Seeking Alpha

Netflix near breakeven following Icahn's disclosure

  • 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.
Comments (13)
  • Water Brothers Financial Co...
    , contributor
    Comments (339) | Send Message
    Sounds like Carl is now pumping it up to dump the remainder of his position. Finally, I have started to see folk writing about their huge overspending, overbidding on content - which I have been saying for months. Of course you can still buy into Hastings saying he will basically penetrate virtually every household in US - because that's the only way you - or Carl - get to the right numbers to justify any price above $100/share. And that assumes Hulu, HBO, Amzn et al fall on their face in gaining market share; I think we look back in five years and this co. has been bought by - say Disney, or Amzn at 25$/share -- or it goes bust.
    23 Oct 2013, 11:03 AM Reply Like
  • Mark Krieger
    , contributor
    Comments (3759) | Send Message
    pump and dump for sure----of course he is going to sugarcoat NFLX, he still needs to sell his remaining half.
    23 Oct 2013, 11:37 AM Reply Like
  • Julian Acosta
    , contributor
    Comments (123) | Send Message
    You're right, but so are they. I don't think anyone would argue that $8/month is a bad deal. It's pretty fantastic and customers enjoy Netflix enough that they would pay more within the next 5 years. Especially once there is more content on the service.
    23 Oct 2013, 11:55 AM Reply Like
  • Vern Hoffmann
    , contributor
    Comments (197) | Send Message
    Then why didn't he sell it all and be done with it? Why sell half and then P&D?
    23 Oct 2013, 02:12 PM Reply Like
  • Water Brothers Financial Co...
    , contributor
    Comments (339) | Send Message
    Because he probably couldn't get the rest off without driving the price a lot lower and by then the cat was out of the bag that he had sold a huge bloc.
    23 Oct 2013, 02:37 PM Reply Like
  • musiccomposer
    , contributor
    Comments (977) | Send Message
    Brett Icahn would do well to follow his father's wisdom. That anyone could call a stock with a 400 PE significantly undervalued is downright astonishing.
    23 Oct 2013, 11:54 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (4018) | Send Message
    In this case, one can't even accuse Icahn...he is simply rational, I already expected he could cut his stake as NFLX approached $300.
    23 Oct 2013, 12:22 PM Reply Like
  • ladubs111
    , contributor
    Comments (49) | Send Message
    love the valuation. 60 mill users X 10 bux a month X12 month = 7.2 billion sales, 3.3 billion contributing margin = 45% operating margin (currently at 23%)
    23 Oct 2013, 03:46 PM Reply Like
  • Sakelaris
    , contributor
    Comments (1223) | Send Message
    In the long run, it will be good for us other Netflix investors to not have someone with such a large stock holding keeping us guessing about the next move.
    23 Oct 2013, 07:34 PM Reply Like
  • Vern Hoffmann
    , contributor
    Comments (197) | Send Message
    or blatantly manipulating the market, thank you very much.
    24 Oct 2013, 06:49 AM Reply Like
  • epygood-mai
    , contributor
    Comments (20) | Send Message
    Did you see the options trade today. The calls are green and the puts are red. The market has return bullish on Netflix despite the bad press.


    I think, some of you just want Netflix shares to dive further so you can buy and make money.


    I bought some shares before Mr. Ichan did and bought more after he did and I made a significant amount of money. I am just waiting for the shares to go lower more before I buy again.


    Isn't the wisdom of investors to buy the stock when most of you are negative on it? I did more than a year ago. I do see the same rationale as Mr. Ichan.
    24 Oct 2013, 01:58 AM Reply Like
  • Capeerik
    , contributor
    Comment (1) | Send Message
    I see NFLX reaching $600 after AAPL buys the company. June - July.
    15 May, 10:35 PM Reply Like
  • Sakelaris
    , contributor
    Comments (1223) | Send Message
    Well, since I still have a little Netflix stock, that would be great. But I think of a buyout generally as something that might be more likely to rescue Netflix from the $50 to $100 range; I would never dream of a buyout taking it quickly up to $600.


    But my main motivation in posting this response is to point out something here that I also noticed recently on another Netflix thread from someone else who was advocating strongly concerning the stock. The other commenter was very negative--but negative or positive, both of these were the very first Seeking Alpha posts under their particular usernames--and no biographies were given! Those characteristics make a post very suspect.


    I myself have gotten some criticism on Seeking Alpha for supposedly being too complimentary toward Netflix. So let me show my ability to be cautious by warning people to be skeptical of this rumor.


    An old saying but true: If they really knew, they wouldn't tell you.
    15 May, 11:03 PM Reply Like
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