NEW YORK ( TheStreet) -- Of course, I have been recommending Netflix (NFLX - Get Report), the stock, since it was around $60. Called it to $100. And while I nailed it even higher, I have a separate, relatively measured and bearish-leaning take on the company.
Calling this surge was like predicting a New York Islanders loss. So obvious based on the dysfunction that's right in front of us.
Netflix CEO Reed Hastings delivers endless smoke and mirrors that Wall Street loves to lap up. The guy will talk jive -- and a little trash -- to the judge's face at Netflix's bankruptcy hearing. He'll raise a glass to himself at the company's funeral.This business (still) has serious problems. In recent days, others have done an admirable job of identifying and analyzing them. I have been hammering some of these points for a while, not so much on others; the work I cite does it just as well, if not better. First, over at Seeking Alpha, Vince Martin hammers home the absurdity of Netflix-to-HBO comparisons, even if he didn't mean to, as he makes an excellent case for an absolutely necessary Netflix price increase. Martin nails the context from within which increased prices would have to happen:
Any price hike would surely have to be conducted with communication and customer care that was sorely lacking in 2011 . . . . A careful, managed price hike, which communicates Netflix's value proposition, emphasizes the superiority of its content relative to its competitors, points out the additional content licensing costs required by streaming, and is framed as a necessary investment to improve the Netflix library could have a reasonable chance of success.As I explained in September, Netflix needs to hire a celebrity spokesperson. It should have done this months ago. Preferably a highly attractive woman, who comes without controversy, is universally liked and easily trusted. Interestingly, it's probably, at least in part, Hastings' ego that keeps this from happening. I'm not certain he fully comprehends what an awful idea it is to keep himself the face of Netflix. If Netflix is smart (or can maneuver around Hastings death grip), it will introduce tiered monthly pricing, some on-demand, pay-per-view content and dip its toes -- meaningfully -- into e-commerce, not to mention sell its DVD division, about two years late, for relative scraps. Because, as Richard Tullo who covers Netflix for Albert Fried and Company, points out, no matter how it appears on the surface, all is not well at Netflix. Consider what he had to say in an email last week to me and a handful of other interested parties:
NFLX . . . cancels the 2014 season of Arrested Development which is no longer core according to CEO Reed Hastings. My guess is NFLX thinks its institutional Investors have not been paying attention to the roughly dozen conference calls bulling the show. Alternatively can NFLX afford its now non core originals? I guess that is the risk of paying top dollar for content before reviewing pilots for green lighting. Boy I wish I was that smart.
NFLX House of Cards GOOGLE Trends tanked; can I now dismiss the $100 million investment (about $2 per share) too? Dismissal of data makes a buy rating easer to justify. My guess is House of Cards finishes 4th in the Flixies behind, the Walking Dead, Mad Med, and Breaking Bad.
We think NFLX should merge with AMC Networks (AMCX - Get Report) (the Company discovering shows such as the Walking Dead, Mad Med, and Breaking Bad).Wall Street barely reacts to this stuff.