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Publication: "Barron’s"
Publication title: "Netflix: AMZN Video a Negative, But Oppenheimer, Piper Defend"
Publication Date: 2/22/2011
Brief Summary:

Amazon.com, Inc. (AMZN) announced on Tuesday that it would begin offering digital streaming services to its Prime subscribers, essentially declaring war on Netflix, Inc. (NFLX). This Barron's article takes a look at how the dust is settling for NFLX, while also responding to the question of whether investors should be worried about the DVD diva's future.

The author cites several brokerage firms that have responded to Tuesday's news -- and it appears that analysts have taken AMZN's announcement with a grain of salt. Jason Helfstein, an analyst at Oppenheimer, calls AMZN's selection of 5,000 TV shows and movies "inferior" to NFLX's, while also raising questions over the newcomer's video streaming quality. Meanwhile, Piper Jaffray analyst Michael Olson called AMZN out on its relatively puny content selection, compared to NFLX's over 20,000 titles.

The sole "skeptic" in the group -- if you can call him that -- seems to be Citigroup analyst Mark Mahaney, who simply states that the deal could be a "modest negative" for NFLX.

Contrarian Takeaway:

Based on this Barron's article, you'd think that analysts are pretty upbeat when it comes to NFLX -- but that isn't the case. According to Zacks, 21 out of 32 brokerage firms maintain a "hold" or worse rating on the equity. What's more, Thomson Reuters pegs the stock's 12-month consensus price target at $211.72 -- just cents above the stock's Wednesday's close at $211.20, suggesting that analysts expect virtually no upside from NFLX in the coming year.

However, analysts aren't the only ones betting against NFLX. Short interest surged by 4.4% during the past month, and now accounts for a hefty 22.1% of the stock's available float. Meanwhile, NFLX's Schaeffer's put/call open interest ratio (SOIR) of 1.53 ranks above 87% of all other readings taken during the past year, pointing to elevated levels of pessimism among near-term option players.

On the charts, NFLX has been unstoppable in 2011, adding over 20% year-to-date. Like the rest of the broad market, the stock pulled back a bit this week, but remains docked above the steadfast support of its 10-week and 20-week moving averages.

In fact, NFLX's pullback this week could actually provide a nice buying opportunity. Going forward, a bounce off technical support could shake loose some of the bears, helping NFLX add to its already-impressive year-to-date advance.


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