Peter Kafka

Recent Posts by Peter Kafka

Wall Street Punishes Netflix for Making Wall Street Happy

netflix ticketShares in Netflix, which have have more than doubled in the last year, are a bit down today, sagging some three percent. What gives?

Best to be wary of anyone who tells you why a stock moves on a given day, but a good bet here would be: Shares in Netflix have more than doubled in the last year.

That go-go growth prompted Citigroup (C) analyst Mark Mahaney to downgrade the stock from “Buy” to “Hold” late yesterday. It’s the kind of perverse punishment that Wall Street occasionally doles out to companies it loves, sort of akin to Yogi Berra’s “It’s too crowded, nobody goes there anymore” malapropism.

In any case, Mahaney makes it clear that while he’s dinging Netflix (NFLX) the stock, he loves Netflix the company. Still, if you wanted to find reasons to worry about the company, you don’t have to look very hard: For many years, it owned the market for a la carte entertainment delivered straight to your home. But that’s finally changing.

Cable companies like Comcast (CMCSA) have finally started to figure out how to promote video on demand, and a bevy of digital types, from Apple (AAPL) to Amazon (AMZN) to Google (GOOG) will be beefing up their home entertainment offerings in the next year.

Then again, prognosticators have been predicting that Netflix would get overtaken by heavyweights since it launched. No one has caught it yet.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work