Monday, July 25, 2011

Somewhere, Whitney Tilson is smiling

11:30 am (Hawaii) NFLX closed the session at 281 and is now at 254 after hours. The company announced slowing growth due to rising costs during its earnings report press conference, and the stock is being bitch slapped across the room. Whitney Tilson and all the shorts were right, of course. Most of them, however, jumped off the short train at 100, 150, 200, 250. Tilson's reasoning was simple enough. How can a company that relied on virtually free content in its first few years maintain the same rate of growth having to pay hundreds of millions, for continued content acquisition?

Impossible. So, Netflix raised rates recently. Subscribers balked, canceling subs en masse. The collapse was due. Anybody who rode NFLX from 70 last year to almost 300 cannot possibly be a whiner. Looking forward, there's been talk about promising expansion in Central and South Americas. Okay. But how will that overcome rising competition from Apple and Amazon.

I don't think I ever traded NFLX, not being a subscriber and not knowing the joy (?) of low-price, unlimited access to content. Such is the nature of the beast. Yesterday, it was Blockbuster. Tomorrow, who knows? Here's how it shook out in February, when NFLX was at 222 and Tilson pulled out.

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