Netflix Losing Its Edge? (NFLX)

In the past two weeks Whitney Tilson, a Netflix NFLX bear, has been digging in his heels into his notion of NFLX being overvalued. CEO of Netflix, Mr. Hastings, replied with another piece to provide investors with his rebuttal. In a dialogue that transpired through one of the leading blog sites SeekingAlpha,Tilson and Hastings outline their arguments. Relevant overviews of the debate are noted below, cited directly from SeekingAlpha. Whitney Tilson's Thesis for Shorting: Because we think the valuation is extreme and that the rapid shift of its customers to streaming content (vs. mailing DVDs to customers) isn't the beginning of an exciting, highly-profitable new world for Netflix, but rather the beginning of the end of its incredible run. In particular, we think margins will be severely compressed and growth will slow over the next year. (Read More) NFLX CEO Reed Hastings Response: I have to agree with my friend Whitney that there are many risks ahead for Netflix, that our valuation is substantial, and that it is possible that one could make money shorting Netflix today. But shorting a market leading firm as it is driving a huge new market is a very gutsy call. On balance, I would rather have my co-philanthropists on the long side of this particular bet. . (Read More) Related Stocks Other stocks involved in this debate include Apple AAPL, especially as it begins its 2011 launch of Apple TV and enters Netflix's streaming video market, and the now-bankrupt Blockbuster BLOAQ BLOBQ), which will not likely be a major competitor in the near-term future.
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