Thursday, January 5, 2012

Netflix - A good short?

Anyone who follows stocks knows the story of Netflix.  Distributes videos by mail and by streaming.

Stock was in the $50 range a few years ago, and suddenly caught fire, moving over $300.  Then a string of questionable decisions by management cut 75% from the stock, hitting around $62 for a recent low. 

The stock has rebounded slightly and is up to $79 as of today.  It jumped $8 yesterday on takeover rumors. 

In my opinion, the rumors are likely unfounded.  The stock still has a $4 billion market cap, and is still in a space that is can be invaded by others, particularly giants like Amazon or Apple.  It is definitely first in the market, but could be supplanted, in the way book and movie sellers have been in the malls.

It also has competition from Redbox and Blockbuster. 

I think the streaming business is worthwhile, but not necessarily at these prices.  Be very careful, as there is a big short position, and squeezes are likely from time to time.

Disclosure:  No position.

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