3SOF

Just went through the NFLX earnings release: a good quarter all around.

Press Release:
http://biz.yahoo.com/prnews/050725/sfm018.html?.v=19

Associated Press article:
http://biz.yahoo.com/ap/050725/earns_netflix.html?.v=5

=QUOTE from AP Article=

Emboldened by the second-quarter surprise, Netflix management predicted it will finish this year with a profit of $2.4 million to $11.9 million, a reversal from just three months ago when the company warned it might lose as much as $15 million with Blockbuster hot on its trail.

=End QUOTE=

Technically, I think the stock is poised for a breakout (please see P&F chart below), especially because the volume on this upleg, relative to others, is very small. Add to that that fact that trading closed at $19.00 at 19:59 in the after-hours market, 12% above the 16:00 closing on heavy volume (the 2.2-million after-hours share volume was only second to the QQQQs on the NASDAQ and is above the 1.6-million daily average).

Further, note that 14.0-million shares are short, per YahooFinance, and that is 30% of the 41.0-million share float. Even the most ardent sceptics of this company will have to admit that this was good quarter. The only question is whether the valuation at 39 P/E (on $16.96) for the year ending 31-Dec-2006 is expensive.

Finally, note that cash flow was just incredible: from investing activities, $29.4-million for the June quarter and $65.9-million for the half-year ended 30-Jun-2005. Annualised, that's about $130.0-million or $2.03 per share. Cash at 31-Jun-2005 was $171.0-million or $2.67 per share. No debt on the balance sheet, by the way.

Bought in the after-market at $18.98.

Great volume today. The P&F chart confirms the break-out as of today.

Additional notes:

• more than 7 times {average volume of1.6-million}, much of it above $20 (very good)
• close of $19.01 is 1¢ above the low of the day (not good; will probably move lower tomorrow); volume between $20 and $19 is relatively low (good)
• I would sell only if heavy volume took the price down to $17.50
• P&F price target is $35, implying a close of the gap/down-leg from Jul-2004
• As an aside, been wondering if NFLX is a good fit for AMZN (found discussions through YahooFinance message baords)

Would appreciate more sophisticated traders' short-term price perspectives.

Looks to be headed higher.

I bought a few shares of NFLX at 28.21
Do you guys think I made a mistake since I need the shares to reach at least $35 to earn a decent profit? Is it conceivable? or do you think I have more to lose?

I could still sell back in the 29ish and get my money back (and broker fee covered)

thank you for answers

Quote from: buffalo_wayne on March 30, 2006, 10:36:58 AM
I bought a few shares of NFLX at 28.21
Do you guys think I made a mistake since I need the shares to reach at least $35 to earn a decent profit? Is it conceivable? or do you think I have more to lose?

I could still sell back in the 29ish and get my money back (and broker fee covered)

thank you for answers

Hi BW,

It is hard to say.  If your break even price is $29ish then anything above that is all gravy.  I think it is worth the ride as long as you are not in the red.   Your definition of a decent profit may be different to others.  Good luck on your trade.

Netflix where I rent my DVD's... excellent service, THUMBS UP ;) :D ;D


NetFlix returns to profit
DVD rental company raises revenue and subscriber forecasts.
April 24, 2006: 5:53 PM EDT

LOS ANGELES (Reuters) - Online DVD rental company Netflix Inc. turned in a larger-than-expected quarterly profit and raised its revenue and subscriber forecasts, sending its shares to a new 52-week high in after-hours trade on Monday.

The company reached 4.87 million subscribers during the quarter from 4.2 million in the fourth quarter. The company raised its 2006 subscriber target to 6.3 million from 5.9 million.


The strong earnings report and bright forecast boosted the company's share price (Research) 3.4 percent above its previous 52-week high.

Net income was $4.4 million, or 7 cents per share, compared with a loss of $8.8 million, or 17 cents per share, a year ago.

Revenue rose 47 percent to $224.1 million from $152.4 million in the year-ago first quarter.

Analysts, on average, were expecting net earnings of 1 cent per share and revenue of $221.2 million for the first quarter, according to Reuters Estimates.

The company also saw churn, or subscriber cancellations, drop to 4.1 percent from 5 percent in the year-earlier quarter.

Subscriber acquisition costs fell during the quarter to $38.47 from $38.68 a year ago.

Netflix forecast second-quarter net income of between $9.5 million to $13.5 million, revenue of $238 million to $242 million and ending subscribers of 5.1 million to 5.3 million.

For the fiscal year, Netflix expects net income of $29.5 million to $35.4 million, pretax income of $50 million to $60 million, revenue of at least $990 million and ending subscribers of at least 6.3 million.

The company's earlier forecast had been for fiscal year revenue of at least $960 million.

Wall Street expects net profit of $11.2 million and revenue of $237.3 million in the second quarter, and fiscal year net profit of $33.9 million and revenue of $977.97 million.

Netflix shares rose 11 percent during the first quarter, which ended March 31.

During the same period, shares of rival Blockbuster Inc. (BBI.N: Quote, Profile, Research) rose 6.4 percent to $3.97, while Movie Gallery Inc. (MOVI.O: Quote, Profile, Research) dropped 47 percent to $3.02 on declining same-store rentals and now-resolved problems with its debt covenants.

Netflix shares rose to $32.82 in after-hours trade on Monday on INET -- surpassing the previous 52-week high of $31.75 on April 19 -- after closing at $31.24 on Nasdaq.

Netflix is _SO_ 2005...I will eat my shorts if they meet their targets in 2006... ;D

I believe this would fit pretty well in the ascending triangle thread.  Broke through the top line of 30 in the past week or so and this will for sure bring in the volume to verify the breakout.  Looks pretty good..

upgrade ;D

Netflix upped at J.P. Morgan, technology concerns overblown

LONDON (MarketWatch) -- J.P. Morgan upgraded online DVD rental services provider Netflix, Inc. (NFLX :
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NFLX21.18, +0.95, +4.7% ) to overweight from underweight, saying it believes investors are overly concerned about growth risks tied to technology changes. The broker told clients it sees Netflix reaching 16 million subscribers by 2010. In addition, it said that with limited selection, difficult TV connections and no pricing advantage over physical DVDs, it doesn't see video downloads as a meaningful threat to Netflix over the next three to four years. "We also believe that Netflix's ability to combine DVD by mail with movie downloads will allow it to compete effectively in the nascent download market," J.P. Morgan concluded. End of Story

Hi,

Technical analysis says me to SELL this stock..

Technical analysis :
1. We have a breakaway gap near strong resistance..
2. Retracement of 50%
3. Major DOWNTREND
4. Volume : very low on pullback

Close at 23.01
stop-loss at 23.97
First target at 19

Reward/Risk ratio of 21.10 / 4.17 = 5...Great :)

Hello, this is the new thread for NFLX's short trade, separated from HLIT's long.

I'll copy the related posts of the initial thread, which was Long HLIT & Short NFLX (http://www.3stocksonfire.org/trading/index.php?topic=8687.msg84059#msg84059) to this new thread and move the old combined thread to the Members Corner.

The following was the initial recommendation:

«I've been thinking about this macro trend, from movie rental to movie download, for a long time, but Apple TV (http://www.apple.com/appletv/) tells me the time is now (although I guess Apple TV will only work with iTunes, there are several other devices which allow any downloaded film to be watched on TV, like a Kiss DVD player, for example).

It is already possible to download videos from the internet and watch them in your television set, my friend and partner Ramsburg has been doing it for years. But now I see it becoming the mainstream.

HLIT's business description is:

Harmonic Inc. is a leading provider of versatile and high performance video solutions that enable service providers to efficiently deliver the next generation of broadcast and on-demand services including high definition, video-on-demand, network personal video recording and time-shifted TV. Cable, satellite, broadcast and telecom service providers can increase revenues and lower operational expenditures by using Harmonic's digital video, broadband optical access and software solutions to offer consumers the compelling and personalized viewing experience that is driving the business models of the future.

HLIT is the future.

NFLX is the past:

Netflix, Inc. operates as an online movie rental subscription service provider in the United States. It provides its subscribers access to a library of movie, television, and other filmed entertainment titles. As of December 31, 2005, the company provided approximately 4,200,000 subscribers access to a library of approximately 55,000 movies, television, and other filmed entertainment titles. Netflix was founded by Reed Hastings in 1997 and is headquartered in Los Gatos, California.

