The Bull vs. Bear Case for Netflix

The disruption of Blockbuster's video rental business by Netflix is a classic tale of a dynamic David bringing down a sclerotic Goliath. Netflix emerged from that epic struggle as one of the companies in America most beloved by both consumers and investors alike. Its stock soared ever higher, while the skeptics looked on in disbelief.

Things change, however. As the company wisely and proactively tried to disrupt its own highly profitable business model by pivoting to streaming video, the stock market eventually took the former media darling out to the woodshed for an old-fashioned thumping. After reaching a peak of over $300 per share in the summer of 2011, Netflix's stock plunged dramatically several months later after it became abundantly clear that the new business wasn't quite the same as the old one.

With the stock price now around $100 per share, some investors are hoping that Netflix can return to its former glory. Others believe Netflix is playing a losing hand, and will never achieve the profitability it once enjoyed.


So, who's right? Are the bulls more persuasive on Netflix? Or the bears?

We think there are strong points on both sides, so we decided to present the various arguments in the embedded slideshow below. To navigate through the slides, just click the arrows. Alternatively, you can just click the link below the slideshow. The entire deck might appear somewhat long, but it shouldn't take too long to look at.

The bull vs. bear case for netflix from The Motley Fool.

Motley Fool co-founder David Gardner has recommended Netflix several times for subscribers of his Stock Advisor investing service. The company is a great example of the innovative growth companies that David likes to recommend to his membership. If you are interested in how David picks his winners, click here to get instant access to a personal tour behind David's Supernova service.

The article The Bull vs. Bear Case for Netflix originally appeared on Fool.com.

John Reeves owns shares of Walt Disney. The Motley Fool recommends Amazon.com, Netflix, and Walt Disney. The Motley Fool owns shares of Amazon.com, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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Walt D in LV

While I've always admired Netflix' vision for the future in streaming, knowing even back in 1999 that it would someday come true, I do NOT endorse it's "all in" philosophy.
DVDs/Blu-rays are extremely profitable for Netflix, and until the last quarter, the MOST profitable part of their business. DVDs and Blu-rays are still very much the most profitable customer for customer, so I don't see why Netflix feels they have to KILL of that business in order to take on streaming so hard.
Can't they keep both businesses going and remain even MORE profitable?

January 14 2013 at 1:26 PM Report abuse rate up rate down Reply