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One of the most up and down tech stocks on the market resumed its seesaw ways today.
Netflix (Nasdaq: NFLX), pioneers of the streaming-video and DVDs-by-mail businesses, has dipped more than 5% today on news that rival Comcast (Nasdaq; CMCSA) is launching its own streaming video service. Netflix’s latest fall is nothing new for what has been one of the most volatile tech stocks on the market the last six months.
Quick review: Netflix was a stock market darling as recently as mid-July, topping out at $305 a share. But after a series of ill-advised moves made by owner/founder Reed Hastings, the stock came crashing back to Earth, bottoming out at $63.86 on November 25.
But the stock made a comeback that was accelerated by a quarterly earnings beat late last month. Netflix was back to $130 a share as recently as February 7. Now, with today’s news, the stock is back down to $111 a share.
This time, stupid decisions by management aren’t to blame for Netflix’s falling stock price. It’s the prospect of a little competition that’s scaring investors off.
Some analysts are predicting that Comcast’s new “Xfinity Streampix” video service (a mouthful compared to the catchier “Netflix” moniker) could steal away anywhere from 10% to 30% of Netflix’s subscribers. The Xfinity Streampix service will initially be available only to Comcast cable subscribers, but may eventually operate as a stand-alone service.
Comcast’s stock is up only slightly since the news broke yesterday.
But Comcast is just the latest company to take aim at Netflix’s lofty perch atop the video-streaming world. Verizon (NYSE: VZ) and Coinstar (Nasdaq: CSTR) announced a joint venture several weeks ago to provide online video and DVD rentals. An online video deal between Google (Nasdaq: GOOG) and Amazon (Nasdaq: AMZN) is also reportedly in the works.
So this is nothing new to Netflix. The stock has been beaten down plenty before. What matters is whether or not the company can continue to expand its business despite the added competition.
If so, then Netflix may still be undervalued.