Netflix is the premiere name here. Wal Mart failed in their attempt and Blockbuster is too entrenched in brick and mortar business. The issue here isn’t about the price of rentals, it’s who can deliver what they say they can deliver. Netflix is rolling out their watch it now feature, similar to what Movielink and Vongo offer now but soon offering over 70,000 movies.
Here’s the scoop from the street:
Analyst Richard Ingrassia says Q4 ahead of consensus, thanks again to lower content costs, tax credit… But says projected ‘07 growth of 20% remains well below previous anecdotal guidance of 50%… Says BBI’s new Total Access program will continue to siphon NFLX’s new-subscriber pipeline; NFLX faces significantly more threatening competitive situation than in ‘05, when BBI last challenged… Notes NFLX trades at multiple well above range implied by its growth rate, market position, so he still suggests fundamentals-based investors stay away… Cuts $25 tgt to $20.50.
So what’s the real story? Netflix is going on sale. Cutting the target of a stock on the way down just gives contrarian investors the power and price point to buy up the stock. At this level you have maybe 3 points down and over the next 18 months could double in price..
