Not Giving in on Netflx

Several weeks ago I called Netflix “the absolute worst stock to buy right now.” My call was terrible. Wait, not just terrible but awful terrible. Since I posted that, shares of Netflix (NFLX) soared from $87 to as high as $128 (they’re now around $110).
Well, I’m not giving in—I still think Netflix is wildly overpriced. Only now, it’s even more so. The stock is currently going for more than 40 times this year’s earnings. Plus, as First Adopter pointed out, Netflix is about to be squeezed by higher postage rates.
The Post Office is, like everyone else, in a bit of financial trouble so it’s asking for an increase of two cents on first class stamps. The Los Angeles Times notes:

Seattle, Wash.-based Netflix, which ships an average of 2 million DVDs each day, said it’s “willing to take our share of the sacrifice to ensure a stronger, more viable United States Postal Service.”

Two cents on two million DVDs a day comes to $14.6 million a year. That’s more than 10% of what Netflix will make this year.
Update: Trefis has a good post at Forbes arguing that Netflix is an $82 stock:

Posted by on July 7th, 2010 at 11:12 am


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