In the not so distant future, people will not be willing to wait for a DVD coming with the mail. They will download and instantly see it on TV.

Technically speaking, HLIT is bullish and NFLX is bearish:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=31595;image)

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=31596;image)

HLIT had a strong quarter in Q3 2006 and the CFO said yesterday in a Needham presentation that Q4 will be the strongest of the year (and there's no seasonality). I particularly appreciated Q3, because gross margin rose from 43% to 50%, and we've been seeing that an expansion in gross margin is one of the most important factors in stocks about to explode in price. Since management says Q4 will be even better, and with the current macro trend, I'm a bull on the stock.

I know NFLX also has growing revenues and rising gross margin, but it is valued at 30 times next year's earnings, and I don't think that business will be around in three years time, at least not with the current business model.

For the following updates I'll separate this thread in two, because these are two different trades (although connected).

The trading plan is:

Buy 6.66% of capital in HLIT and short 6.66% of capital in NFLX.»

Reply #4 on: January 12, 2007, 03:32:47 PM, by realcoolhead:

«This is the 1st time I followed a short recommedation and I am a bit nervous. I have two questions:

1. For shorting in general, shall we have a target price? I imagine at some point, there is no point staying in a short position as the most you can make is only 100%.  :D

2. For a volatile stock like NFLX, is it prudent to hold the short position over its earning report? I am kind of fearful when I looked at the huge gap on its last earning back in October... ???»

Reply #5 on: January 12, 2007, 03:37:44 PM, by nutsterrt:

Quote from: realcoolhead on January 12, 2007, 03:32:47 PM
This is the 1st time I followed a short recommedation and I am a bit nervous. I have two questions:

1. For shorting in general, shall we have a target price? I imagine at some point, there is no point staying in a short position as the most you can make is only 100%.  :D

2. For a volatile stock like NFLX, is it prudent to hold the short position over its earning report? I am kind of fearful when I looked at the huge gap on its last earning back in October... ???

Your first question, it's possible to go over 100% on a short. For example, let's say you bought 100 shares of Netflix at 23.00, and it tanks after earnings, driving the price down to 5.00 (just bear with me!). Your sale price was $2300, and you covered for $500, a profit of $1800 on a $500 purchase, or 260%...

(Someone please correct me if I'm full of it)

Reply #6 on: January 12, 2007, 04:02:46 PM, by David Randolph:

«

QuoteYour first question, it's possible to go over 100% on a short. For example, let's say you bought 100 shares of Netflix at 23.00, and it tanks after earnings, driving the price down to 5.00 (just bear with me!). Your sale price was $2300, and you covered for $500, a profit of $1800 on a $500 purchase, or 260%...

(Someone please correct me if I'm full of it)

Hi nutsterrt, I also had that same doubt for years.

First, if you bought NFLX at $23 and sold at $5, as you wrote, you would lose 78% of your investment ;D

But I understood you. If you sold 100 shares short of NFLX at $23, you sold a $2,300 value. When you buy the stock to cover your short position at $5, you pay $500.

The difference (or profit) is $2,300 - $500 = $1,800.

So, your initial investment was $2,300, your final capital was $2,300 + $1,800 =  $4,100.

The profit on your investment was $4,100/$2,300 = 78%.

The conclusion is: you can only make 100% of profit in a short sale of common shares, unless you leverage your capital or use margin.»

Reply #7 on: January 12, 2007, 05:26:03 PM, by David Randolph:

«There are five possible ways to make more than 100% profit from a declining stock, all of them include leverage:

1) Buy put options;
2) Buy put warrants (more common in European markets);
3) Sell call options short with leverage;
4) Sell single stock futures if available for that specific stock;
5) Sell the stock short using leverage or margin.

All of these strategies involve more than normal risk and I wouldn't recommend it to anybody. I believe shorting is a losers game over the long run.

NFLX's short (just selling common shares without leverage) is a short/medium term trade. I'll probably close it with about 30% profit if I have the chance to do it quickly.»

Reply #8 on: January 12, 2007, 05:26:42 PM, by Terliso:

«Profits in Long or Short position are the same thing right?

(Short position) Let's say you sold short 100 shares of NFLX:
sold short NFLX at ---> $23 = $2,300
Buy to cover at -------> $5 = $500
Profit --> $2,300 - 500 = $1,800 or 78%


(Long position) bought 100 shares of NFLX:
Bought NFLX at ------> $5 = $500
Sold NFLX at ---------> $23 = $2,300
Profit --> -500 + (2,300) = $1,800 or 360%»

Reply #9 on: January 12, 2007, 05:34:04 PM, by David Randolph:

«

Quote from: Terliso on January 12, 2007, 05:26:42 PM
Profits in Long or Short position are the same thing right?

(Short position) Let's say you sold short 100 shares of NFLX:
sold short NFLX at ---> $23 = $2,300
Buy to cover at -------> $5 = $500
Profit --> $2,300 - 500 = $1,800 or 78%


(Long position) bought 100 shares of NFLX:
Bought NFLX at ------> $5 = $500
Sold NFLX at ---------> $23 = $2,300
Profit --> -500 + (2,300) = $1,800 or 360%

Not at all, because in the short case your initial investment is $2,300 and in the long case your initial investment is $500.

In the short position you make $1,800 profit using $2,300 of capital, so 78% profit.

In the long position you make the same $1,800 profit, but on a percentage basis it is a 360% profit on your initial investment of $500.

If you were to invest the same $2,300 buying a stock at $5, you would buy 460 shares. If you sell those 460 shares at $23, your final capital is $10,580, so, again, you made 360% profit, which is the percentage rise from $5 to $23.

The difference between the short and the long case is the initial commitment of capital you need to make, and the profit you make is always:

Final Capital - Initial Capital = Profit in $ terms;
Final Capital/Initial Capital = Profit in % terms.

So, having $2,300 to invest, you make $8,280 if the stock you buy goes from $5 to $23. Yet, if you sell those $2,300 of shares short at $23 and buy to cover at $5, you make a $1,800 profit.

Right?»

Reply #10 on: January 12, 2007, 05:43:54 PM, by Terliso:

Quote from: David Randolph on January 12, 2007, 05:34:04 PM
If you were to invest the same $2,300 buying a stock at $5, you would buy 460 shares. If you sell those 460 shares at $23, your final capital is $10,580, so, again, you made 360% profit, which is the percentage rise from $5 to $23.

So, having $2,300 to invest, you make $8,280 if the stock you buy goes from $5 to $23. Yet, if you sell those $2,300 of shares short at $23 and buy to cover at $5, you make a $1,800 profit.

Ohh yeah, that's fair enough... thanks for clearing that up ;)

Reply #11 on: January 12, 2007, 09:45:32 PM, by realcoolhead:

«Wow, that's a lot of replies on my question  ::) Thanks.

I always had the thinking that shorting is always done on margin and will have to pay margin interest the minute you shorted. David's answer got me to do a bit googling, and found:

https://us.etrade.com/e/t/estation/help?id=1302000000#Understand4

So margin interest only begins at a point when there is not enough cash in the account to cover the short position. That makes sense.

This also explains the question of initial commiment for shorting a stock. Even though you can short $2300 with much less equity on hand, in order not to actually use the margin, you will need the full $2300 cash as colleteral, thus $2300 is "as if" the initial investment.

I like David's idea of covering at 30% profit. It is clearer using a dollar figure not a percentage figure to compare the potential of a short position and a long position: for a $2300 initial investment, a short position can at most net you $2300, whereas a long position can potentially give you much more profit than $2300. Hence there is no need to stay in a short position for too long.»

Reply #12 on: January 13, 2007, 01:03:23 AM, by TerryG:

«NFLX is definitely in the clutches of a bear. Their battle with Blockbuster was at even when Wal Mart folded closing its mail DVD rental service. Now they are looking at Blockbuster's improvement and Hollywood Video becomes the suspect loser in the battle. Who will win the Blockbuster versus NFLX battle?»

