Despite the quality of content, albeit content produced primarily through data mining, some analysts are suggesting a fall to earth for Netflix, Inc. (NASDAQ:NFLX) and its stock. Netflix determined that its subscribers like political intrigue, Kevin Spacey, David Fincher and binge viewing and gave them just that. Kentucky Fried Chicken has determined that fat people like the same thing but don't like bones. The former produced House of Cards and released all thirteen episodes on the same day. KFC after weeks of negotiation with Spacey and Fincher will have to settle for deep-fried boneless chicken pieces.
Wedbush analyst Michael Pachter recently backed his "underperform" rating of Netflix, Inc. (NASDAQ:NFLX) saying that their original programming means next to nothing as other companies own both the DVD and syndication rights. Regardless of this, thousands of people continue to drop their cable contracts in lieu of streaming. Consequently, Netflix's stock has risen over 80% since the start of 2013. I can't be alone in thinking that Pachter is just being a touch obstinate.
"Although Netflix's ownership of only partial rights is not a new disclosure, we believe that in recent months, Netflix, Inc. (NASDAQ:NFLX)'s share price appreciation has been driven in part by the perceived potential upside for the company from 'House of Cards" success," Pachter wrote in a note to investors.
While I understand the point, I can't help but feel that Mr. Pachter is missing the fact that there is no reason to pay $5o for the DVDs when you could simply take that same money and subscribe to Netflix, Inc. (NASDAQ:NFLX) for over a half a year. With more people installing streaming devices on their televisions, who would bother to buy the box set of DVDs? With a small amount of research and limited investment, video capture devices are also able to copy this stream. This makes little sense at the end of the day. Oh wait, he has to cover his ass based on an "underperform" rating issued when Netflix, Inc. (NASDAQ:NFLX) hovered around $100 per share.
Pachter believes HBO is doing it right with their syndication and DVD rights. They are. While Netflix, Inc. (NASDAQ:NFLX) is focused on making its money on subscribers and streaming that doesn't mean that they will fail to secure their rights in the future.
I'm not suggesting that Netflix, Inc. (NASDAQ:NFLX) is as safe as the Pound, I'm just thinking that Mr. Pachter's target price of $55 is a little low for the time being.