Wedbush Morgan Cuts Netflix to "Underperform"

MarketWatch cites a Wedbush Morgan report: "In a note to clients, analyst Michael Pachter says while the company's performance has been "solid," the stock's current price "reflects investor expectations for growth well above what can be reasonably expected." 

Netflix stock recently hit broke $60 a share for the first time, so what do you think? Will Netflix stock continue to rise?  

[Reminder: I do not own shares in any company I write about.]

Comments

[Seth]

Netflix trades at a very high premium.

So what does that mean exactly?

Michael Pachter's remarks are very accurate about the price of the stock versus the company's growth and performance.

That being said, it doesn't mean the stock will necessarily go down or go up. It just means people are buying it without regard for the fundamentals. Indeed, the stock may continue to rise but the further it goes up, the riskier it will be to purchase it. Afterall, if the price is overinflated, what will happen if Netflix has a misstep? Or a competitor strengthens? It makes Netflix's price very prone to a rapid correction.

[Jeremy]

I have no idea if he's right this time. If you go back and look at this guy's history of predictions about Netflix, he's been wrong probably 90% of the time. Again, maybe he's got something this time but I'm a little skeptical.

[cg]

I don't know all the stock market valuation methods, so can't say if it's overpriced or not. What I do see is if they continued to do DVD rentals only, it would get to that point. They're adjusting by providing more value for the customer with streaming and more ways to do that.