Quote from: David Randolph on January 14, 2007, 10:25:46 AM
Reply #12 on: January 13, 2007, 01:03:23 AM, by TerryG:

«NFLX is definitely in the clutches of a bear. Their battle with Blockbuster was at even when Wal Mart folded closing its mail DVD rental service. Now they are looking at Blockbuster's improvement and Hollywood Video becomes the suspect loser in the battle. Who will win the Blockbuster versus NFLX battle?»

Hi TerryG, I believe both, BBI and NFLX will lose, because I don't see any sense in renting DVD's three years from now. Internet downloads, Apple TV/iTunes, video on demand from cable and satellite operators will erode the necessity of renting a DVD.

Also, DVD prices are going down so much that they need to rent the movies at lower and lower prices, because who would rent if they can buy for similar prices?

But I guess I'm seeing too far ahead, three years from now. I believe you're right, over the short term the market is benefiting BBI and selling NFLX due to competitive reasons between the two companies.

Again, I think they will both go under, because video is a digital content, and with time that will come from the internet or to the TV screen directly without any trip to the video-club or waiting for the DVD to come over the regular mail.

They both should be trading at a discount because of this technological threat that I see as inevitable, but no, NFLX is still trading at 36 times 2006 earnings and 28.4 times next year's earnings estimates.

Since there's no point in being short a stock for a very long time (as we've seen, a short sale of common shares has a maximum profit potential of 100%, yet the risk is unlimited, so it is a losers game over the long run), I guess I'll close this short NFLX when it is trading at a more reasonable multiple, say 20 times next year's earnings?

To be trading at that forward earnings multiple, NFLX shares would need to go down to $16 a share. Sounds nice to me.

In the meantime I'll continue holding NFLX short.

News out at Midnight!!!

• Netflix Offers Subscribers the Option of Instantly Watching Movies on Their   PCs - PR Newswire (Tue 12:17am)
http://biz.yahoo.com/prnews/070116/sftu117.html?.v=70 (http://biz.yahoo.com/prnews/070116/sftu117.html?.v=70)
 
• Netflix to Be Delivered on the Internet - AP (Tue 12:06am)
http://biz.yahoo.com/ap/070116/instant_netflix.html?.v=2 (http://biz.yahoo.com/ap/070116/instant_netflix.html?.v=2)
 
• Netflix To Stream Live Movies For Free - at Forbes.com (Mon 11:59pm) 
http://www.forbes.com/2007/01/15/netflix-free-video-streaming-tech-media-cz_qh_0116netflix.html?partner=yahootix (http://www.forbes.com/2007/01/15/netflix-free-video-streaming-tech-media-cz_qh_0116netflix.html?partner=yahootix)

This sock moves fast on news...so I might be forced to cover pre-market.

Quote from: David Randolph on January 14, 2007, 11:59:29 AM
Also, DVD prices are going down so much that they need to rent the movies at lower and lower prices, because who would rent if they can buy for similar prices?

Another question related to that is: Who would buy if you can rent it & clone the DVD?

Thanks for posting the news HANDBALLJIM :)

It pretty much kills my bear case on NFLX. Kind of bad luck on the timing, but of course, bad luck is part of the game of stock speculation, so we need to be prepared for it.

Since my central bearish case was destroyed by the news release, I'll buy to cover the stock. Fortunately the Stocks on Fire Portfolio has a 5% profit on the position, but I fear the stock may open more than 5% higher. I'll close it anyway.

QuoteAnother question related to that is: Who would buy if you can rent it & clone the DVD?

Interesting question Terliso. I bet that it won't be possible to clone the videos rented from Netflix through the internet.

I think this is such a positive development for the future of the company that I wonder if I shouldn't do a stop & reverse here. Livermore did that sometimes and made a ton of money. Also, financials look pretty strong. I wonder ...

I thought some more about NFLX. This new technology (http://biz.yahoo.com/prnews/070116/sftu117.html?.v=70) and idea of renting through internet streaming opens a whole new world for the company.

I guess this means two very important long term fundamental changes:

1) I'll be able to be a NFLX costumer. Anybody in the entire world will probably be able to be an NFLX's subscriber. This wasn't possible until now. The market potential for the company, with this new technology, rises from 300 million people to 7 billion people;

2) The mailing costs will decline and perhaps disappear over the years.

The following graph shows the company has been delivering strong results for shareholders, with this technological fear out of the way ...

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=31768;image)

You can see the revenue growth when compared to the Music & Video Stores industry, showing clearly that NFLX is the market leader.

It takes a lot of courage and flexibility to do what I'm about to do. I got courage. I'm flexible.

The Trading Plan is:

Stop & Reverse the NFLX short, hopefully below $24.55 (buy to cover in any case, enter long below $24.55).

"But I guess I'm seeing too far ahead, three years from now. I believe you're right, over the short term the market is benefiting BBI and selling NFLX due to competitive reasons between the two companies.

Again, I think they will both go under, because video is a digital content, and with time that will come from the internet or to the TV screen directly without any trip to the video-club or waiting for the DVD to come over the regular mail.

They both should be trading at a discount because of this technological threat that I see as inevitable, but no, NFLX is still trading at 36 times 2006 earnings and 28.4 times next year's earnings estimates. "

David Randolph, perhaps you are looking too far into the future but it is shifting now. A few years ago the change to Broadband was "Why?", but prices dropped and the shift is happening. The second obstacle is the increasing cost of Broadband Bandwidth or the ability to send these video digital downloads. They will have to multiply bandwidth with the number of digital downloads, because video downloads are a major load to bandwidth.

Cisco and other industry leaders have proposed charging customers an additional amount to maintain the quality of video downloads.

I agree TerryG, that's why I'm no longer short NFLX and I'm actually long at $24.30 now (as planned and sent on the daily newsletter).

I believe the bandwidth cost is a lot less than shipping costs, per film delivered to the consumer.

We'll study more and more about this pick going forward, but now I see NFLX growing more and more into the future, instead of shrinking, and that is a major fundamental change that can make the stock run a lot to the upside, even over the short term, I believe.

We'll see, wish me luck :)

What about the near-term earning hit? I see they are spending $40 million on it.

Quote from: realcoolhead on January 16, 2007, 09:21:27 AM
What about the near-term earning hit? I see they are spending $40 million on it.

I'm not sure I understood the question realcoolhead, but $40 million is a very low price to pay to access the world market without opening a single store ;)

Ouch, this has been a painful session. It looks like I had the courage, the flexibility, but didn't have ... a real cool head ::)

I guess the market reaction has to do with the news not being so "new" after all.

Anyway, this fundamental development opens many doors (and takes out a cloud) for NFLX, and this is a business I want to own through the ups and downs, because I believe it can grow immensely over the years (as it has been doing recently).

But I probably should just shut up and go refresh my head, that's what I'll do, see you later over the daily updates.

Daivd, I was concerned because $40 million is almost their entire profit in 2006.

But as I dig further, I saw this after their October earning (from Jefferies & Co):


"Management's preliminary FY07 guidance is for $55-60M in GAAP net income, reflecting the impact of $40M in expenses associated with the roll out of the company's digital download service. "

So this $40 million was already factored in the earning estimate.  ;D

Jefferries put out a new article today, here are the key points:

•   Netflix announced its online movie solution, providing more details about the much anticipated offering. Salient highlights of this offering are:
•   Netflix would offer the online movie feature to its DVD rental subscribers at no additional cost. The company plans to roll out the feature to subscribers in a phased manner with a full roll out by June '07.
•   Users would be able to view online movies on their personal computers. The service offers popular features such as instant playback, pause and ability to jump to any position in the movie.
•   Initially, online content on Netflix would consist of roughly 1,000 movie titles and TV series from major studios (e.g. NBC Universal, Sony Pictures, MGM, Warner Bros etc). The company plans to add more content as it signs up more licensing deals for online rentals.
•   Subscribers would be allocated online viewing hours depending on their subscription plan, starting with online 6hrs for a $5.99/mo plan.
•   Netflix's solution compares favorably with online movie offerings from both Apple(AAPL, $94.62, NC) and Amazon(AMZN, $38.20, NC) in a number of ways: a) Netflix's service is targeted at DVD rental subscribers and is offered at no additional cost, while Apple and Amazon customers pay for content, b) Netflix offers online rentals only vs. more expensive download-to-own offering from Apple with a limited title selection and c) Netflix offers instant playback compared to longer wait time for Amazon's service.
•   We believe that bundling free online video with DVD subscription plans would also make Netflix's service more competitive with Blockbuster's (BBI, $6.43, NC) Total Access, and help drive subscriber sign-ups. The new service should also make NFLX offering more sticky and help reduce churn.
•   Overall, we believe that Netflix's latest offering is a step in the right direction and would allow the company to grow its service while offering more to subscribers by keeping pace with technological developments.
•   At $22.71, NFLX trades at an EV/EBITDA of 12.3x, and a P/E of 27.1x (GAAP, fully-taxed) on our FY07 estimates vs. the group at 9.6x, and 22.0x, respectively. Our FY07 price target of $32 per share is derived using a 5-yr DCF.
•   Risks to Netflix include higher than expected churn, SAC, and online video content costs.

