Comments on: Netflix – High Flyer or Falling Star? http://zachstocks.com/2009/04/nfl/ Dynamic Investments for Exceptional Traders Tue, 02 Mar 2010 20:30:15 -0700 http://wordpress.org/?v=2.8.6 hourly 1 By: TheTradingReport » Blog Archive » Buckle Up: Retail Stocks Could Fade Quickly http://zachstocks.com/2009/04/nfl/comment-page-1/#comment-6993 TheTradingReport » Blog Archive » Buckle Up: Retail Stocks Could Fade Quickly Wed, 13 May 2009 07:32:51 +0000 http://zachstocks.com/?p=991#comment-6993 [...] retail stocks in coming quarters. ZachStocks has already pointed out vulnerability in names such as Netflix, Inc. (NFLX) and Buffalo Wild Wings (BWLD), both of which have begun to [...] [...] retail stocks in coming quarters. ZachStocks has already pointed out vulnerability in names such as Netflix, Inc. (NFLX) and Buffalo Wild Wings (BWLD), both of which have begun to [...]

]]> By: John Miller http://zachstocks.com/2009/04/nfl/comment-page-1/#comment-6566 John Miller Thu, 09 Apr 2009 16:53:43 +0000 http://zachstocks.com/?p=991#comment-6566 Due to the huge movement up I'm now pretty exposed to NFLX. In normal circumstances I know I should pare some of my position, but I'm not. I look at NFLX and I see the type of company that becomes a 2 or 3 bagger from where we already are. 1) Consumers are buying less DVDs and renting more. In Disney's Q1 conference call they were unable to explain weak DVD sales and hypothesized that people simply don't want to buy DVDs anymore. I've been feeling the same way. The average collector owns 80 DVDs. I own many more than that and I often look at my collection and wonder why I spent so much money on it. Renting is a much better value proposition. In this economy that preference is really being pushed. 2) The quality of Watch Instantly is improving. Again, just personally speaking, but my Instant queue used to be 8 titles or so; now I have 70+. Lots of great classics and tons of TV content (NBC shows, the BBC Office and South Park). Improving quality means less churn. 3) Blockbuster is dead in the water. It just makes no sense to drive a two ton vehicle to Blockbuster, manually pick out a title and drive the one ounce disc back home. NFLX's earnings report is going to be very interesting to watch. But with ever improving service I'm not fearing it. Due to the huge movement up I’m now pretty exposed to NFLX. In normal circumstances I know I should pare some of my position, but I’m not. I look at NFLX and I see the type of company that becomes a 2 or 3 bagger from where we already are.
1) Consumers are buying less DVDs and renting more. In Disney’s Q1 conference call they were unable to explain weak DVD sales and hypothesized that people simply don’t want to buy DVDs anymore. I’ve been feeling the same way. The average collector owns 80 DVDs. I own many more than that and I often look at my collection and wonder why I spent so much money on it. Renting is a much better value proposition. In this economy that preference is really being pushed.
2) The quality of Watch Instantly is improving. Again, just personally speaking, but my Instant queue used to be 8 titles or so; now I have 70+. Lots of great classics and tons of TV content (NBC shows, the BBC Office and South Park). Improving quality means less churn.
3) Blockbuster is dead in the water. It just makes no sense to drive a two ton vehicle to Blockbuster, manually pick out a title and drive the one ounce disc back home.

NFLX’s earnings report is going to be very interesting to watch. But with ever improving service I’m not fearing it.

]]> By: Zachary Scheidt http://zachstocks.com/2009/04/nfl/comment-page-1/#comment-6528 Zachary Scheidt Wed, 08 Apr 2009 02:21:51 +0000 http://zachstocks.com/?p=991#comment-6528 Hey Doug, I'm actually a big fan of IBD and William O'Neil. I cut my teeth on his trading style and agree with about 90% of what he says. In some ways, I think NFLX stock success can partially already be attributed to the high rankings IBD and other growth stock services have given. Self-fulfilling may in fact be the correct term. However, I also think that you get to a point where PE ratios actually do eventually matter. And in this economy and in this market they matter much more quickly than in a raging bull market. I understand that NFLX has a strong business. As a COMPANY they are firing on all cylinders. But there's a difference between a company and a stock. Stocks can rise or fall on many other issues besides company strength (ironic isn't it?) Regarding the chart, you may be right. There is certainly risk either way. I want to point out that risk to those long the stock because it could be a dangerous holding. I could be early and we could see another 10 or 20% move. That may be a good argument for buying puts instead of shorting outright (but that's so much more expensive). Still, gun to my head, I would say the next 20% move will be down not up. Regarding the cheapest way to get movies - you should probably rephrase to "its the cheapest LEGAL way to get movies now." There are more and more alternatives and competition (even legal competition) could quickly creep in. Not trying to sway your opinion. Honestly I really appreciate the thoughts and the chance to bounce some ideas back and forth. Thanks for the comment! Zach Hey Doug,

