Not a 'Black Swan', But a 'Murder of Ravens' in Store for Netflix (NFLX) - Analyst

December 3, 2012 1:00 PM EST
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You may have heard of a 'Black Swan,' but have you ever heard of a 'Murder of Ravens'?

A 'Black Swan' can be defined as a four Standard Deviation move in an investment due to a catalyst which is relatively overlooked by investors. Analyst at Albert Fried defines a 'Murder of Ravens' as a cluster of competitive and investment fundamental forces which in aggregate equals a Black Swan. Unlike a Black Swan these forces are generally know to investors but the sum influence on a company individually is generally understated.

Albert Fried analyst Rich Tullo believes the recent product line expansions of a number Netflix (NASDAQ: NFLX) competitors is a Murder of Ravens which has the potential to damage its strategic value.

Tullo notes that since Since last week and since Mr. Icahn bough million of stock options Netflix has new competitors to deal with in Europe, South America, and the US:

1. TIVO and Com Hem will launch a cloud based TV service in Scandinavia, in our view if successful the Com Hem model could be replicated in the U.S. and Canada.
2. America Movil a Mexican Mobil telecom company will launch a new offering called Clarovideo for just 99 pesos a month and we like Movil’s idea as NFLX is challenged in collecting receivables in Latin America. As America Movil is the gate keeper for roughly 246 million mobile phone accounts we think the company has several strategic advantages over NFLX.
3. Coinstar looks like its making progress with its Verizon partnership and should be in place to distribute content on Redbox Instant before years end.
4. Time Warner also announced a new initiative in Scandinavia and is now distributing HBO Go in Sweden, Finland, Norway, and the Netherlands a mid sized EU media market were NFLX was hoping to exploit.
5. DISH TV is also in talks to enter the Latin American market in Brazil and might consider bidding for GTV in Brasil (according to the Wall Street Journal) which would open the door for a Block Buster Roll-Out in Brazil if DISH and GTV merge.

"In our view, as NFLX’s multi-year growth plan is reliant on robust international sub growth to meet its $7 billion in off and on balance sheet content liabilities; we think this plan took a major hit over the last few days and still suggest the liquidation of NFLX long positions despite takeover speculation," the analyst said. "We think the notion of a Corporate Board approving a NFLX acquisition in light of the new competition, in light of the Autonomy accounting scandal, and in light of NFLX’s apparent approval of anti-takeover protections makes a bid for the company in the $90 to $130 range a Twitterverse fantasy in our view."

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Emon Mitchell on 2012-12-04 21:00:50
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A "murder of ravens" makes no sense. You either have an unkindness of ravens or a murder of crows. Please get your collective nouns right when it comes to birds, Mr. Fried.

erik on 2012-12-03 18:18:52
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the article is wrong america movil's service in mexico is $69 pesos a month check your facts

$7 billion???
Richard Praeter on 2012-12-03 13:21:09
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I thought the total content obligations for netflix was $5 billion.

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