Should Netflix, Inc. (NFLX) Bears Cover Their Shorts?

The Hunger Games
Investors have to be realistic here. Netflix isn’t going to top $300 again anytime soon. That was a price modeled on a much higher average revenue per user than $7.99 a month, at a time before optical discs began growing out of favor.

However, just as investors have pushed Amazon higher despite shrinking margins — embracing a model that is sacrificing near-term profitability for long-term market share — investors are also starting to come around to Netflix’s thinking.

Conquering the world is going to be easier to do now than it will be in a few years when more competitors are entrenched. Sticking to the absurdly low $7.99-a-month price point will also keep rivals from inking the kind of content deals that they would need to level the playing field with Netflix.

It’s hard to get a read on exactly what Netflix will offer up tomorrow. The former dot-com darling stopped putting out churn metrics more than a year ago, and Netflix finds itself revising its outlook more often than not at its quarterly outings.

However, there’s no denying that Netflix offers a solid product at half the price of the premium movie channels that require costly cable and satellite television plans. As more homes go Wi-Fi and more home theater appliances make it easier to stream video, Netflix is the runaway leader as the greatest beneficiary of these welcome trends.

There’s always the chance of the stock taking a stumble on an operating hiccup tomorrow, especially after the shares have run up so high over the past few months. However, there has to be a reason that a prolific longtime bear wanted to get on the bullish side of this trade ahead of tomorrow’s report.

Good luck to those that chose not to follow suit.

The article Should Netflix Bears Cover Their Shorts? originally appeared on Fool.com.

Longtime Fool contributor Rick Aristotle Munarriz owns shares of Netflix. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix.

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