Streaming Video What goes up must come down. After hitting an all-time high of $173 last month in the wake of the Blockbuster bankruptcy filing, shares of Netflix have begun to fall to earth. As of Friday’s close, the stock was off more than 10 percent from its peak. Short sellers are piling on. According to FactSet Research, short interest in Netflix shares has risen 64 percent since June and now represents roughly one-third of its float. UBS Securities and Susquehanna Research recently downgraded the stock.
High-flying stocks ofter provoke a backlash, and that’s no doubt part of what’s causing the shift in sentiment on NFLX. The shares are currently trading at 42X forward P/E and 63X trailing — sky-high even for a growth stock. But a more comprehensive bearish narrative has also emerged lately, which holds that as Netflix’s business shifts from mailing out DVDs to streaming it is increasingly exposed to direct competition from the likes of Amazon, Google, Best Buy and Comcast, all of which have much larger financial resources than Netflix and generally operate in more favorable release windows. That will lead to slowed subscriber growth for Netflix, higher content acquisition costs, lower prices and ultimately margin compression, according to the bears. Read more »
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