It's Okay to Love Netflix (NFLX) Again - Cramer
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Netflix, Inc. (Nasdaq: NFLX), arguably one of the more discussed companies as of late, is getting a boost from Jim Cramer today.
Yesterday, Netflix CEO Reed Hastings wrote an open letter to T2 Hedge Fund manager Whitney Tilson telling him to not short the stock, or else they'll cancel his account...
But seriously, Reed said that he's a big fan of Tilson's big heart in terms of charity donations, and that he should cover his short so that he'll have more money to donate to the cause. Hastings addresses all of Tilson's concerns, from the recent departure of their CFO to market saturation.
In fairness, Tilson said that the CEO's response was "healthy."
Cramer is also bullish on the shares. Earlier in the month, he recommended that his followers sell half of their position, as a 228% gain from April 27, 2009 (when he first recommended the stock) means that you were playing with the houses money. Shares are down 30 points since the early December advice.
But, Cramer noted that the bearish position on the company is worth looking into. He notes that bears believe that shares are priced for perfection, and he's willing to pay 60x EPS estimates for the stock.
Netflix currently trades at about 47x EPS estimates.
Bears bark about competition from Apple, Inc. (Nasdaq: AAPL), Amazon.com
(Nasdaq: AMZN), and others. Cramer doesn't buy this argument, because Netflix is a low-cost subscription service that isn't competing for the hottest titles.
Moving on, bears point to tightening margins going forward. Cramer retorts that Netflix has already greatly increased their library for little cost.
A final argument that Cramer addresses is that the company is closer to market saturation than most investors believe, which Cramer dismisses as poppycock.
Let's shift gears here. As many know, Cramer is a little bullish on the market. In that sense, he begins to make a bullish case for the shares. Crames calls Netflix a 'game changer,'noting that their streaming service is taking off faster than expected.
The company has broad exposure to the U.S. market, with 113 million Netflix enabled devices in homes across the country, and 20 million subs to-date. Devices enabled include game consoles, Blu-ray players, iPads, iPods, and more.
Cramer also notes that Netflix has only penetrated about 23% of homes with broadband, and international markets still remain untapped, with Netflix only recently expanding into Canada.
After the earlier recommendation to drop half of your holdings, Cramer believes that its okay to start accumulating again on the dip.
Shares of Netflix are up 1.7% premarket today.
Yesterday, Netflix CEO Reed Hastings wrote an open letter to T2 Hedge Fund manager Whitney Tilson telling him to not short the stock, or else they'll cancel his account...
But seriously, Reed said that he's a big fan of Tilson's big heart in terms of charity donations, and that he should cover his short so that he'll have more money to donate to the cause. Hastings addresses all of Tilson's concerns, from the recent departure of their CFO to market saturation.
In fairness, Tilson said that the CEO's response was "healthy."
Cramer is also bullish on the shares. Earlier in the month, he recommended that his followers sell half of their position, as a 228% gain from April 27, 2009 (when he first recommended the stock) means that you were playing with the houses money. Shares are down 30 points since the early December advice.
But, Cramer noted that the bearish position on the company is worth looking into. He notes that bears believe that shares are priced for perfection, and he's willing to pay 60x EPS estimates for the stock.
Netflix currently trades at about 47x EPS estimates.
Bears bark about competition from Apple, Inc. (Nasdaq: AAPL), Amazon.com
(Nasdaq: AMZN), and others. Cramer doesn't buy this argument, because Netflix is a low-cost subscription service that isn't competing for the hottest titles.
Moving on, bears point to tightening margins going forward. Cramer retorts that Netflix has already greatly increased their library for little cost.
A final argument that Cramer addresses is that the company is closer to market saturation than most investors believe, which Cramer dismisses as poppycock.
Let's shift gears here. As many know, Cramer is a little bullish on the market. In that sense, he begins to make a bullish case for the shares. Crames calls Netflix a 'game changer,'noting that their streaming service is taking off faster than expected.
The company has broad exposure to the U.S. market, with 113 million Netflix enabled devices in homes across the country, and 20 million subs to-date. Devices enabled include game consoles, Blu-ray players, iPads, iPods, and more.
Cramer also notes that Netflix has only penetrated about 23% of homes with broadband, and international markets still remain untapped, with Netflix only recently expanding into Canada.
After the earlier recommendation to drop half of your holdings, Cramer believes that its okay to start accumulating again on the dip.
Shares of Netflix are up 1.7% premarket today.
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