 16, 2013 16:55 ET (20:55 GMT)

    051613 20:55 -- GMT

    SOURCE: Form 4

    ISSUER: NETFLIX INC

    SYMBOL: NFLX

    FILER: FRIEDLAND JONATHAN

    TITLE: Officer

    DATE TRANSACTION SHARES PRICE VALUE

    5/16/13 Exercise* 396 $189.37 $74,991

    5/16/13 Sale 396 $246.95 $97,792

    (10b5-1 Plan Indicated)**

    OWNERSHIP: 0 (Direct)

    * - Exercised 76 days after vesting and 9 years, 9 months before

    expiration.

    ** - A 10b5-1 plan enables an insider to establish a program to make trans-

    actions according to an advance plan. Such a program allows an insider

    to continue with planned transactions even if he or she comes into

    possession of material non-public information.

    The Form 4 is filed with the Securities and Exchange Commission by insiders

    to report transactions in their companies' shares. Open market purchases

    and sales must be reported within two business days of the transaction.

    Insider Data Source: The Washington Service

    (info@washingtonservice.com or 301-913-5100)

    (END) Dow Jones Newswires

    May 20, 2013 17:17 ET (21:17 GMT)

    052013 21:17 -- GMT

  • Report this Comment On May 20, 2013, at 10:11 PM, JPerryFool wrote:

    You asked "could anybody explain why all insiders are selling Netflix's shares?"

    The CFO exercising his stock options gave him income of $5 million dollars. Cash. In his pocket (before taxes). That's life altering for anyone.

    Had he waited, sure, his options could have been worth 7 or even 15 million. But they also ran the risk of tanking and being worth nothing. Netflix, as we all know, if a VERY volatile stock.

    Directors already have a LOT riding on the company they're employed by and get waves of stock options. When they're in the money, and especially when they're worth $5 million dollars, I would exercise them too, regardless of how much faith I had in the business. I'd lock it in.

    I think it's human nature. It's not a red flag at all.

  • Report this Comment On May 21, 2013, at 2:28 AM, Seesaw21 wrote:

    The CFO sold almost more than $45 million worth of shares and it is not a red flag !

    Maybe I might be wrong but who would know the most about an organization's financials than the CFO

    Let's go back and check the sales.

    To put things in perspective lets just google and click on wiki for pump and dump.

    I want everybody to read the examples of companies illustrated.

    Individual small investors lose out when they are emotionally invested and netflix is an emotional stock 29 million people having a subscription even if 20 % buy 1 share each that is almost 6 million shares bought if they buy 10 shares each it is 60 million shares at an investment of 2400$ each

    There is no negative press coming for netflix and everything is being sugar coated whereas insiders keep selling.

    When most of the stock is sold by big investors then the market crashes and nobody cares as what most lost was like $2400 each.

    Also the CFO got the shares 24000 shares at $67 and sold at $ 248 so it is not a 5 million profit it is a massive profit

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