Netflix Inc.: Carl Icahn Is Selling Netflix Stock. Should You Follow?

Here's why this guru's sale shouldn't worry you too much.

Aug 26, 2014 at 1:11PM

Screen Shot

The new Netflix logo.

In 2012, famed investor Carl Icahn bought shares of Netflix (NASDAQ:NFLX) at the urging of his son, Brett. At the time, Netflix stock was worth about $58 per share. Investors who followed Icahn into the trade have been richly rewarded: the stock is up 725% since then.

But now that Icahn is selling shares, it begs the question: Is it time for you to get out, too?

A wager between father and son
A few months ago, Icahn sold 480,000 shares of Netflix. But this actually isn't the first time Icahn has shed shares. At the end of 2013, his firm sold almost 2.9 million shares -- half of its total -- for a profit of roughly $800 million.

On the face of it, that sounds like an incredible trade -- maybe one of the best ever in such a short time frame. But Brett and his business partner disagreed with the move. In fact, they so vehemently disagreed that they put an incentive plan in place where they would be rewarded if the Netflix stake continued to increase between then and 2016.

So far, the younger Icahn is winning the bet. Netflix now sits roughly 45% higher than it did when Carl made his first sale. So investors should be well aware that while Icahn continues to sell some of his shares, some of the biggest decision-makers in his fund think owning shares is still a good idea.

Screen Shot

Source: Insider Monkey via Flickr.

In fact, back in 2013, Carl himself stated that he essentially agreed with much of what his son had to say, but thought it was prudent to take some of the chips off of the table.

Digging deeper into the most recent sale
Sometime between April 1 and June 30 of this year, Icahn Enterprises (NASDAQ:IEP) sold 480,000 shares of Netflix. Overall, that sale could have been worth as much as $215 million. But if we look at the bigger picture, investors should take this move with a grain of salt.

Screen Shot

Number of shares in millions on y-axis. Source: Whale Wisdom.

As it stands right now, Icahn Enterprises still owns almost 1.8 million shares of Netflix worth close to $850 million. To put that in perspective, that's the group's 13th largest position, and it accounts for just over 2% of all holdings.

So should you sell your Netflix stock?
There's no denying that Netflix shares are expensive when using traditional metrics. While many people think the S&P 500 is overpriced as it currently sells for 20 times earnings, Netflix's valuation is downright stratospheric at over 140 times earnings (on a non-GAAP basis).

That being said, much of the company's high price tag has to do with two things. First, it is investing heavily in both original content and international expansion. The expenses for international expansion take a huge bite out of earnings, but they aren't an expense that will continue indefinitely.

The second big factor is simply the belief that Netflix will become more and more important in distributing content for years to come. That's a tough thing to forecast, but based on how the company has grown its subscriber base over the past five years, it's hard to argue that's not a possibility.

Screen Shot

All figures as of Q2 in each given year. Subscribers in millions. Total subscribers does not include domestic DVD numbers. Source: SEC filings

Netflix is certainly investment worthy, but folks should be well aware of the heavy expectations baked into the stock price before making major purchases.

Your cable company is scared of Netflix, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: Netflix is not one of the three!


Brian Stoffel has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns 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. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers