Following a day yesterday that saw both market analysts and investors alike welcoming Netflix (NASDAQ:NFLX) back to the dot-com darling fold, Netflix gave it all back in today’s trading.
Yesterday, upon an upgrade from Morgan Stanley analyst Scott Devitt, Netflix gained nearly 11% making investors question whether they had given up too soon on Netflix’s 2012 potential. Today, however, saw the fickleness of the market exposed.
Streaming video is not going anywhere and Netflix remains the leader in paid subscriptions with nearly 28 million monthly subscribers. This, however, was not represented in today’s trading. On the contrary, investors began unloading their Netflix shares not long after the opening bell.
There was seemingly no reason for the change today as the company made no announcements of note, did not return to its place as a poor provider of customer service (that Citi lauded the improvement of last week), nor did Americans stop purchasing smart phones and tablets. CEO Reed Hastings did, however, announce his intentions to retire from Microsoft’s board in order to focus his energies on Netflix.
“Reed has been a terrific board member, and his insights and experience have really helped guide us through a critical period of transformation for both Microsoft and the industry,” Microsoft CEO, Steve Ballmer, said in a statement.
Hastings’ decision was reportedly based on his desire to restore Netflix, which traded as high as $311 last summer, to its place as an industry leader and growth stock.
The “Street” has apparently not forgotten Hastings, often blamed for rash decision-making and the fall of Netflix’s stock. For those who don’t hold Netflix stock, Hastings, in addition to being a founder of Netflix, was largely regarded as the impetus for a sell-off last year based on his decision to begin charging separately for the company’s DVD-by-mail plan and the service that streams video through the Xbox and a variety of other Internet-connected devices.
This decision was met not only by an outcry by subscribers, but also an unexpected cancellation of over 1 million subscriptions that sent Netflix into a near month-long nosedive.
Netflix began today’s trading looking as though it would solidify yesterday’s gains by rising to $69.38 within minutes of the opening bell. From there, the drop was steady and pronounced. Noon saw Netflix struggling to remain over $67.00 before 1PM brought hope. That hope quickly disappeared as the remainder of the afternoon saw a steady decline with Netflix finishing the day at $65.53. A loss of nearly eight dollars, and a reconfirmation of cynical investors’ concerns.
Trading doubled 90-day averages, and it would be the acme of folly to suggest that a stock that has moved this much in a mere 24 hours will not be greeted by heavy trading tomorrow. Netflix is going somewhere, and while its AMC content is nearly guaranteed to find your computer, phone or tablet, its position following tomorrow’s trading is anyone’s guess.
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