Netflix Might Be Up 300% Since January, But There Is A Down Side…December 1 | Posted by Kevin Monaghan | Top Story
The downside certainly hasn’t been owning shares of the stock Netflix (NFLX), who’s price is up over 300% from January, 2010. The downside lies with companies that are realizing the true cost of partnering with Netflix (NFLX). Take HBO for example, they saw subscribers fall by 1.5 million. The company will tell you they aren’t worried and think subscribers will improve next year. However, if you could pay $7.99 at Netflix and get a library of movies and access to HBO movies and series as well, why would you pay $12 a month for HBO? In a cost conscious environment, I know what option I would choose.
Level 3 Communications (LVLT) and Comcast (CMCSA) are now getting into legal issues as Netflix (NFLX) customers are streaming huge amounts of data and at times are now responsible for about 20% of ALL internet traffic. Cable companies, like Time Warner Cable (TWC), are also at risk of losing cable subscribers to Netflix as it gives you access to TV shows under their monthly package for $7.99. Cable is more expensive many times over.
The fact that Netflix’s CEO continues to sell shares is very admirable as he’s very prudent in managing his own finances by selling shares on the way up. There is nothing wrong with selling a winning stock on the way up, especially when you own as many shares as him.
Success breads competition though. Microsoft (MSFT), AT&T (T), and many others are looking at putting forth their own libraries of streaming movies and television series. Netflix has a strong brand name and good head start so it may take an innovative company or idea, like another shot from iTV of Apple (AAPL), to dethrone the king of movies.
Disclosure: Kevin D. Monaghan, Senior Account Executive at Elite Investment Group is long AAPL