Your timing might be a little bit off but it looks like this new development is very positive.  ;)

Quote from: David Randolph on January 16, 2007, 09:30:52 AM

Quote from: realcoolhead on January 16, 2007, 09:21:27 AM
What about the near-term earning hit? I see they are spending $40 million on it.

I'm not sure I understood the question realcoolhead, but $40 million is a very low price to pay to access the world market without opening a single store ;)

Quote from: David Randolph on January 16, 2007, 12:47:36 PM
Ouch, this has been a painful session. It looks like I had the courage, the flexibility, but didn't have ... a real cool head ::)

The timing to go long is not so good, we should have waited when the price is come up & close above 50sma (daily chart).

To be bullish again in NFLX, the 50sma must cross the 200ema & 200sma below & from that point the price must come up & close above the 50sma.

-- We don't know how far down NFLX is going to run away from the 50sma, so by entering NFLX in the close above 50sma is a much safer bet I believe & probably much profitable. (T2T input) ;)

hi ,
i agree. the chart has not yet turned bullish. while there is a good case for the fundamentals, unless the chart says to buy on the technicals then you are left with a poor entry. i know how hard it is to time entries cause i try to do it everyday , as of late with some success as i have been a lot more careful with my trading.
given that you are doing such a great job on the fundamentals david, and that you are an exellent technical trader already, a combination of these two aproaches will garner the most rewards. if you are buying soley on the fundamentals then this doesn't matter and you can put it in the bottom drawer and forget about it until next quarter . then a daily update is of little importance. a daily update can only be frustrating for a long term hold.
p.s. thanks for the input analysis on ptsc, it was greatley appreciated. i sold this morning with no regret.
maxi

I have not shorted a stock in quite some time, the psychology behind it can get you.  For me, when holding a shorted position, if that stock gaps up on news like NFLX, it is a whole lot harder to hold than when you are long on a stock and it gaps down on news.  I guess that's where the "short squeeze" arises from.  David, don't beat yourself up over this trade.  Every trade is a gamble, no matter how much charting and fundamental analysis is used.  If you have ever played craps,  The pass side of betting is a lot more fun than the don't pass side, but if you switch to pass from/to don't pass it will mentally wear on you and you'll walk away from the table scratching your head and licking you wounds.  If NFLX had closed at $26 today, you would probably feel like it was a good trade.  Sometimes, the  >:D wins, but not always, so start a new tomorrow! Sunny days ahead.

I was planning also on the reverse...but by accident...instead of buying to cover NFLX...I purchased more NFLX.  >:( Make a long story short it totally messed up my plans....and it took all day for Etrade to flatten the trade out. When you have a short and a long in the same position it basically evens out...and the buy price they just use as the cover price. (They should have a system that prevents you to even make a mistake).

It turned out okay after all...since I only lost $60 on the trade. This was all done pre-market session 8:05am...the stock jumped another $1 a little while after...and then came back down to almost yesterdays close. A non trade would have been the best move today for me.

I do agree that NFLX outlook is better now than yesterday, but I feel we might see some small profit taking in the markets...which might drag down some leading sectors...technology. Let's hope I am wrong.

Plenty of time, the Instant Viewing download is not scheduled until June, and the picture will change by then.

Thanks a lot for the great posts and support :)

I agree with everybody. I guess Rickjust hit the right spot, with thousands of stocks outthere with very attractive technicals & fundamentals combined, why buy stocks with just one harm pushing them up?

It probably is a waste of time to fight the market, even if fundamentals are sound (which I'm not completely sure they are on NetFlix).

After learning technical analysis, fundamental analysis, and how to identify macro trends, I really need to learn how to have a more cool head, as realcoolhead has been saying :) I'll work on that.

As for NetFlix, as I went away from the computer all day yesterday and read nothing, I thought more about this investment, and it makes perfect sense in my head. NFLX is now the largest movie rental business in the world, with $1.56 B in market cap. Estimates point to $1.37 B in 2007 sales.

All this from www.netflix.com, without opening a single physical store. This business was impossible just a few years ago. You had to open stores in different locations to expand your reach for consumers. Now all you need is a popular website.

www.netflix.com is so popular that they already have more than 6 million subscribers. They have the money and the power to improve their service, as yesterday's news shows, with the 40 million dollars investment on the service to stream films through the internet.

With this internet offering, over the long term, they will be able to reach consumers worldwide from their website. Instead of, like a MacDonalds, or indeed a BlockBuster, having to open thousands of restaurants and stores across the world, they'll have global reach from a single website.

The profit implications of this technological change can be astounding, don't you think?

NFLX is positioned to conquer the world of the video rental business. I don't know about you, but I see dozens of video-clubs (do you call them this way?) here in Mafra, Sintra and Cascais going out of business soon. Someone else will take their business away, because that someone else is more technologically advanced. And after absorbing the market, NFLX will maintain a much higher profit margin than traditional brick and mortar businesses.

I'll keep on holding NFLX, this company can grow several fold over the next 5 years, it has everything in its favor now.

Quote"Management's preliminary FY07 guidance is for $55-60M in GAAP net income, reflecting the impact of $40M in expenses associated with the roll out of the company's digital download service. "

So this $40 million was already factored in the earning estimate. ;D

Yes, realcoolhead, the "news" wasn't really new, that's why I'm losing 6% on this trade. But not being new doesn't change the fact that it exists and is a very positive development.

There's much debate about video online services. Apple let's you download films from iTunes starting $9.99 per film. NetFlix let's you watch potentially 90 different films a month for $18. It will let you watch films instantly over the internet with $0 cost (for the next 12 month period or so).

I don't know where I've read it, but NetFlix's CEO expects its subscriber base to grow from the current 6 million to 20 million by 2010. Revenues would triple. Profits would probably more than triple. The stock would at least triple.

That means a 44% average annual return for the next 3 years. I'll take it.

Quote from: David Randolph on January 18, 2007, 05:37:23 AM
There's much debate about video online services. Apple let's you download films from iTunes starting $9.99 per film. NetFlix let's you watch potentially 90 different films a month for $18. It will let you watch films instantly over the internet with $0 cost (for the next 12 month period or so).

What! Apple charges $10.00/ film? that is too much (no wonder apple makes a lot of money) I would rather go to Netflix. ;)

--- Apple also sells their music $0.99 cents per song... again, I would rather go to www.allofmp3.com only $0.10 to 0.15 cents per song  :D ;D

Look, I've downloaded 7.81GB of music from Allofmp3.com for a very cheap price... ;) :D

Maybe we should have stayed in the short position for a little while longer? I got killed again. Hopefully this was just a bad day for everyone and tomorrow 3SOF will bounce back.

QuoteLook, I've downloaded 7.81GB of music from Allofmp3.com for a very cheap price...

Terliso
Is this website legit? What is their payment method? Not sure if I would want to give out my cc# to a website in Russia.

QuoteMaybe we should have stayed in the short position for a little while longer? I got killed again. Hopefully this was just a bad day for everyone and tomorrow 3SOF will bounce back.

I felt the correction coming, QQQQ (NASDAQ 100 Trust Shares)
volume was light on Tuesday and Dow making new highs...as you see we got hit real hard today. Friday will be interesing...we might see a bounce in the morning...and get a false reading...then finish the session lower again.

People can get very scared when big name stocks get beat down...AAPL, INTC, and IBM after hours down like 6%. (in the past if IBM had a bad day...the stock market had a bad day)

Just checked Bloomberg channel and Dow futures are down 20....

Quote from: HANDBALLJIM on January 19, 2007, 12:19:40 AM

QuoteLook, I've downloaded 7.81GB of music from Allofmp3.com for a very cheap price...

Terliso
Is this website legit? What is their payment method? Not sure if I would want to give out my cc# to a website in Russia.

HANDBALLJIM, whenever you are dealing in a website check your "URL" before giving your personal information to them, make sure your URL is showing "https" "Hyper Text Transfer Protocol" with an added dash of "s", or Secure Sockets Layer <---- that means you are giving your personal info in a secure manner.

In my experience, I can say that the website is legit. I am a downloader in www.allofmp3.com for more than two years & those people in the other side of the world never gave me a problem....I'm a happy guy! I get songs for cheaper price.. ;)


My payments record below, see for yourself:

Thanks for that music website Terliso :)

Quote from: lancefur on January 18, 2007, 05:09:02 PM
Maybe we should have stayed in the short position for a little while longer? I got killed again. Hopefully this was just a bad day for everyone and tomorrow 3SOF will bounce back.

Yes, we should, but of course that is always easy to know after the fact.

My hope is the same as yours, since yesterday was one of the worst days in the history of the Stocks on Fire (now Main) Portfolio.

Let's see what today, but especially the next week, brings.

In the meantime I'm not willing to sell NFLX. I'm already selling NVLS today, but I need a cool head over the weekend to think this over. I don't want to rush to the selling door just because of one nasty day on the general market, since the trend shows we're in a bull market.

I'll keep holding NFLX, as it approaches the $21.95 support level.

Quote from: Terliso on January 18, 2007, 11:19:12 AM

Quote from: David Randolph on January 18, 2007, 05:37:23 AM
There's much debate about video online services. Apple let's you download films from iTunes starting $9.99 per film. NetFlix let's you watch potentially 90 different films a month for $18. It will let you watch films instantly over the internet with $0 cost (for the next 12 month period or so).

What! Apple charges $10.00/ film? that is too much (no wonder apple makes a lot of money) I would rather go to Netflix. ;)

--- Apple also sells their music $0.99 cents per song... again, I would rather go to www.allofmp3.com only $0.10 to 0.15 cents per song  :D ;D

Ohhh man, Apple, apple $10.00/film ---EXPENSIVEEEEE!!!

Here, I'm giving you more cheaper prices if you want to watch movies through online. It's www.GUBA.com $0.99 cents per film, how's that sound? sounds good ain't it? ;)

PS. GUBA movies selection are not that many, lots of them are old. So, Netflix still far the best choice & fast shipping, no wonder the company is #1 in this kind business. ;)

NFLX must be spending lots of ad $'s. I've seen several TV commercials lately and I've got no fewer than 3 free trial offers in the mail last couple of months. Hmm.

I was trying out GUBA so I can start watching movies through online, I picked up a particular movie but unfortunately there was an error (see the error below). I hope that Netflix does not do the same thing when they released their "Video Online", lucky though I lived here in the U.S. ;)

David, how do you resize this thing?

Quote from: HANDBALLJIM on January 19, 2007, 12:19:40 AM
Terliso
Is this website legit? What is their payment method? Not sure if I would want to give out my cc# to a website in Russia.

HANDBALLJIM, One more thing.. If you are afraid giving out your credit card numbers to the Russians just let me know I got tons (103Gb) of Music in my hard drive... he he he....  ;) :D ;D

Apple needs to start making iPod that has capacity of 200GB version for me! ;)

Well, you can't resize that because content doesn't shrink. Unless the part that you want to show is small then you can capture the part you want to show with paint shop pro, save as .gif and upload here.

Like this:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=32103;image)

NFLX is still being offered just in the US, but they could easily spread their business to Europe and Asia, even just with the mail offering.

There's this article from Motley Fool that talks about NFLX:

Which Could You Not Live Without? (http://www.fool.com/investing/high-growth/2007/01/18/which-could-you-not-live-without.aspx?source=eptyholnk303100&logvisit=y&npu=y)

I think the answer is NetFlix, what do you think?

We also have this interview with NFLX's CEO:

• CEO Interview: Netflix (http://cosmos.bcst.yahoo.com/up/finance?ch=633473&cl=1694352&lang=en)

From what I hear on the interview it will take Blockbuster one year more to release its "watch now" IP video rental service. In 2007 Netflix can literally "eat" BBI with its instant online offering.

But I'm absolutely not worried with the competition between NFLX and BBI (although the market seems obsessed with it). I prefer to focus on the size of the potential market. And it can be the world. NFLX can grow from its 6 million subscribers to 100 million or more in some years, as it spreads across the world.

Even with this $40 million dollar investment in the "watch now" service, NFLX expects to report full year 2006 EPS of $0.80, so the trailing earnings multiple is 28. It looks high. But, if they didn't invest these $40 M and that were to go directly to the bottom line, EPS would then be $1.4 and PER would be 16.

Average annual EPS growth for the past 4 years was 68%, going up from 10 cents in 2003 to about 80 cents in 2006.

I'll keep holding NFLX.

That short position, for the wrong reasons, would have been right, at least over the short term.

As I see it, if the company didn't invest $40 M in changing it's long term outlook and prospects, EPS would have been $1.4 and PER would then be 15.6. This for 2006.

Considering the company's growth rate and global market prospects I don't see how it can go down over the long term. But I sure can see it breaking down 5 or 10% more. If I wanted to make a short term trade, I wouldn't buy this stock.

And if I wanted to do a long term trade I certainly wouldn't buy the stocks I've been buying on the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php).

I'll keep holding NFLX as an investment. I won't sell it if I'm losing 20% and I won't sell it if I have a 20% profit on it.

I wrote the following yesterday:

QuoteI'll keep holding NFLX as an investment. I won't sell it if I'm losing 20% and I won't sell it if I have a 20% profit on it.

4th quarter earnings will be out today after the close. Expectations are:

«Analysts polled by Thomson Financial expect Netflix to post fourth-quarter earnings of 15 cents per share on $277.2 million in revenue. For the full year, the company forecast a profit of $41.7 million to $47.7 million, on revenue of $992.4 million to $997.4 million. Analysts are looking for earnings of 64 cents per share on $996.7 million in sales.»

I fear the results as anybody else, but as I see it, if NFLX didn't invest those $40 M in the "watch now" service, it would earn $1.4 per share in 2007 (instead of the $0.8 expected), and then the forward earnings multiple would be 15.5.

If they make those $0.64 EPS expected for the full year, the trailing earnings multiple will then be 34 and I'm afraid the stock may tank tomorrow.

This is a though decision. On the other hand, analysts are expecting 15 cents EPS for the 4th quarter. It was 18 cents on the 3rd and 25 cents on the 2nd, so perhaps they're being somewhat pessimistic here?

We'll see, but I'll stay the course, stick to my guns, as realcoolhead and President Bush say, and I'll hold NFLX through earnings (since the stock has been down so much over the short term, maybe bad news are priced in and good news aren't).

Earnings out.  Another nice call, David!

Netflix Announces Q4 2006 Financial Results
Wednesday January 24, 4:05 pm ET 

Subscribers - 6.3 million, up 51 percent year-over-year Revenue - $277.2 million, up 44 percent year-over-year GAAP Net Income - $14.9 million, down 61 percent year-over-year Income Before Income Taxes - $23.8 million, up 439 percent year-over-year


LOS GATOS, Calif., Jan. 24 /PRNewswire-FirstCall/ -- Netflix, Inc. (Nasdaq: NFLX - News) today reported results for the fourth quarter and year ended December 31, 2006.
ADVERTISEMENT


"2006 was a solid year for Netflix, demonstrating again the strength of our business model," said Reed Hastings, Netflix co-founder and chief executive officer. "Our accomplishments during the year -- strong subscriber growth, continued improvement in the customer experience, and increased profitability -- together with the recent launch of the first generation of our online video option, leave us better positioned than ever to achieve our long-term objective of being the movie rental leader."

