Netflix nails it
Let's go over what it did right that the Street didn't expect.
Could there be a more perfect result for a stock called Netflix (NFLX), a stock with only six analysts in favor of it and 30 against? Could the stars align more closely for this stock, which has, at its core, a group of haters that live to be short the darned thing, not unlike those who shorted Amazon.com (AMZN) in the $100s three years ago?
Netflix exists because people want to watch programing when they want on the device they want. Netflix succeeds because it is inexpensive. Netflix thrives because of the change in programming on cable and how much more people like cable shows than they do network shows except for a couple enduring comedies and some longer-running dramas.
But because it stumbled and because it seemed to be out of money when it dropped below $100, it had become hated by people who either didn't understand it or dug in their heels rather than declaring victory as they might have on the long side.
In short, it went from loved to hated faster than I have ever seen a stock travel that distance except the speed with which it is now loved again by owners and still needs to be loved by analysts. Hence how it could have such a huge move last night.
Let's go over what Netflix did right that the Street didn't expect.
First, when it screwed up and created that screwy plan to force adoption to online, the owners and the analysts figured that was the end of Netflix -- that users would be so angry they would switch to Amazon or Apple's (AAPL) iTunes. What people didn't understand, though, was that the Web was adapting so fast to high-speed at the same time that the tablet had been born that Netflix was simply too cool a product not to have. And when you compared it to cable, it's a real bargain, especially because, other than sports, who the heck cares when you watch something.
Second, the mea culpa of management was dissed by Wall Street, but the customers loved it. The customers came right back. That wasn't in the playbook.
Third, the company, while spending far more than it had, was thought to be incapable of raising the money that it needed to survive. But these are more bountiful times than analysts realize. In a sense, Netflix was still one more company bailed out by the hated Ben Bernanke, who is supposed to be more like a European central banker and make money tight to appease the ideologues, even as the discrediting of austerity is a daily event.
Fourth, analysts and hedge funds are simply not believers that content can ever move a needle. They forget that HBO, the model they love that will soon be pushed behind by Netflix's accelerating growth, grew on the back of "The Sopranos" the way "House of Cards" spurred Netflix. It's not supposed to happen, but it did.
Fifth, analysts didn't see the symbiosis with the new kind of television profit center, the long-form arc series, where you can't just crack into it. You need to start from the beginning, and Netflix is riding the success of everything from "Breaking Bad" and the "The Walking Dead" to "Mad Men" and "Downton Abbey." It doesn't hurt that the programming crosses all ages and can be watched in binge fashion.
Finally, the rich people who are analysts don't understand the new frugality -- that folks don't want to pay for cable or for Amazon or iTunes. Netflix is their bargain.
All of these cut in favor of the Netflix bulls and eviscerated the Netflix bears at precisely the time when the bears were supposed to win. It's a textbook failure of typical security analysis, and it's the handiwork of a brilliant exec, Reed Hastings.
Oh, and one more thing: Maybe now, as a $12 billion company, Netflix will at last be seen as the potential growth engine acquisition for Microsoft (MSFT) or Apple, although the former is too go-it-alone and the latter is just too arrogant to ever figure it out.
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Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long AAPL.
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I honestly down't quite understand why people rush to Netflix instead of Amazon Prime. Amazon Prime has roughtly the same or better offerings for free plus you get free shipping on Amazon purchases! All for less than a Netflix online subscription. I'm hanging out for another month, Arrested Development's final season.. then I'm dropping.
Besides, Amazon Prime is also making their own content too... Zombieland.. THE SERIES!
Just about everything Cramer's saying is about streaming viewing. You only need to drive around on a fruitless search for a video store, something as rare nowadays as a twinkie in a post-apocalypic wasteland, to see that's the model that's won. Netflix just isn't the only game in town, and it can very easily be a very competitive market. It's all about who can throw cash at the providers to supply content without ticking off the providers. I think Amazon and ITunes have a good model here because not only can you watch the authorized stuff for free.. but the providers can also sell movies and shows on the same platform.
the netflix model is easy and affordable. $8 streaming content. $9 to get DVD's (which are generally the current releases).
i wonder if they will track like AOL did however. gather the masses, raise their fees, then collapse?
"Finally, the rich people who are analysts don't understand the new frugality" Is this not a very funny Cramerism? He covers a lot of ground in 12 words. But anyway, concentrating on at least one of the points Netflix seems destined to success and has created its' own niche that plainly and totally makes sense. I think the aha syndrome applies well in this instance. And Microsoft does need something new in that Windows 8 doesn't seem to have much magic, but perhaps they have become; which I suspect, a lumbering giant incapable of adopting a new direction. By the time their management gets around to being able to make a decision the horse will have left the barn. I personally think MSFT is now as great a short as Netflix is a long. JMHO
However, always Be careful of Pump and Dump plays. Jimmy.
I've been a Netflix subscriber for a couple of years. I do not understand why Netflix is succeeding when its movie selection is so poor. The online browsing capability through internet TV boxes stinks. There are a significant number of Chinese films with English subtitles that are offered. Very few premium films are offered; most of the offerings in the B and C class. I like 1930's and 1940's mystery movies, the Netflix selection is very weak. I can get more Charlie Chan movies on youtube than I can on Netflix.
The only reason that Netlix is succeeding is because, despite the hundreds of channels on cable and satallite TV, progamming is so bad with a myrid of junk channels and programming repetition. The Netflix technology model is simple and can be readily copied by any mom and pop shop who wants too. Netfix is likely to be a flash in the pan.
THE REAL PROBLEM...
Anybody noticing that day after day we seem to let some massively Earth-stopping problem like North Korea or Iran or Lawyers Who Didn't Intervene With Banks Illegally Foreclosing or Ben Bernanke fiat printing us into oblivion or hired-in "talented" executives who can't run companies but they can gamble in the markets or Obama's inability to pretty much do anything or Congress failing to arrest themselves for ruining America or why we have online everything instead of jobs, including online job posting that never actually gets people jobs or why we aren't growing our own food or why Monsanto is allowed to corrupt nature or why big oil can do whatever the F it wants as we are forced to live in homes that are underwater or won't sell or get repossessed so baby mommas can buy them or why anything that was once "AMERICA" is now illegal and everything no person other than psychopaths would condone is all we are exposed to? What the Hell? If we: Close the banks, End the Fed and get RID of Wall Street... we might have some discomfort for a week or two days... but then after that... all the pariah would have used their passports to skip out of the country and it would be available to normal people again. We want our America back. We want psychopaths out.
Not really sure why Blowem came out of the woodwork, probably per Mr. Brucey's instructions.?
Ahhh, a grain of salt, just a grain of salt....Too many Analysts, so little time...
Lt. Danz, will be here in a little while, got to set the day's agenda..
I'll bet my Lt. Danz, can whip Mr. Brucey's azz...He may not know Ka-rot-te, but he has a hammer..
A Hundred to the upside, and no explanation from CGT1....Absolutely amusing.
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