The fall of Netflix ( NFLX) stunned investors Friday, as the debate about the mail-order DVD rental firm's prospects only got louder.Netflix shares slid 26% in the wake of Thursday's
Value JudgmentThe debate over Netflix, a heavily shorted stock, touches on several themes recognizable to investors -- particularly those who have sought to value fast-growing media companies carving out new businesses. As with satellite radio companies XM ( XMSR) and Sirius ( SIRI), some key issues are how quickly a company can acquire new customers, how much it will cost to do it, how long those customers will stick around, and how much a company will have to spend to keep them happy. For Netflix bears, Thursday's earnings release and conference call with analysts gave them additional morsels to feast on. While subscriber acquisition costs for the second quarter came in in line with expectations, the company said Thursday that its SAC budget would increase from about $35 per subscriber to between $37 and $39. The company says it will advertise more on television in the third quarter, and is cutting back on online advertising because of second-quarter rate increases.
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The Netflix rally