Fourth-Quarter and Fiscal-Year 2006 Financial Highlights

Revenue(1) for the fourth quarter of 2006 was $277.2 million, representing 44 percent year-over-year growth from $193.0 million for the fourth quarter of 2005, and 8 percent sequential growth from $256.0 million for the third quarter of 2006. Revenue for fiscal 2006 was $996.7 million, up 46 percent from $682.2 million for fiscal 2005.

GAAP net income for the fourth quarter of 2006 was $14.9 million, or $0.21 per diluted share, compared to GAAP net income of $38.2 million, or $0.57 per diluted share, for the fourth quarter of 2005 and GAAP net income of $12.8 million, or $0.18 per diluted share, for the third quarter of 2006. GAAP net income for the fourth quarter of 2005 included a benefit of the realized deferred tax assets of $34.9 million, or approximately $0.52 per diluted share, related to the recognition of the Company's deferred tax assets.

GAAP net income for fiscal 2006 was $49.1 million, or $0.71 per diluted share, compared to GAAP net income of $42.0 million, or $0.64 per diluted share, for fiscal 2005.

Non-GAAP net income was $16.8 million, or $0.24 per diluted share, for the fourth quarter of 2006, compared to non-GAAP net income of $41.5 million, or $0.62 per diluted share, for the fourth quarter of 2005 and non-GAAP net income of $14.6 million, or $0.21 per diluted share, for the third quarter of 2006. Non-GAAP net income for the fourth quarter of 2005 included a benefit of the realized deferred tax assets of $34.9 million, or approximately $0.52 per diluted share, related to the recognition of the Company's deferred tax assets.

Non-GAAP net income was $56.8 million, or $0.82 per diluted share, for fiscal 2006 compared to non-GAAP net income of $56.4 million, or $0.86 per diluted share for fiscal 2005.

Non-GAAP net income equals net income on a GAAP basis before stock-based compensation expense, net of taxes.

Gross margin(2) for the fourth quarter of 2006 was 38.9 percent, compared to 37.2 percent for the fourth quarter of 2005 and 38.0 percent for the third quarter of 2006. Gross margin for fiscal 2006 was 37.1 percent, compared to 31.7 percent for fiscal 2005.

Stock-based compensation. In accordance with SEC Staff Accounting Bulletin No. 107, stock-based compensation is no longer presented as a separate line item on our income statement. Stock-based compensation is now presented in the same lines as cash compensation paid to the same individuals. Stock-based compensation recognized in prior periods has been reclassified to conform with the presentation in the current period. In the fourth quarter, the charge related to stock-based compensation was $3.1 million, compared to $3.3 million in the fourth quarter of 2005 and compared to $3.2 million in the third quarter of 2006.

The charge related to stock-based compensation for fiscal 2006 was $12.7 million, compared to $14.3 million for fiscal 2005.

Free cash flow(3) for the fourth quarter of 2006 was $22.5 million, compared to $24.3 million in the fourth quarter of 2005 and $22.3 million for the third quarter of 2006. Free cash flow for fiscal 2006 was $62.0 million as compared to $24.3 million in fiscal 2005.

Cash provided by operating activities for the fourth quarter of 2006 was $87.1 million, compared to $59.1 million for the fourth quarter of 2005 and $61.5 million for the third quarter of 2006. Cash provided by operating activities for fiscal 2006 was $247.9 million, compared to $157.5 million for fiscal 2005.

Subscriber acquisition cost(4) for the fourth quarter of 2006 was $44.31 per gross subscriber addition, compared to $41.17 for the same period of 2005 and $45.32 for the third quarter of 2006. SAC for fiscal 2006 was $42.96 per gross subscriber addition compared to $38.77 for fiscal 2005.

Churn(5) for the fourth quarter of 2006 was 3.9 percent, compared to 4.0 percent for the fourth quarter of 2005 and 4.2 percent for the third quarter of 2006. Churn includes free subscribers as well as paying subscribers who elect not to renew their monthly subscription service during the quarter.

Subscribers. Netflix ended the fourth quarter of 2006 with approximately 6,316,000 total subscribers, representing 51 percent year-over-year growth from 4,179,000 total subscribers at the end of the fourth quarter of 2005 and 12 percent sequential growth from 5,662,000 subscribers at the end of the third quarter of 2006.

Net subscriber additions in the quarter were 654,000, compared to 587,000 for the same period of 2005 and 493,000 for the third quarter of 2006.

During the quarter Netflix acquired 1,493,000 gross subscriber additions, representing 29 percent year-over-year growth from 1,156,000 gross subscriber additions in the fourth quarter of 2005 and 14 percent quarter-over-quarter growth from 1,310,000 gross subscriber additions in the third quarter of 2006.

Of the 6,316,000 total subscribers at quarter end, 97 percent, or 6,154,000, were paid subscribers. The other 3 percent, or 162,000, were free subscribers. Paid subscribers represented 96 percent of total subscribers at the end of the fourth quarter of 2005 and 97 percent of total subscribers at the end of the third quarter of 2006.

Business Outlook

The Company's performance expectations for the first quarter of 2007 and full-year 2007 are as follows:


    First-Quarter 2007
    -- Ending subscribers of 6.7 million to 7.0 million
    -- Revenue of $304 million to $310 million
    -- GAAP net income of $9 million to $13 million, or $0.13 to $0.18 per
       diluted share

    Full-Year 2007
    -- Ending subscribers of 8.0 million to 8.4 million
    -- Revenue of $1.25 billion to $1.3 billion
    -- GAAP net income of $55 million to $60 million, or $0.76 to $0.83 per
       diluted share

    Float and Trading Plans
The Company estimates the public float at approximately 55,863,475 shares as of December 31, 2006, up 1 percent from 55,230,571 shares as of September 30, 2006, based on registered shares held in street name with the Depository Trust and Clearing Corporation. From time to time executive officers of Netflix may elect to buy or sell stock in Netflix. All open market sales are made pursuant to the terms of 10b5-1 Trading Plans approved by the Company and generally adopted no less than three months prior to the first date of sale under such plan.

Just my opinion- you were right the first time >:D

Bail or short

Fast Money on CNBC talked about NFLX tonight, they interviewed the CEO.  Here is what I heard:

-Up 10% after hours
-2.1 million subscribers added
-Video on demand not heating up the business but they have 70,000 DVD titles for users to choose from, CEO says that is the core of why they are doing well, in addition to great pricing
-They got kudos from the traders on Fast Money on a great quarter
-Blockbuster is a small headwind, but the CEO didnt seem worried
-Expect over 8 million subs by end 08, etc.

Good stuff, congrats David!

Thanks basonista, boatguy and tokyopua :)

Here's my current take on NFLX:

I think it is a terrific company and a stellar long term holding. But I'm concerned with the price I'm paying for it.

You see, with the 2006 full year results and 2007 internal expectations, the trailing earnings multiple is 35.56 and the forward earnings multiple is 31.56 (this considering yesterday's after hours closing price of $25.25, up 11% from the regular session close).

If EPS growth is 20% a year for the next 10 years, in 2016 EPS will be $4.4. Apply an average 16 earnings multiple and get $70.4 for the share price.

Considering these rough estimates, average annual share price increase will be:

$25.25*(X^10) = $70.4 <=> X^10 = 2.7881 <=> X = (2.7881)^(1/10)

<=> X = 10.8%

This is just a little more than the market average long term growth rate of 8%. Not enough, as I'm looking for at least double the market average, that is, 16%.

Although NFLX is an astounding company, I don't think we can realistically expect more than 20% average annual EPS growth for the next 10 years, what do you think?

So, my take is, NFLX is a great long term holding, but the price paid is not right.

Yesterday's news wasn't totally unexpected to me, as I saw those 4th quarter estimates kind of "artificially" low, that is, logic didn't support that 15 cents EPS estimate, since they made 25 cents in Q2 and 18 cents in Q3, I would expect EPS to rebound at least some, given the strong and continuing revenue growth.

I'll use this opportunity to correct the kind of mess I've been doing on NFLX and take profits as the market opens. I'll keep the stock on a close watch and will get back in when those long term estimates point to a 16% or more long term average annual yield on my investment, ok?