I’m actually a big fan of IBD and William O’Neil. I cut my teeth on his trading style and agree with about 90% of what he says. In some ways, I think NFLX stock success can partially already be attributed to the high rankings IBD and other growth stock services have given. Self-fulfilling may in fact be the correct term.

However, I also think that you get to a point where PE ratios actually do eventually matter. And in this economy and in this market they matter much more quickly than in a raging bull market. I understand that NFLX has a strong business. As a COMPANY they are firing on all cylinders. But there’s a difference between a company and a stock. Stocks can rise or fall on many other issues besides company strength (ironic isn’t it?)

Regarding the chart, you may be right. There is certainly risk either way. I want to point out that risk to those long the stock because it could be a dangerous holding. I could be early and we could see another 10 or 20% move. That may be a good argument for buying puts instead of shorting outright (but that’s so much more expensive). Still, gun to my head, I would say the next 20% move will be down not up.

Regarding the cheapest way to get movies – you should probably rephrase to “its the cheapest LEGAL way to get movies now.” There are more and more alternatives and competition (even legal competition) could quickly creep in.

Not trying to sway your opinion. Honestly I really appreciate the thoughts and the chance to bounce some ideas back and forth. Thanks for the comment!

Zach

]]> By: Doug Coulter http://zachstocks.com/2009/04/nfl/comment-page-1/#comment-6524 Doug Coulter Tue, 07 Apr 2009 21:24:02 +0000 http://zachstocks.com/?p=991#comment-6524 I've only started watching this one, but I think there may be more at work than you are looking at. For one thing Investor's Business Daily, a bible to some, has been touting it recently, and had it as a buy this week. IBD is big enough for this sort of thing to be self-fulfilling. Bill O'Neil has a good strategy that completely ignores high PE ratios, and believes in buying high and selling higher. His rules do work better in a bull than in the current markets...but they do work. The numbers O'Neil looks at for Netflix are really good...and anecdotally, a lot of my neighbors are cutting things like expensive cable and getting Netflix instead...Including the ones living in mansions who don't turn white when you mention credit card debt. I'm not sure I'd go either long or short on this one right now. Chart doesn't look right for either, frankly, according to my way of trading (very aggressive, usually try for 10% or more in a few days in any position). Sure did well in the last couple market drops, which is significant -- it's not being dragged around by the market as a whole, something to watch. It's the cheapest way to get movies now -- and cheap is IN (see economy). If you like to wast time watching movies, they are the go-to guys at the moment. Any real competition will take awhile to make any difference. Note, as I said above, I don't have a position in this either way, but AM looking at it pretty hard for any sign the time is right -- for either short or long. I’ve only started watching this one, but I think there may be more at work than you are looking at. For one thing Investor’s Business Daily, a bible to some, has been touting it recently, and had it as a buy this week. IBD is big enough for this sort of thing to be self-fulfilling.

Bill O’Neil has a good strategy that completely ignores high PE ratios, and believes in buying high and selling higher. His rules do work better in a bull than in the current markets…but they do work. The numbers O’Neil looks at for Netflix are really good…and anecdotally, a lot of my neighbors are cutting things like expensive cable and getting Netflix instead…Including the ones living in mansions who don’t turn white when you mention credit card debt.

I’m not sure I’d go either long or short on this one right now. Chart doesn’t look right for either, frankly, according to my way of trading (very aggressive, usually try for 10% or more in a few days in any position). Sure did well in the last couple market drops, which is significant — it’s not being dragged around by the market as a whole, something to watch.

It’s the cheapest way to get movies now — and cheap is IN (see economy). If you like to wast time watching movies, they are the go-to guys at the moment. Any real competition will take awhile to make any difference.

Note, as I said above, I don’t have a position in this either way, but AM looking at it pretty hard for any sign the time is right — for either short or long.

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