Apparently, exoneration by the Securities and Exchange
Commission isn't the cure-all one would think it would be.
At least not for Netflix (NASDAQ:
). Despite the fact that the government agency absolved Netflix
CEO Reed Hastings of wrongdoing after Hastings used a Facebook
) post last summer to announce June 2012 online-streaming stats,
the stock fell as much as seven percent Wednesday. The stock
recovered, ending the day down almost four percent, representing
the fifth straight day of decline for the company.
The main cause of the tumult? A Wall Street rumor, originally
reported by CNBC and Barron's Tech Trader Daily, according to
The Wall Street Journal
, that activist investor Carl Icahn had sold some of his 10
percent stake in Netflix.
report, Icahn said that he has "not sold one share of Netflix
since buying it." Icahn added that while he generally does not
comment on rumors and believed investors might be trading on the
misinformation, prompting the unusual public denial.
Investor's Business Daily
reported that Albert Fried & Co. analyst, Rich Tullo, issued
a negative Netflix report on Tuesday that said the perspective on
Netflix has transitioned from a "questionable takeover story to
an untenable content liability growth story." Tullo added, "We
think the shares are significantly overvalued and should be
Sterne Agee analyst Arvind Bhatia said that the recent slide
was more likely fueled by profit taking, since Netflix stock has
risen 106 percent this year. "The stock has had such a nice run
that a small pullback is not surprising," Bhatia said.
Brett Harriss, an analyst with Gabelli & Co., disagreed
and wrote that Netflix's valuation "is still incredibly
Tullo, in his report, said Netflix has "an uncompetitive cost
structure" and is spending heavily on content, including original
programming like House of Cards. Competition with services like
Hulu and Amazon.com's (NASDAQ:
) Prime Instant Video, cable channels like AMC (NASDAQ:
) and Time Warner's (NYSE:
) HBO are taking a toll, Tullo said.
Now, Time Warner has upped the ante with the launch of its
streaming video competitor. Time Warner's offering will cost
$9.99 a month and give subscribers access to the studio's catalog
of movies going back to the 1920's.
The "good news/bad news" stew has culminated in
's Jim Cramer saying Wednesday that he sees Netflix as an
attractive takeover target for a company like Microsoft (NASDAQ:
). Cramer's take is pure speculation, not even based on that
traditional Wall Street staple - rumor.
Cramer does offer some cogent analysis, including this:
"Here's a company (Microsoft) that suffered from not being
social enough, not being mobile enough and certainly under CEO
Steve Ballmer … not being cool enough. Microsoft would, in one
fell swoop, change all of that by spending $13 billion to buy
Cramer admitted his notion is all based on hypotheses. "Nobody
has expressed one iota of interest in buying Netflix," he said.
"But let's face it, if Microsoft wants its groove back - that is,
if it ever had a groove - then a $220 bid for Netflix would
instantly make that happen."
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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