NEW YORK (TheStreet) -- Through Netflix's (NFLX) momentum-driven frenzy past $300, bulls ridiculed me. When the stock crashed toward the end of 2011, I was vindicated, although I do regret not taking what the market gave -- as irrational as it was -- and riding the dog long for at least a little while.In any event, Wall Street had no clue on NFLX last year and the cluelessness continues into 2012-13. Morgan Stanley upgraded NFLX on Monday. At his blog, TheStreet's Scott Rutt asked, where in the heck were they prior to NFLX's 30% two-week run? In late July, I started turning bullish NFLX. In Prepare to Buy Netflix Before It Rises From the Dead, I cited content costs as one of several reasons for my change in sentiment. That was part of Morgan's Johnny-come-lately bull case from this week. At the end of July, NFLX traded for $57.75. Of course, it ended Monday's session at $73.52 before pulling back a bit Tuesday. After the stock's recent run, there's mixed opinion on NFLX. You have houses such as Morgan recommending it. Take that with a grain of salt. And you have BofA/Merrill downgrading it on the basis of valuation and the recent run. While I appreciate the call for caution, I rarely use valuation and strength as reasons to stop buying a growth/momo stock, particularly if you're looking at it as more than a trade. For long-term investors, nothing but the forward-looking story matters; therefore, if you're bullish, this weakness could present a buying opportunity. That said, I tend to agree with TheStreet and CNBC's Jim Cramer, who simply calls the stock "hard to own". That's how stocks driven by a mix of emotion and clueless Wall Street sentiment roll. They gyrate for no apparent reason. And the so-called expert analysts only make accurate assessments when their insight and information has become painfully obvious. That makes it difficult to commit. I prefer to stay on the sidelines. One of the few folks who was on the ball, re: NFLX, throughout 2011 is CNBC's Herb Greenberg. On Monday, he wrote a piece that gets at a core Netflix issue: Has subscriber growth hit a wall?
It certainly has domestically. And you can't blame Netflix for this. It's merely a function of the subscription model. As Greenberg points out, that presents quite a conundrum for a growth company. He doesn't mention the one thing Netflix is banking on to drive subscriber growth -- international. I don't blame him. It's just not going to happen in any part of the world at the level Netflix needs. So, what's the solution? In theory, it's simple: Netflix Should Raise Prices Again. In practice, that's not as easy as it sounds given the way Reed Hastings (mis)handled last year's increase. That's one of the reasons why I argue that Netflix Needs a Celebrity Spokesperson. Somebody to massage the public into going along quietly with a significant price hike. As I explain in the above-linked articles, there's no reason, other than blowback from last year's controversy, why Netflix should not be able to raise prices. It offers a service that is worth way more than $8 a month. Cable, satellite, SiriusXM ( SIRI) -- they all do it. Some pull the move off without a hitch (SIRI), while others (cable, satellite) get away with price hikes at the same time as customers spew vitriol their way. I can't see a way forward for Netflix other than a price hike, hopping into the crowded advertising space (they would blow it) or opening its platform up in two ways -- increasing content delivery methods and working in relevant e-commerce components. In the past, I recommended the company get into the adult streaming market by taking out privately-held AdultDVDEmpire, but that's not happening. So then, Netflix needs a cash cow. DVD once served that purpose, but Hastings blew the business up. He also says he will not offer on-demand, al a carte options because that's never been what Netflix is about. I assume he's against advertising and e-commerce for similar reasons. Hastings has a model in his head -- Netflix Streaming at $8 a month across the globe -- and he's stubbornly sticking to it. Not a good idea.
It's odd. Mark Zuckerberg, the CEO at much-maligned and strongly hated Facebook ( FB) can teach veteran executives how to deal with crisis and adjust on the fly. As I detailed earlier this week, Hewlett Packard ( HPQ) CEO Meg Whitman can learn from Zuckerberg. And so can Hastings. If Zuckerberg can stray from Facebook's social mission even a bit, why can't Hastings do something similar? Netflix's survival depends on it. At the time of publication, the author was long FB. Follow @RoccoPendola This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.