Photo: Kim Scarborough
Wall Street Journal columnist Martin Peers made an unusually bold call in March, 2009, writing that “a correction is looming” to Netflix’s stock price, which had recently doubled into the $40 range.At that point, Netflix had “a rich valuation of 26 times estimated 2009 earnings — a loftier multiple than either Google or Apple,” Peers wrote, noting that the “Netflix stock-price bubble may be close to bursting.”
To make his argument, Peers noted that Blockbuster wasn’t in as bad of shape as one might have thought; that Hollywood studios could demand harsh terms when renegotiating deals with Netflix because of the strength it was amassing via its streaming service; and that competition was getting stronger, from the likes of Amazon’s IMDb service.
So, how’d those things turn out?
- Blockbuster still isn’t a threat to Netflix, as it’s a penny stock on the verge of liquidation.
- Hollywood studios have indeed gotten some concessions out of Netflix, but mostly 30-day windows for new-release DVD rentals, with more streaming content as part of the deals. (And pay-TV upstart Epix just did a big streaming deal with Netflix.)
- And, yes, competition is intensifying, especially from Hulu, and eventually Apple and Google, and the networks, and the cable guys. But IMDb’s streaming service — the one Peers cites — is the least of Netflix’s worries.
Meanwhile, Netflix’s stock price, the focus of Peers’ piece — headline: “Rewind Time For Netflix Stock Price” — has gone up, up, and away.
Shares are trading past $137 today, an all-time high, which is almost $100 per share ahead of where Peers argued for a “correction.” There were some issues last month, when shares lost a lot of value after Netflix reported disappointing Q2 revenue. But over the last two weeks, shares have increased 30%.
Peers obviously isn’t the only one to put a SELL rating on Netflix. Two UBS analysts, for example, downgraded Netflix to SELL in May, at $112, with a $90 price target.
And yes, Netflix stock is still expensive. And there’s still plenty of competition ahead.
But for now, Netflix continues to make its doubters look like fools.
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