DVD by-mail rental king Netflix
In Netflix's widely tracked home market, the San Francisco Bay Area, household penetration grew to 5.9%, up from 5.4% in the prior quarter, and up from 3.8% last year. While critics keep looking for Netflix's good fortunes to end, household penetration continues to grow. With national penetration at just 1.3%, the opportunity ahead looks promising, although Netflix's competition is muddying the outlook.
Investors will want to pay attention to two sharks in the by-mail DVD market. Wal-Mart
The movie studios are testing the rental business waters, too. Disney-owned
For movies downloaded over broadband to your computer, Movielink is the star. A joint venture between Metro-Goldwyn-Mayer
With competition from so many heavyweight corporate names, including the content providers themselves, you'd think Netflix's stock would reflect the threats. Not so, though. While Netflix is about 8.5% off its all-time high of $61, it's still substantially above its 52-week low of $9.60. Plus, it sells for an amazing 43-times the highest analysts' estimates for 2004.
Given the tsunami of competition aimed right at Netflix, savvy investors should consider David Gardner's advice for Motley Fool Stock Advisor subscribers and sell here. Netflix's current price assumes too many happy endings.