Netflix has begun a new expansion into Northern Europe, and this has resulted in significant movement of Netflix stock. The expansion itself is a significant risk for the company, as it may take two years or more for the company to see a profit. In the meantime, the expansion is leading to the company reporting its largest ever level of loss for the fourth quarter of 2012.
In the last few weeks, Netflix has seen a dramatic rise in the values of its stocks. Investor Carl Ichan was largely responsible for this rise in share price, as he and his affiliates purchased a ten percent stake in Netflix. The result was a 14% increase in the price of Netflix’s stocks.
Ichan believes that there is strategic value in obtaining Netflix stocks, and he is well known for investing in companies in order to promote his own agenda for change within the organization. Indeed, many observers wonder whether a shakeup would do Netflix some good, as the company appears to have little direction, with subscriptions for the DVD service decreasing, and companies beginning to charge Netflix more to stream their content.
However, not all investors are as confident in Netflix, and the stock has not been staying steady. Only a week before the 16% increase in stock prices, Netflix saw a drop of 15% in stock prices in trading, after Netflix forecasts a lower projection of the number of streaming subscribers that it would have. This rollercoaster of stock prices has made many investors worried, and while Netflix still appears to be doing well as a business, it is difficult to predict its future.
Netflix faces difficulties because it offers an amazing service, but more and more companies are beginning to offer the same or better services, with competitors differing from each other in terms of the specific content that they offer. In particular, a lot of producer’s websites are able to watch full episodes of many television series for free online; much of this content arrives on these sites before it does on Netflix, which discourages people from using Netflix.
Netflix is sitting on the fence between two different types of technology, its online streaming content and its DVD by mail service. While Netflix appears to be trying to move consumers aware from the DVD service and towards streaming, many consumers are reluctant to make this switch. Investors are also not too happy about the idea, because the DVD business has lower cost and also continues to maintain high profit margins.