Netflix (NFLX): What goes up, must come down
Shares of Netflix, Inc.(Public, NASDAQ:NFLX) are up 40% in the last 52 weeks amid a
struggling economy. How long can they defy the recession?
Netflix Inc.'s Q4 profit climbed 45 percent to surpass analysts' estimates, boosted by the appeal of its relatively inexpensive DVD rental and Internet streaming service during the budget-crimping recession.
It's quite amazing that NFLX is in the position it's in today.
However, that was Q4, this is Q1. With the US unemployment rates at near all-time highs, and more and more companies announcing lay-offs every day, how long can NFLX sustain it's growth?
I just can't make a bet on the long side of NFLX right now. With the way the exceeded expectations in Q4, they are going to have to exceed the un-exceedable in Q1. That's a recipe for disaster.
If anything, I'm looking at the June 19th $32.50 Puts, currently trading at $3.7 a contract
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Netflix growth
Contrary to your doubts, Netflix seems like one of the few companes positioned for success in this economy. With people looking to save money but still enjoy some sort of entertainment, Netflix becomes the perfect option. For as low as $9/mo families can rent unlimited DVD's by mail and enjoy thousands of movies and tv shows streamed instantly to their PCs and TVs.
This allows families to save on movie theatre costs, dvd rentals from brick and mortars, and in some cases even cancel/reduce cable. Netflix now has 10 million subscibers with 600,000 new additions since the new year alone. It seems that your doubts may be unjustified as Netflix is one of the few companies that will likely reap tremendous benefits in these uncertain times.
Netflix growth
You make some valid arguments. However, families that are unemployed right now will be looking to cut costs and if it comes down to it, will cancel their subscriptions to buy food.
I've been watching Netflix for many years now and I know for a fact that they won't sustain this high of a stock price for long. Short now and go long again at $20, that's what I would recommend