It appears that investors are finally ready to call an end to the Netflix, Inc. (NASDAQ:NFLX) bull run. The firm’s stock dropped by more than 5% of its value on today’s market at time of writing while Outerwall Inc (NASDAQ:OUTR), a competitor with a hedge fund going activist, picked up almost the same margin.
Today’s move is the one of the first days of big losses for Netflix, Inc. (NASDAQ:NFLX) in a long time and it may mark the end of the payoff for one of the hottest stocks on this year’s market. Outerwall Inc (NASDAQ:OUTR) isn’t a direct competitor to Netflix, but its business may be close enough to result in this kind of problem at the video streaming firm.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
Netflix and Outerwall competition
Outerwall Inc (NASDAQ:OUTR) is the owner of Redbox, a kiosk movie rental service. Before Netflix, Inc. (NASDAQ:NFLX) became wholly interested in the streaming side of the business Outerwall Inc (NASDAQ:OUTR) was one of the company’s biggest competitors. The direct competition between the two has fallen by the wayside, but recent events may have sparked fears of a return.
Jana Capital Partners announced yesterday that it was looking to take a 13.5% stake in Outerwall Inc (NASDAQ:OUTR). The fund said that it was going to look at unlocking shareholder value at the company and had contacted management about doing so. Outerwall is in the headlines for the first time in a while and Netflix, Inc. (NASDAQ:NFLX) shares are crumbling in value.
Netflix bull run
Several narratives have followed the Netflix, Inc. (NASDAQ:NFLX) run through 2013. The firm was one of the many dubbed disruptive this year, and its efforts to establish itself as a maker of premium content was noticed for the first time with shows like House of Cards and Arrested Development.
The stories of the company’s future value have driven its Price Earnings ratio to close to 400X. The valuation of Netflix, Inc. (NASDAQ:NFLX) remains unbelievable unless you hold to the theory of disruptive technologies. If the company’s future is threatened by the return of the video kiosk today, Netflix may not be quite so disruptive.
Since the start of the year shares in Netflix, Inc. (NASDAQ:NFLX) have more than tripled. A great earnings report last January coupled with a pair more later in the year led the shares to high valuations and high risks. As with Tesla Motors Inc (NASDAQ:TSLA) this doesn’t look like the end of the bubble, but it is time to ask questions.