Netflix Stock Could Crash 40%
Netflix (Ticker Symbol: NFLX) can do no wrong. NFLX stock is currently trading at over $300 a share as of September 2013, near an all-time high and its original series House of Cards just won two Emmy awards.
But forget the bright lights and awards shows, because there may not be a happy ending for Netflix. In fact, one analyst warns that $180 is where the stock will ultimately wind up — about 40% below current valuations by 2014.
Increased competition with sap NFLX momentum and that the bottleneck caused by a lack of reliable broadband both in the rural U.S. and in emerging markets will exacerbate the slowdown in subscriber growth as competitors elbow in. These competitors, of course, include the well-heeled Amazon (Ticker Symbol: AMZN) with its Prime Instant Video, Google (Ticker Symbol: GOOG) with its emerging model of paid YouTube channels, Intel (Ticker Symbol: INTC) with a set-top internet cable box and the catalog of Hulu Plus, just to name a few.
The waning momentum in subscriber growth will indeed send Netflix stock crashing back to earth. Last quarter Netflix had just shy of 29 million domestic subscribers, so a roughly 40% increase in NFLX customers is expected — not hoped for and baked in to pricing.The market may not punish NFLX in the next few weeks — but it will correct eventually, and severely.
The short interest in NFLX is creeping up again, to 7.8 million shares as of August 30, 2013 — but last time they were this high was in mid-June, before a 40% rally in Netflix stock.
Just one year ago Netflix was trading for less than half of the $180 target plotted — if you bought Netflix stock in early 2012, you still made a good choice and nobody can take that away from you. But selling right now in 2013 as the stock trades above $300 could be an even better one; protect your profits and sell NFLX now if you own.