Recently, Neil Cavuto of Fox Business Network spoke with Mark Matson (Matson Money, Inc.) and Lori Rothman (Fox Business) about Netflix’s gradual rise to the top that came about a year after its 50% price hike in 2011.
After Netflix changed its pricing structure in 2011, the online streaming and DVD-by-mail company experienced a year-long decline in stock prices until July 2012. Since then, it’s been experiencing a steady rise to the top. After the stock reached its lowest point in July 2012 at 53.91, it continued to rise until it peaked at 448.37 in March 2014.
With tons of opportunities for consumers to binge-watch compelling shows and access a wide selection of movies instantly, Netflix is giving streaming services like HBO GO and Amazon Prime a run for their money. “The stock’s on fire,” said Cavuto. “And it’s not only eating HBO’s lunch, but a lot of short sellers’ lunch as well.”
After introducing Netflix and its consistent rise in stock price, Cavuto asked Mark Matson and Lori Rothman what they thought about the company, its stock history, and how investors should respond.
“It’s a cautionary tale of why people should not stock-pick,” said Mark Matson of Matson Money, Inc.
“Netlix’s previous high was 300. It dropped 74 percent and then made its way back up to 389, which is a 14 percent rate of return. This sounds impressive, but, until you consider the S&P averaged 60 percent during the same period of time with only one-tenth of the volatility, you can see that picking individual stocks [like Netflix] is a bad deal for individual investors.”
While Matson spoke to individual investors regarding Netflix and offered a note of caution, Rothman mostly spoke on the cause of Netflix’s recent success.
“It’s affordable,” Rothman said. “The other thing is that they’ve really tapped into our viewing habits [like binge watching]. If you keep putting out original content that’s good and compelling, people are going to come back to it.”
To which Cavuto replied, “Bingo, bingo, bingo.”