The trading plan for NFLX is SELL.

Great analysis as always, David!  Applause!  I'm going to hold a little longer.  After earnings were reported in October, NFLX gapped up, pulled back a little and then moved higher to a double top at $30.  If it follows this same pattern, we could be looking at another move up to around the $30 level again.  Indicators are way oversold and improving and volume is strong right now.  Stop will be below support around $24.00.

Good luck to us holders on!  ;D

I agree with David that it may be good to sell now and pick it up later for a cause. I think NFLX will recede to $23-ish before making the possible launch basonista is talking about. I sold at $24.25. My wife was swifter (i.e. less greedy) and let go at $24.4 on her account.

David, I agree with your decision on this one. I feel this "stop and reverse" was made too much on emotion anyway.

The online offer is free and won't add meaningful revenue any time soon, let alone getting any kind of revenue outside US as it stands now. Perhaps down the road your thesis on worldwide subscrption can be realized, but there is too many unknows from here to there and I imagine competition from BB, Apple, Amazon etc. will be fierce. They just had to lower the basis subscription fee...

Plus, I think you "covered and bought" NFLX at premarket, why didn't you sell it at premarket too?  ;) (I am glad I did  >:D )

QuotePlus, I think you "covered and bought" NFLX at premarket, why didn't you sell it at premarket too?  ;) (I am glad I did >:D )

I'm afraid I wasn't looking (also there's no habit of entering pre-market or after hours orders). I sold at $23.91 (although I still couldn't put it on the Portfolio page, some server error there not allowing me to make changes).

I'm glad most of you sold in the pre-market ;)

I got out at 24.04 after netting 12% on this. After that initial bearish trend made me nervous so I resisted getting in long and I am glad I pulled the trigger when I did. Only had this a few days.  I did have this one day a while back after making money shorting it and longed it for a day and sold it. I need to have a realcoolhead as well. They are right when it comes to being patient, it truly is a virtue.

I also agree with the analysis David so you are getting much applause on this end, thanks for your efforts. I happen to be an account member of NetFlix. I would like to speak with their marketing person that came up with their "your DVD will arrive usually within one business day". Their one business day pledge falls short and it usually takes 3 business days for me to get DVD's. Anyone had experience with that as well or is it because I live in the sticks of Wisconsin and encased in this darn chedder curtain?  8)

Stopped out with about a 10% gain.  Will be watching closely... :)

Netflix Delivers 1 Billionth DVD
Sunday February 25, 4:39 pm ET
By Michael Liedtke, AP Business Writer
Netflix Reaches Milestone With Delivery of 1 Billionth DVD After More Than 7 Years in Business

SAN FRANCISCO (AP) -- Netflix Inc. delivered its 1 billionth DVD over the weekend, marking another milestone in the Internet rental service's evolution from a peculiar dot-com to a marquee attraction in millions of homes.


It took Netflix nearly 7 1/2 years to mail out 1 billion DVDs -- about seven months less than it took McDonald's Corp. to sell 1 billion hamburgers after opening its first restaurant in April 1955.

To commemorate the occasion, Netflix is awarding a lifetime subscription to the Helotes, Texas, customer who received the 1 billionth DVD shipped from one of the Los Gatos-based company's 42 distribution centers nationwide.

Netflix didn't identify the recipient because of its privacy policies but did reveal the title of the landmark DVD -- "Babel," one of the best picture nominees in Sunday's Academy Awards ceremony.

The Oscars play a big role in shaping the rental requests of Netflix's 6.3 million subscribers.

"Crash," the best picture winner at last year's Academy Awards, ranks as the most frequently requested DVD from Netflix's library of more than 70,000 titles. "Million Dollar Baby," the 2005 best picture winner, is the fifth most requested rental.

But it doesn't necessarily take a prestigious award to become a big hit on Netflix. The service's second-most rented DVD is "Mr. and Mrs. Smith," a less acclaimed flick best known for sparking an off-screen affair between stars Angelina Jolie and Brad Pitt.

Crossing the 1 billion shipment threshold provides further validation for a concept that was once was mocked as just another wacky idea to emerge from the Internet boom of the late 1990s. The achievement also provides another marketing hook for one of the Internet's biggest advertisers.

Instead of fading into dot-com oblivion, Netflix is fast becoming as much of a household fixture as the living room couch. Last year alone, Netflix signed up 2.1 million new customers, who pay anywhere from $4.99 to $47.99 per month for DVD rentals that are requested online and delivered through the mail.

When Netflix delivered its 100 millionth DVD in May 2003, the service only had about 1.1 million subscribers.

Netflix success has inspired a copycat service from the nation's largest video rental chain, Blockbuster Inc., which says it has dispensed billions of movies since its first store opened in 1985. Dallas-based Blockbuster has signed up than 2 million subscribers to its online service.

But Blockbuster's challenge hasn't derailed Netflix, which is now shipping an average of 1.5 million DVDs each weekday. At that pace, it will take Netflix about 2 1/2 years to mail out its next 1 billion discs.

But it probably won't take that long, given how fast Netflix has been growing. Management believes the service will add another 1.7 million to 2.1 million more subscribers this year, leaving it with more than 8 million customers heading into 2008. Netflix hopes to have 20 million customers by 2012.

Whether the company achieves that goal may depend on how quickly major movie and TV studios de-emphasize DVD sales and rentals in favor of Internet downloads or other forms of "on-demand" delivery. If that happens, Netflix's DVD-by-mail concept could become as outmoded as drive-in theaters.

Although Netflix doesn't believe the shift to on-demand delivery will happen for many more years, management is starting to position the company for the change by offering subscribers a chance to watch a limited number of movies on personal computers equipped with high-speed Internet connections.

Quote from: Terliso on February 26, 2007, 02:22:58 AM
Netflix Delivers 1 Billionth DVD
Sunday February 25, 4:39 pm ET
By Michael Liedtke, AP Business Writer
Netflix Reaches Milestone With Delivery of 1 Billionth DVD After More Than 7 Years in Business

Alister,

Interesting timing on that news.

After the H&S Top target of 22.40 MADE in mid-January, NFLX found support at the neckline of the Bullish Inverse H&S from last summer.

The initial rally off 21.30 support was a "Gap To Crap," at Purple #1, which was the beginning of a Symmetrical Triangle (pattern in purple).

The Symmetrical Triangle broke out last week, putting 25.68 IN PLAY.

That pattern possibly has morphed into a little Ascending Triangle (dotted purple line).  The highs of that pattern, beginning at Purple #3, are 23.83...23.88...23.85.

NFLX closed Friday at 23.53, so if it's called higher into the mid-to-high 23.80s,
at the top of the Ascending Triangle, then prints in the 23.90s above that, it looks like a decent chance of 25.68 getting MADE.

If, however, NFLX has a huge gap up of $2.00 and the 25.68 gets MADE at the open, I'd suspect a "Gap To Crap."  The entire pattern might be morphing into a Bear Flag (pattern in red), the top of which comes in today at 25.58, at Red #4.

Above that is neckline resistance from the H&S Top, at 26.20.

Note: The last 3 crosses of the 50/200DMAs have been whipsaws.  The most recent one was a Bearish Cross, on February 14, but it was a low at Purple #4, then the Symmetrical Triangle broke out to the upside, so those have been out of sync for awhile.

The inverted 50/200s could provide resistance on any rally to the 25.68 target IN PLAY, though.  They're at, roughly, 24.30 - 24.78.

"NFLX" Threads have been Merged.
Please use the search before starting new threads on a Stock Pick.
Chances are a thread already exist.
So why not post whatever you have to comment about on that pick to that thread.
"Simplicity" My fellow traders.  ;D                               
All history on a stock pick in 1 thread is awesome.    ;)                           
Just trying to get threads together,so we don't have a numerous amount floating around on the same stock.   :'(         
Thank You....and good luck with all your trades....make some $$$     ;)       

chart update. Revised guidance

rallied on revised guidance up

Another positive research for NFLX:

(http://img117.imageshack.us/img117/695/nflxcn8.th.png) (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=43919)

the 3 year chart...

