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.