More Caution For Netflix (NFLX, AAPL, AMZN)

Netflix, Inc. (NASDAQ: NFLX) went from Wall Street’s darling in 2011 to being Wall Street’s whipping boy.  The company’s efforts under Reed Hastings could easily become the classic case study for “How To Kill Your Great Company” in all colleges.

Zacks Investment Research is only maintaining a very mixed “Neutral” rating has new holiday data on e-commerce showing that there is even more concern ahead.  Research firm ForeSee noted that Netflix has lost a full seven points this year to post a score of 79 and that is at par with the index average.  Netflix was actually the joint leader in the 2010 and has historically been a leader, indicating that there is growing disappointment.

Netflix’s decline in the index was unsurprisingly attributed to the raising the prices and due to the splitting its DVD and video-streaming services. Even having backed away from some decisions after losing 800,000 subscribers did not stem the exodus and the market value was cut by about 75% to under $4 billion. Netflix also gave a dismal outlook and the belief is that the problems will persist.  Can a company go from an earnings growth story to an EBITDA story?  Most likely not.

You do not need to use any outside research for this realization: Amazon.com Inc. (NASDAQ: AMZN) won at the expense of Netflix.  Apple Inc. (NASDAQ: AAPL) is rumored to be releasing some variation of Apple TV that could be an a la carte service but even if not it could still pose a serious disruption to Netflix.

Read Also: The Worst Product Flops of 2011

Netflix shares are down another 1.2% on Thursday at $68.25 and the 52-week trading range is $62.37 to $304.79.  If you want a great lesson from a guy who knows how to pick out losers and bet against them, go back and review the short sale call from Asensio more than a year ago.  His call took some time to play out, but he was almost spot on.

JON C. OGG