MOST NOTEWORTHY: Today's notable initiations include NetFlix (NFLX) and Diamond Foods (DMND):
- Bank of America started NetFlix Inc. (NASDAQ:NFLX) with a Sell rating and $24 target, as they expect increasing subscriber acquisition costs and decreasing average revenue per subscriber to be challenging for the long-term;
- Diamond Foods Inc. (NASDAQ:DMND) was initiated with a Buy rating and $23 target at Oppenheimer, as the firm believes Diamond Foods has a solid core business and sees healthy growth with the Emerald products division.
OTHER INITIATIONS:
- JB Hunt Transort Services Inc. (NASDAQ:JBHT) was initiated with a Hold rating at McDonald.
- Duke Energy Corp. Holding Co. (NYSE:DUK) was initiated with a Hold rating and $35 target at Deutsche Bank, citing valuation.
- JP Morgan initiated shares of International Coal Group Inc. (NYSE:ICO) with an Underweight rating, citing difficult business conditions for Central Appalachian coal miners.
- Rochdale initiated Cypress Semiconductor Inc. (NYSE:CY) with a Buy rating and $21 target; the firm believes new business, operating efficiencies and the SunPower (SPWR) investment will improve profitability in 2007.
Analyst summaries provided by TheFlyOnTheWall.com (subscription required).
Closing Bell: Dubai sends jitters throughout the market (S, BBY)
Heinz looking good after the second quarter?
Why isn't Bank of America updating its shareholders on CEO situation?
Reader Comments (Page 1 of 1)
12-14-2006 @ 12:08PM
Rick Hanley said...
Download is an entirely different space than DVD by mail and Netflix does not have a prayer.
Important developments:
DVD BURNING SET FOR ROLLOUT
DVD Forum approves new recordable disc with CSS copy-protection
By Paul Sweeting — Video Business, 12/7/2006
Industry efforts to develop a uniformly compatible download-and-burn system have cleared the last major technical hurdle, opening the way for commercial implementations of customer burning services early in 2007.
FREEMAN’S CLICKSTAR SIGNS MAJOR STUDIOS
Sony, Universal, Warner add films to new movie download service
By Jennifer Netherby — Video Business, 12/11/2006
The three deals announced today will make movies from the studios available on ClickStar the day they debut on DVD as a download-to-own copy or rental.
For the rest of the story:
http://www.videobusiness.com/article/CA6398956.html
DISNEY/COMCAST DEAL DESCRIBED IN THE PRESS
Comcast also secured on-demand access to such hit ABC shows as Desperate Housewives and movies from Disney’s film studios, such as Pirates of the Caribbean 2, for its customers.
Those movies could become available to Comcast customers as soon as 15 days after they are released on DVD. That’s about 15 fewer days than in current windows.
TIME WARNER AND FOX have stated that they will launch their own download sites - this is a perfect case of disintermediation. Why give middlemen a cut?
ANOTHER REASON FOR PRESSURE ON NETFLIX SHARE PRICE
Netflix board members include people who trade large blocks of Netflix stock.
Jay Hoag and his VC company, Technology Crossover Ventures (TCV), acquired 12.1 million shares of Netflix this past summer. That’s almost 18% of shares outstanding at 9/30/06. Partners of TCV are on the Board at Netflix, including Jay Hoag.
At the moment, with Netflix at about $29.00/share, Hoag/TCV is sitting on a paper profit of over $250,000,000. What are they likely to do? Sit on it and possibly watch it fade away? Twice before, they sold significant shares in the late January timeframe (in 2004 and in 2006).
Hoag/TCV had invested in Netflix early and helped Hastings take Netflix public and Hoag/TCV received shares and/or options and/or warrants for their investment in Netflix. Hoag/TCV took some part of their gains off the table in 2004 and 2006.
• Hoag/TCV sold 1,498,600 shares (pre-split) on 1/26/04 for $113,219,230.
• Hoag/TCV sold 2,000,000 shares on 1/27/06 for $54,560,000.
Anyway, this past summer Hoag/TCV decided to re-up their investment in Netflix. They acquired 8.3 million shares through the exercise of warrants (kind of like options) at a cost of $1.50/share. Then they bought 3.8 million shares in the open market at an average cost of about $19.50/share. The cost basis of the 12.1 million shares is therefore about $7.21/share.
My guess is that, one way or another, they will sell a good portion of those shares within 3 to 6 months.
Perhaps a crazy thought: Reed Hastings has about a 5% interest remaining in Netflix. Does he stay around? Last I heard, his family was moving to France.