Netflix shares take another fall
The stock is downgraded to 'underperform' by a prominent analyst who says the company is broken.
On a day when stocks soared, Netflix's (NFLX) drop was particularly jarring.
The stock just can't catch a break after passing $300 in July. Its plunge since then has been breathtaking, with shares closing at $64.53 Wednesday.
The day's fall was triggered largely by a downgrade from one of the more prominent analysts covering the stock. Michael Pachter of Wedbush Morgan said in a research note to investors that the company is broken.
Post continues below.
Pachter criticized the way Netflix hiked prices for subscribers in July -- the beginning of the stock's long slide. Customers who had signed up for one DVD out at a time plus online streaming saw prices jump by nearly 60%, a move that showed Netflix was truly out of touch with customers.
"It is clear that a price increase was necessary, and equally clear in hindsight that a 60% increase on the hybrid customer was too much," Pachter wrote. Yes, the company would have seen customer defections and trade-downs at any price point, he added, but the carnage would have been milder if the price increases had been smaller.
Pachter cut his rating to "underperform" from "neutral" and has a $45 price target on the stock. Wow, who ever would have thought $45 was in the realm of possibility for this former highflier?
Here's more from Pachter's note:
We are particularly concerned by the company’s "growth at all costs" business model. Netflix management is willing to incur losses for all of 2012 in order to chase international expansion; we think that international subscribers will generate losses for the foreseeable future at a time when the company has alienated its most profitable domestic customers with its sharp price increases, further challenging its profitability.
They didn't realize the power of social media and how it can work to band people of all sorts together toward a common cause. To find so many others as angry and as willing as I was to downgrade or leave Netflix altogether helped me to keep my resolve to take my business elsewhere where it might be more appreciated. I hope other companies take note of what has happened to Netflix and understand that price increases, when all of us are struggling, can be understood, however, nasty, less than appreciative attitudes towards customers will not be and in highly competitive markets don't have to be.
A fine example corporate greed!!!....that's what's wrong with the country...can't be satisfied with making a living...have to make a killing.
It's nice to see some of them crash and burn...CEO should be fired with out his golden parachute.
When I threatened to cancel Netflix after they doubled their rates for both dvd and streaming, reps actually laughed at me. I told them that Incredible Universe, Barney's coffee, and Circuit City also believed they were untouchable but look what happened.
Corporate greed can truly turn its ugly head; Netflix, stop the greed and give back value to its consumers and stocks will rise again.
Or on the way down, say hi to another arrogant greedy video company - Blockbuster, now called Bleakbuster.
People have already mentioned that you are dead wrong. Neflix didn't reverse the price. The problem, as the story states, is not that they raised prices necessarily (it was a necessity), it instead was how they raised the fees, with little to no care for the consumers and out of touch with the population. I loved netflix, but at a 60% increase in the price point, they all but required people to choose between dvd or streaming. The best business model was that netflix offered the best of both worlds, and then took that away from customers, while increasing their prices at the same time. Bad business move. They followed that up with a half-**** apology which turned even more customers off. If the price hike didn't scare you off, the inability to figure out the future of the company might have.
I left Netflix and am using Amazon Prime. The free streaming library seems as good as Netflix and I don't wait months to get new titles!
Their fault...greed does that...so now you're losing all that money and, I would bet, having to let a lot of people go...how many are jobless, now?
Too bad...I was a happy customer until you got greedy...
Way to go Netflix...
I am examining the Amazon Prime service. I had a hard time finding something to watch on Netflix- it was a mishmash of old, old movies and kiddie shows.
their problem for them now is "how to recover" from their summer time extortion.
first suggestion is to fire the ones who thought of the faulty idea. the public likes to see blood and loyalty in return
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The apparel chain takes a hard hit after blaming the weather for its quarterly sales decline. But cold temperatures don't explain the drop in full-year sales as well.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.