In an interesting statement, Bank of America analyst Nat Schindler said to Netflix Inc. (NASDAQ:NFLX) investors that their concerns over the 18 percent drop in the share price of the company was due, and there is no need to be concerned over the company.
Schindler says, "To a combination of a broad pullback in the Internet sector and newer perceived competitive offerings from Amazon (NASDAQ:AMZN) and Facebook. In our view, neither these service offerings are remotely competitive with Netflix’s leading subscription video streaming service and recommend investors buy the stock on this pullback."
Citing shares of the company trading at a multiple of 27 of the consensus of earnings for 2012, Schindler called it "attractive."
While his assessment may be correct in the short term, I don't see how it could be over time, as the issue of the quality of Amazon.com and Facebook (among others) video streaming isn't where they are at now, as few expect it to take out right out of the gate.
But once they are expanded and video streaming becomes a commodity product based on pricing, there is no foreseeable defense the much smaller NetFlix would have against these giants.
Netflix closed Thursday at $200.02, gaining $7.03, or 3.64 percent.
Friday, March 11, 2011
BofA (BAC) Tells Netflix (NFLX) Investors Not to Worry
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6 comments:
Stick a fork in it. Anything over 20 is too high a multiple, given all the head currents. Trust me I love my Netflix streaming but over the longer term, Amazon and FB will gain market share as video streaming becomes a commodity and content costs increase ( Starz, Epix, Paramount and MGM)
So by your logic, you should sell Amazon because it has a PE of 65. While we're at it let's not buy any of the 2427 stocks/mutual funds/REITS/etc with a PE of 20 or higher. Moron.
Perceived competition is not competition. The 'Facebook' competition is simply a new delivery platform of an already existing product: non-subscription based digital rentals. Amazon can't offer the the same breadth and quality of film library that Netflix can without substantial investment that (i presume) would have a lesser margin than their current business, and core competency, provides; this leads me to believe that they wouldn't internally allocate capital to lesser returning investments. Netflix wins!
TL;DR - No real competition exists, just perceived competition.
What the analyst may not be aware is that Netflix program to put "subscriptions on hold" has many setting asisde the subscriptions and thus affects the cash flow. I know that many have become dissatisfied with the limited choices offered. So maybe the number of subscribers need to be adjusted from the % "on hold".
When I see a Facebook or Amazon logo printed on the front of every Blu-Ray player, game system, video-streaming device and every other video-playing gadget in existence -- alongside the Netflix logo that's already there today -- then I'll start to worry... when I see Apple bundling Facebook and Amazon video-player apps for the iPhone and iPad -- like the Netfix app that's there today -- then I'll start to worry...
BOA is absolutely correct! Not one of these trumped up would be competitors are offering the same service as netflix.
All these competitors have to offer is another platform for Pay per View which has been around forever.
The news that facebook could be a threat to Netflix coming from an analyst at goldman sachs, is nothing more than blatant (unfortunately successful) attempt at stock manipulation. They own a considerable stake in Facebook.
How in the world is ONE movie available on Facebook a threat to Netflix?
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