- Down in AH trading yesterday following news Carl Icahn had pared his stake in half, Netflix (NFLX +0.1%) is now close to breakeven. Shares are still down 9% from where they traded going into the Q3 report.
- Icahn discussed his straight-forward rationale for the sale in a PR: "I have learned that when you are lucky and/or smart enough to have made a total return of 457% in only 14 months it is time to take some of the chips off the table." Reed Hastings, who just declared "momentum investor-fueled euphoria" has played a role in Netflix's run-up, might not argue too much.
- At the same time, Icahn's son, Brett (responsible for the Netflix investment), and fellow Icahn Enterprises fund manager David Schechter assert Netflix "remains significantly undervalued," and call its $7.99/month service "one of the great consumer bargains of our time."
- B. Icahn and Schechter estimate a $2/month price hike - not expected in the next two years, but seen as possible in the next five - and a doubling of Netflix's U.S. streaming base to ~60M (the low end of Hastings' estimated market size of 60M-90M) would yield an additional $3.3B/year in U.S. streaming contribution profit, even if Netflix raises its content spend by $1B/year.