Netflix Leads Technology Stock Rebound: Will It Last?

| About: Netflix, Inc. (NFLX)
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Of all the technology stocks that made healthy gains on the market this morning, Netflix (Nasdaq: NFLX) needed it the most.

It has been a rough few months for Netflix -- and that's putting it mildly. The world leader in online movie and TV show subscriptions has seen its stock plummet since it announced in July that it would be hiking prices and splitting its DVD-by-mail and movie-streaming service into two businesses, the latter of which would have been operated by Netflix subscribers and shareholders alike hated the move, and as a result its stock has been in a three-month freefall, descending from a 52-week high of $304.79 in early July to a low of $107.63 in late September.

Desperate to reverse such ugly momentum, Netflix formally announced this morning that it was scrapping its Qwikster plans. The news sent its stock up more than 8 percent in early trading, although at mid-day the technology stock has begun to falter. Netflix wasn't the only technology stock that was up this morning.

Thanks to record pre-order sales of its new iPhone 4S, Apple (Nasdaq: AAPL) stock was up nearly 4 percent as of noon today.Insituform Technologies Inc. (Nasdaq: INSU) and Micron Technology Inc. (Nasdaq: MU) were both up more than 5 percent in early Monday trading. Cisco Systems (Nasdaq: CSCO) and Research In Motion (Nasdaq: RIMM) were other tech stocks that continued to rise after making big gains last week.

Though tech stocks have thrived over the last week, the gains made by Netflix earlier today may be a case of too little too late. Thanks to the whole Qwikster debacle, the damage has already been done. Even with today's early gains, Netflix's stock price was still down roughly 60 percent from its early July high.

The company's very public Qwikster proposal and its accompanying price hike angered subscribers and eroded confidence in the Netflix brand. Co-founder and CEO Reed Hastings tried to perform major damage control, sending an email to subscribers in late September that opened with the mea culpa, "I messed up."

That's putting it mildly, Mr. Hastings, in my opinion.

By the time he issued this apology public sentiment had already turned against Netflix. Worse, the company is losing subscribers -- about 1 million of them had jumped ship as of September. Once a hot growth stock, Netflix squandered all the gains it had made in the market over the previous year in a matter of three months. What's more, the future is very uncertain right now.

This chart, courtesy of Yahoo! Finance, paints a pretty clear picture of Netflix's precipitous drop since July:

So while technology stocks like Apple and Cisco Systems may be good buys at the moment, Netflix's early-day market success on Monday is likely fleeting. By 3 p.m., in fact, Netflix stock was actually down 3 percent for the day.

The company's decision to abandon its idea of splitting into two websites was wise. But it didn't come "Qwickly" enough to stop hundreds of thousands of subscribers, and investors, from jumping ship.