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  1. #1
    AaronZowly Guest

    Default Blue Horseshoe Loves...Netflix

    Do you remember the line “Blue Horseshoe loves Anicott Steel” from Wall Street the 1987 movie? It’s the part in the movie where all the hype was occurring on the new hot stock. Well, in my opinion this is the case with Netflix which closed today at $264.51. I’m saying this because I don’t think it is sound business decisions that are pushing the company’s stock north. The 2010 EPS is $2.96. That means that today’s price is 89.4 price/earnings ratio. Is that a smart price to pay for a future income stream? Well, part of the hype stems from the company’s EPS which have grown nicely at approximately 35%. But, let me ask you this. Are you comfortable projecting earnings into the future at that growth rate? I’m not. Can economies of scale take over and slow that rate? On 5/16/2011 I posted an entry about avoiding this stock and I’m revisiting it again today because I think this company, which I do like, is in a bizarre situation. I have no idea if this stock price will rise, fall, or go sideways. But it will be interesting to watch. my 2 cents.

  2. Default

    Nah, this thing had a solid breakout last week. 248 was key, and that break set up 16 bucks a share gain, or well over 100% on the 250 prompt month call option prices. (Which is where I play big priced stocks) The stock is still in a major uptrend. I'm not saying go all in with that 2nd mortgage, but its a hold right now; and/or play with those call options. Firms still have it at a buy, but I'm saying hold, and buy those dips.

    http://stockcharts.com/h-sc/ui?s=NFL...08&a=235548858

    Careful using P/E for Netflix and Amazon. (Which is actually 75 based on 3.48- which is the trailing 4 qtrs from 1st quarter 2011) You have to look at the whole picture here. Yes, Google, Disney, and Apple, have P/E's closer to twenty, but Netflix has the highest Return on Equity of the sector at 65, and net profit margin is still a nice 7%, better than Amazon, but behind Google and Apple.

  3. #3
    Airbladepnh Guest

    Default

    Netflix has access to all of Disney's products to rent, and offers apps on Apple Equipment. If Netflix ends up on Facebook as both companies want; Netflix is cheap. Easily goes to 300 if the market doesn't crap out. But for protection a stop should be used around 248, the new support level.

    I love that the chart breakout is justified by the Facebook talk. This proves to me that journalists don't have an understanding of price action and economic forces of buying and selling, so they post stuff like this:

    http://wallstreetpit.com/76367-netfl...-facebook-talk

    I know you have already written off technical analysis, but the fundamentals are on Netflix's side here in my opinion. P/E ratio isn't everything in this bull market.

  4. #4
    Airbladeuhx Guest

    Default

    Thanks for your comment on NFLX btbulldawgs, your position is noted.

    For a good discussion on the importance of earnings I recommend the following book by Peter Lynch One Up On Wallstreet and in particular chapter 10.

 

 

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