Netflix (NFLX) rose 6.61% on Wednesday due to the long awaited chapter 11 filing of Blockbuster. Blockbuster which 10 years ago hit its peak stock price, 10 years later it shares trade at 2 cents. An investor would have lost over 99% investing in something that seemed as timeless as the movie renting business.
Blockbuster has had to report losses more often than not over the last 5 years. More people appear to be moving towards substitute services such as Netflix. Though Edwards commented that Netflix is just a buzz word to describe the new industry of renting movies digitally and no longer in a tangible form. He said Netflix is actually a very small business in the video market and does not feel it is appropriate to think a Blockbuster bankruptcy helps them. Edwards noted that Netflix stock now has a market cap of 8.2 billion when it has earnings of 120 million a year and tangible of equity of 100 million. The stock is valued all on the future said Edwards.
"10 years ago, Blockbuster was a titan and fell, today Netflix may become a titan but its uncertain but the stock is priced into one day become a titan and ignores any possibility of a substitute service coming around. Blockbuster got priced as a titan when it was one, Netflix gets priced as one when it isn't." Edwards reiterated to holders to sell Netflix stock and the stock is ready for a huge decline coming up. Calling it the most overvalued stock in the world.
No comments:
Post a Comment