This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Netflix Can Rise From the Dead, But Is It a Buy?

Stock quotes in this article: NFLX

NEW YORK ( TheStreet) -- For as long as I have called Netflix (NFLX) a short, I have expressed a certain level of due respect for Reed Hastings.

Of course, I took shots at Hastings along the way, but it has been difficult not to. And, while I am reluctant to put him in a class with Steve Jobs and Jeff Bezos, you're simply not being objective if you do not think he's a sharp guy and a visionary.

Netflix CEO Reed Hastings

He invented DVD-by-mail. That, in and of itself, deserves props. It's not simply that he invented it; it's the way he invented it.

Long story short, Hastings was returning an overdue movie while on his way to the gym. As he agonized over the resultant late fee, it dawned on him: the movie rental industry should run its business more like a gym. Charge a flat, monthly rate and allow people to use your service as often as they like. What might have ended as a daydream for most people creative enough to even have it in the first place turned into a company that changed the way millions entertain themselves.

Now, as Netflix transitions aggressively into a streaming pure play, Hastings has not had much to say over the last few months. Other than lashing out at Comcast (CMCSA) over net neutrality and gliding his way through a couple of conference calls, he has been relatively mum.

The silent treatment, whether intentional or not, makes sense for Hastings. It should make you think twice if you're short Netflix stock.

When Reed Hastings talks too much, he tends to get himself in trouble. That's been his history over the last year or so. And I am not talking about the so-called missteps the mainstream media latched onto in 2011. The well-publicized price increase and Qwikster debacle came as no surprise to me. They were merely outcomes of two larger, more structural errors Hastings made along the way.

Netflix's Suddenly Quiet Transition

First, Hastings killed DVD too quickly. He took a high-margin business that generated cash and, for all intents and purposes, snuffed it out. Without that source of revenue to fund digital content acquisition, international expansion and marketing expenses, Netflix put itself into a precarious enough financial situation that it had to go to market to raise $400 million towards the end of 2011.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,042.90 -28.32 -0.17%
S&P 500 1,972.29 -5.51 -0.28%
NASDAQ 4,493.39 -12.4620 -0.28%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs