Some of the craziest Wall Street action anyone can remember has taken place in all of four little letters:
This week, Netflix (NASDAQ:NFLX) has taken the ‘ol ker-plunge — careening over the edge, going from the land of triple-digits to double-digits.
In fact, just 3 1/2 months ago, NFLX fetched $300 per share. And as I pen this note to you, it goes for just around $80. Wow.
To be sure, there’s a unique way to put a bunch of fungolas in your pocket because of this truly unique situation that’s been served up here. And that’s what this edition of the “Weekly Windfall Corner” is all about.
The New Era for NFLX Traders
My strategy for NFLX takes advantage of two new realities facing the company:
1) There will be many, many, more months of volatile, temper-filled action in the stock price, and
2) We’re witnessing a one-sided overreaction on a scale that hasn’t been seen in some time.
Now, there’s no denying reality, which is that the stock dropped $40+ in one day, and is trading in the $70s right now. It’s also happening at six times the normal daily trading volume. This kind of action “is what it is” — and it doesn’t lie!
Not only this, but NFLX already has been dropping, sliding, losing and bleeding for several months now. Investors have been factoring in the new subscription changes, the price hikes, etc for several months already!
Before the earnings announcement, it was no secret Netflix was losing subscribers. The company even said so. They had estimated this number to be around 500,000.
But this week when they reported the real number to be 800,000 lost subscribers, investors freaked again — sending the shares down 35% in one day!
But wait. Is that you asking how many total subscribers Netflix has? It is?
Well, they have upward of 23 million. In other words, they still have 23 million paying subscribers!
NFLX’s Bigger Picture Hasn’t Changed All That Much!
So did they bungle their strategy a few months ago? Yes. Was their communication not the best? Yes. Is their CEO not the most-polished on all corners? Yes, yes, yes.
That’s all true. But to lose 75% of the company’s market cap in all of three months after losing about 3% of the subscriber base?
What we might be witnessing here is some of the most one-sided action in years, and here’s how I see things…
The whiners and complainers are dropping off … 800,000 of them so far. They’re furious, upset and voting with their feet — teaching Netflix a lesson.
But then there’s the “vacuum theory,” which states that when you remove something (like old clothes from your closet that don’t fit), something newer, cooler and more pleasant will rush in to replace the void.
Right now, extremely angry and bitter folks are leaving. And when all’s said and done, it’s probably going to be easier on the company, thanks to the vacuum theory!
And if they don’t replace them, I don’t think Netflix cares.
I’m just talking about reality here. They’d never say it, but maybe Netflix has turned a corner. After all, they’ve been running this same business model forever … they’ve had mega success … but now they want to modify it.
An Inflection Point for a Solid Business
I’m sure they see the landscape with a much broader lens than someone sitting in Topeka, Kan., ticked off about their new, higher Netflix bill.
After all, the company is extending streaming services overseas (with a launch in the U.K. and Ireland set for early 2012). They are busy signing new, exclusive content deals. And they also know that MOST CUSTOMERS WILL REMAIN THAT WAY when all’s said and done!
Again, 23 million paying subscribers are still 23 million paying subscribers.
And those people re-upping their membership every month means there’s a money-making options trade for YOU in there. Get the details on the next page…
Learn Preston James’ Weekly Windfall Secrets here.