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Netflix (NFLX) looks like a buy. And then again, it looks like a sell. Don't you hate that? Louis Navellier was recently bullish on the movie-rental company. I see his point. But I also see the one-year chart as maybe a reason to take profits at this time. Inarguably, the stock has had a nice run.
A little over a week ago, Wade Hansen discussed the streaming success the company has had and also analyzed the technical prospects for the equity. There's no question that the management team wants to aggressively move its business model forward from physical media to digital delivery. Considering the brand equity in place, I believe the service has a good shot at achieving long-term success.
Yet, when I wrote about Netflix's latest quarterly report about a month ago, the share price was around the $108 mark (this was an extended-hours quote). Eventually, the shares would reach a 52-week high of over $140. Yesterday, they closed at $126.90.
Do you get the feeling this is one not to fight? And that the more bearish you become, the higher it's going to go? Is it killing you that you don't have the guts to buy?
I myself don't have the guts to buy. And, yes, it is sort of killing me. So, what do I plan to do?
If you thought I was going to say that I would open a little speculative position with a tight stop to see what happens, I'm afraid I'm going to disappoint you; I guess I don't even have the guts for that small bit of market participation with this idea. It's a pretty tough trading environment out there. I just don't want to buy high.
And in terms of valuation, I think some of the metrics aren't wholly attractive. I know you can't always judge a situation by the P/E ratio; furthermore, sometimes you have to pay up for growth. Sure, it's true.
Nevertheless, I'm going to remain cautious on Netflix. I'll probably revisit this idea on the next pullback. If I miss out on some gains, so be it.
Disclosure: I don't own any company mentioned; positions can change without notice.
Do you get the feeling this is one not to fight? And that the more bearish you become, the higher it's going to go? Is it killing you that you don't have the guts to buy?
I myself don't have the guts to buy. And, yes, it is sort of killing me. So, what do I plan to do?
If you thought I was going to say that I would open a little speculative position with a tight stop to see what happens, I'm afraid I'm going to disappoint you; I guess I don't even have the guts for that small bit of market participation with this idea. It's a pretty tough trading environment out there. I just don't want to buy high.
And in terms of valuation, I think some of the metrics aren't wholly attractive. I know you can't always judge a situation by the P/E ratio; furthermore, sometimes you have to pay up for growth. Sure, it's true.
Nevertheless, I'm going to remain cautious on Netflix. I'll probably revisit this idea on the next pullback. If I miss out on some gains, so be it.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
8-24-2010 @ 12:43PM
thedude said...
I'm out ! I would like to see Netflix do a stock split though. Maybe 3 for 1, or more let's say 5 for 1.
I use Netflix several times per week, either through the Wii, my PC or a delivered DVD when the video isn't available for streaming.
I have to think that shipping and handling on home delivered DVD's is sucking up a good chunk of profitability. If Netflix can improve the streaming menu and cut those delivery costs there can be a lot of profit to be realised.
At a P/E of 50 though I am too chicken to play in that sandbox. I guess I am too old school, give me a P/E of 15 to 17 and I am happy.