Netflix 1Q earnings soar on gain of 3.6M customers
Netflix 1Q earnings nearly double as video service attracts another 3.6 million subscribers

SAN FRANCISCO (AP) -- Netflix Inc. attracted another 3.6 million customers to its video subscription service in the first quarter, the biggest growth spurt yet in a prosperous run that has established the company as a Hollywood power broker and Wall Street darling.

The financial results announced Monday topped analyst forecasts. But management offered a cautious outlook that included a second-quarter earnings projection below analyst estimates. That caused Netflix shares to shed more than 5 percent in Monday's extended trading.

Netflix's first quarter earnings nearly doubled to $60.2 million, or $1.11 per share, during the first quarter. That was up from $32.3 million, or 59 cents per share, at the same time last year.

The performance was 4 cents per share above the average estimate among analysts surveyed by FactSet.

Revenue rose 46 percent to $719 million about $13 million above analyst estimates.

The company, which is based in Los Gatos, ended March with 23.6 million subscribers in the U.S. and Canada, up from 20 million at the end of 2010. The first-quarter surge left Netflix with more subscribers than long-established pay-TV channels such as CBS Inc.'s Showtime.

Netflix charges $8 per month to stream movies and TV shows over high-speed Internet connections. Most customers pay a little more per month so they can also rent DVDS delivered through the mail.

The company is trying to nudge its subscribers to stream video more frequently to help lower its postal expenses. In the process, Netflix hopes to free up more money to buy more compelling material for its streaming library, which is currently stocked with more than 20,000 movies and TV shows.

Netflix spent $192 million on streaming rights in the first quarter, nearly quadrupling the amount spent at the same time last year.

The company's recent success emboldened Netflix to expand its streaming service outside the U.S. After entering Canada last fall, Netflix plans to begin streaming in another international market that management will identify later this year. The company is so confident about the next step in its expansion that it is already drawing up plans to move into another country early next year.

Netflix ended March with 22.8 million subscribers in the U.S. The remaining 800,000 are in Canada.

After adding more than 3 million subscribers in each of the last two quarters, Netflix expects its growth to taper off in the spring and summer -- typically a tougher time to sell subscriptions because more people are taking vacation and spending more time outside.

Netflix thinks it will add 1.3 million to 2.25 million subscribers in the second quarter. The company projected earnings as much as $1.15 per share for the period, below the average analyst estimate of $1.19, according to FactSet.

The company's shares fell $13.50, or 5.4 percent, to $238.17 in extended trading. After tripling last year, Netflix's stock price had risen more than 40 percent so far this year before the reaction to management's forecast.

Netflix Lowers Subscriber Forecast...
Friday September 16, 2011

Netflix Inc.'s (NasdaqGS: NFLX) shares plummeted almost 19% in yesterday's trade after the company cut down on the projected subscriber base for its third quarter of fiscal 2011. Estimates for the total subscriber base declined by a million.

The new estimate pins the company's DVD-only subscriber count at 2.2 million, down from the previously projected estimate of 3 million. Netflix also lowered its estimates for its streaming subscriber base to 9.8 million, down from the previously-guided estimate of 10 million.

However, the company retained its projection of 12 million customers in the third quarter using both services. Netflix also has not changed its financial forecast for the third quarter despite the projected loss of its subscriber base.

Netflix's subscriber loss is likely on account of its new subscriber plan that was formulated in July, which divided its mail-order and streaming services into two separate plans. It raised the prices by 60% to $15.98 a month. The new rates were immediately effective for new subscribers that opted for both DVDs and online streaming services. For existing subscribers the new rental plan becomes effective from this month.

Netflix had expected a decline in its subscriber base when it announced the new rental plan, but the company never expected this type of repercussion. This would be the second time Netflix has posted a net loss in domestic subscribers, the last time being in 2007 due to stiff competition from Blockbuster.

This recent development is likely to be a heavy blow to Netflix after the license renewal talks between Netflix and Starz Entertainment LLC failed in Sept 1, 2011. With that deal falling through, Netflix lost out on content from Walt Disney Co. (NYSE: DIS) and Sony Corp. (NYSE: SNE) movies.

In this context, the intensifying competition in the online streaming market from large players such as Amazon.com Inc. (NasdaqGS: AMZN), Apple Inc. (NasdaqGS: AAPL) and Google Inc. (NasdaqGS: GOOG) act as an additional pressure as it will further push up the license fee and also make subscriber acquisition more difficult.

Netflix has a growth plan that includes overseas expansions, which along with higher license and renewal fees and technology investments could result in some cost escalation. Moreover, this expansion plan and the subsequent cost escalation come at a time when the shrinking subscriber base looks likely to weigh on the company in the coming quarter.

Additionally, Movie Gallery Inc. and Red Box, the kiosk company owned by Coinstar Inc. (NasdaqGS: CSTR), are also increasing competition for Netflix.

Problem is so easy to fix...
The top brass at NFLX should all be FIRED immediately. They could have simply fessed up that the price increase was poor judgment and called it off. Staving off the fleeing subscribers would have offset the losses from the price increase. This is truly a case of arrogance and ineptness. If you are not a service that customers need like medical care you have to love your customers and treat them as your loyal fans. You don't alienate them with forced price increases with little to no explanation. Really this is one of the sloppiest moves in corporate history here though it's probably not too late to recover.

Day's Range: 154.14 - 168.00
52wk Range: 140.02 - 304.79
Volume: 17,852,947
Avg Vol (3m): 4,779,950
Market Cap: 8.15B
P/E (ttm): 39.38
EPS (ttm): 3.94
Div & Yield: N/A (N/A)

Technicals
Most Actives
Percentage Loser
Price Loser

Last Price Quote is:
-22.95%below 13-day EMA
-32.47%below 50-day EMA
RS Rating: 41 


Back to the 3 year chart...

Don't take the customer for granted...
9/16/2011

Of all strategic mistakes the leadership of fast-growing corporations makes, one stands out: Taking the customer for granted. Blinded by growth, leadership comes to believe that whatever products corporations produce are unique and indispensible, so their customers will always be there to buy them.

While this mind-set may have worked in the old days when corporations were at the center of the economic universe, it doesn't apply in today's world, where customers occupy that position. With a few exceptions, products are neither unique nor indispensible, as competition catches up quickly with fast growing corporations. This means that customers will search elsewhere for value, when corporations fail to meet their expectations or they become greedy. Here are four fast-growing corporations that have made such a mistake and suffered the consequences:

1.McDonald's (NYSE:MCD). In the 1990s, the company got carried away with phenomenal growth, paying too much attention to the supply side of its business, building new restaurants and buying up other food chains, and too little attention on the demand side, on what a new generation of consumers liked to see on the menu—more vegetables and less meat. Big mistake. Growth and profitability declined, as consumers searched elsewhere for value.

2.Cisco Systems (NASDAQ:CSCO). In the early 2000, the company lost its customer centric orientation. Its leadership got obsessed with the product supply chain, lost focus, and end up distancing itself from its end customers. The Flip video product line—a misguided acquisition that drove the company outside its core business is a case in point. The "edge" routers—Internet gear deployed by Cisco customers to get closer to their own customers are another case in point. Big mistake. By failing to focus on the end customer, Cisco has been losing market share to Juniper Networks (NYSE:JNPR), Alcatel-Lucent (ALU), and Huawei Technologies.

3.Research in Motion (NASDAQ:RIMM). For most of the 2000s, Research In Motion growth was soaring. Each quarter the company delivered better than expected earnings results, as its BlackBerry smartphone took over conventional phones—outperforming even Apple (NASDAQ:AAPL). In the last two years, the company has failed to keep up with innovation. Big mistake. Rim's customers dumping BlackBerry phones for iPhones.

4.Netflix (NASDAQ:NFLX). For the last three years, Netflix has been growing by leaps and bounds, luring movie viewers away from the video store and the cable TV to its video streaming and mail order bundle. Last month, the company tested the loyalty of these viewers by raising the price for its product. Big mistake. Subscribers fled in droves for competing services.

Nearing the 61.8% retrace and RSI finally back under 30 like in 2008 low and Williams under 80 also like then - they are not as low as the last bounce back then but think this week we get a tradable bounce

(http://stocktiger.net/imhost/images/stocktiger/fflx.png)