Netflix (NASDAQ:NFLX) reminds investors that markets are as likely to take gains away as award them. And, least you forget, the market doesn't care what you think, or want. It will punish you mercilessly once the bloom comes off the rose, as many Netflix investors have discovered this past month.
The sell-off in Netflix is eerily reminiscent to many stock booms and busts. And the admission of guilt by Netflix leadership does little to quell investors' survival instinct.
While the merits of Netflix's restructuring will be borne out in time, it's clear Netflix is a troubled teen conflicted by wanting to please both bean counters and low price ideologues. And, like a typical teen, it thinks it can wear two different jackets and live two separate lives.
Netflix may have apologized for raising prices by 60%, egotistically assuming its popularity would remain untarnished. But, from a customer standpoint, they changed nothing. Instead, they split into two distinct companies and place hope a new name will help keep consumer's memories short.
Which raises questions for investors. The markets typically punish uncertainty. There are few reasons to take risk amid the unknown when there are plenty of other alternatives on sale, with less baggage to overcome.
Even in Netflix's own industry, the younger competitor Coinstar (NASDAQ:CSTR) comes across as an unassuming, self-assured player content with building lasting relationships.
While Netflix may offer a sexier alternative, Coinstar's growth rate is no slouch. Last quarter, revenue increased 27% and earnings per share rose 151%. With an ever-increasing installed base of over 33,000 kiosks, the question becomes less if RedBox revenue rises, but instead by how much?
Coinstar's largest challenge remains keeping enough content on the shelf to woo Netflix's weekend movie customers, the 590,000 or so Netflix users the company admits it may have lost this quarter. Couple content with Redbox's $1 price point and Coinstar remains the most likely beneficiary of Netflix's stumbles.
Disclosure: I am long CSTR.