Netflix looks grossly overvalued: Barron's

Netflix (NFLX -1%) could easily fall by 50% if its volatile past track period is any indication, speculates Barron's.

Escalating programming costs could create a "snowball drag" on earnings that could be difficult to catch up to with cable operators likely to keep content bidding moving even higher.

A last sobering thought for Netflix longs from Barron's is the publication's conclusion that even if NFLX share price halved, the company's forward P-E looks rich at 23.

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Comments (6)
  • wyostocks
    , contributor
    Comments (9113) | Send Message
    All the Wall Street money will exit this stock simultaneously and the "little guy" is going to get slaughtered.
    12 Nov 2013, 12:55 PM Reply Like
  • Esekla
    , contributor
    Comments (4445) | Send Message
    Perhaps, but institutional investors almost never use trailing earnings metrics for situations like this, and the cable companies, with their outdated pricing schemes, have more to lose here than Netflix. Here's what I think is going on



    Even though the Barron's article begins, "We've seen this show before. It didn't end well previously and may not end well again." The truth is that Netflix has recovered all of the losses from its previous fall, and that was due to a proposed change in business model, not a mere article stating what everyone already knows.
    12 Nov 2013, 01:07 PM Reply Like
  • mpreng101
    , contributor
    Comments (36) | Send Message
    Talk about Barron's being a little late to the game.
    12 Nov 2013, 01:21 PM Reply Like
  • Sakelaris
    , contributor
    Comments (2584) | Send Message
    Barron's might still be trying to justify its earlier bearish calls on Netflix that were made during the year 2012--when Netflix stock was selling for less than $100 a share!
    12 Nov 2013, 02:10 PM Reply Like
    , contributor
    Comments (209) | Send Message
    There are some similarity between AMZN and NFLX: The high stock price depends future revenue growth. If growth of domestic subscribers (NFLX), sale growth (AMZN) slows, the over investment will catch up earning dearly. AMZN built many warehouses and NFLX contracted many content; all depend on future growth to pay for them. The risks are that they all need to use lower price to attract users. If you think that users will accept future higher price to use AMZN and NFLX compared with other alternative, current stock price has some support; If not, it will fall dramatically. That is why AMZN works very hard to get Prime Member with all sort of goodies and NFLX keep claiming not rate hike. The stock price of these two companies is on the hand of consumers.
    12 Nov 2013, 02:15 PM Reply Like
  • Esekla
    , contributor
    Comments (4445) | Send Message
    I believe AMZN and NFLX trade on very different principles. See the article referenced above.
    12 Nov 2013, 02:19 PM Reply Like
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