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Posted by on Sep 15, 2011 in Markets, TG Roundup

NetFlunks Got Cramered

Do you listen to Bozo Cramer on CNBS’ Mad Money show? Long before he became a TV “star,” he and I used to exchange messages and jabs on the Silicon Investor website. Back in early 1999 I said to him, (paraphrased) “For a long time after the tech bubble deflates, cheerleaders you who pump worthless pieces of junk as great stocks, will be derided and hated.”  His retors was something like, “Go kick your dog” or something like it. Well, I had the last laugh when his major picks blew up after the implosion of tech stock bubble. I have already brought to this audience about the expose on the great adventures of Jim Cramer via the Daily Show’s Jon Steward and his crew.

Today, Cramer has earned another feather in his cap, which he apparently has trouble wearing as his head is firmly stuck up you know where.

Here is his view of NetFlix over the last few months.

He said on Aug 9th (NFLX Closing: $237.80):

Netflix (NFLX) is growing faster than the economy, and like Google (GOOG), Apple (AAPL) and Amazon (AMZN), Netflix is a buy on its rapid growth. Cramer would use deep in the money calls to buy Netflix.

July 26, 2011 (NFLX Close price: 269.40):

“When the smoke clears, it’s the track record that matters, and Hastings (the CEO) has the best track record in the business,” said Cramer.

July 20, 2011 (NFLX: 281.40)

Netflix (NFLX): “Very controversial…it didn’t go to $300, and because it didn’t go to $300 that day, people hate me…I have liked the stock since it was $50…I think it could go to $300. I think Apple should buy it…once we see these social media companies go public, we will see how cheap Netflix is, and I still want to buy.”

July 11, 2011 (NFLX: 290.74):

The internet was abuzz with criticism of Netflix (NFLX) for raising its prices. However, the stock shot up 7 points following this news. Is it worth giving Netflix the benefit of the doubt? Since the stock has risen from $54 where Cramer got behind it in 2009 to $300 for a 450% gain, Cramer thinks Netflix’s pricing power is a benefit not a liability. What is the real story behind its increases? Netflix is not upping the cost of its streaming service but is raising the price for ordering DVDs. Cramer sees this price hike as a strategy to encourage its customers to move away from the old-fashioned, expensive delivery service to its streaming service. The company saves money if its customers watch streaming videos, and the move could raise revenue per customer, a key metric, by 20%. Cramer doesn’t think Netflix will lose many subscribers over the price increase, and those who dump Netflix are just “complaining about being dragged kicking and screaming into the future.”

September 15, 2011:

(Via Reuters)

On Thursday, Netflix said it would have 24 million subscribers at the end of the third quarter, down from a prior forecast of about 25 million given soon after the July announcement of the price increase.

The decision by Chief Executive Officer Reed Hastings to raise rates for customers who still want DVDs by mail took effect earlier this month.

Fewer customers than expected are opting to take Netflix’s DVD-only subscription package. Netflix now expects to have 2.2 million such subscribers, down from the previous forecast of 3 million. The company also cut its forecast for streaming-only subscribers, to 21.8 million from 22 million.

Lazard Capital analyst Barton Crockett expressed concern that the changes might also hurt Netflix’s fourth quarter.

“Clearly, if the third quarter is slipping, there’s risk to the fourth quarter, as the year-ago period was a time when everything went right for Netflix,” he said in a research note.

However, Netflix maintained its third-quarter financial outlook as well as its international subscriber forecast.

The company’s stock fell 19 percent to close at $169.25 on Nasdaq.

(Via WSJ)

Certainly folks in Hollywood have a reason to feel vindicated. Netflix stock in recent years had become detached from reality. Even after its sell-off on Thursday, leaving it down about 40% since mid-July, the stock still trades at a rich 38 times this year’s expected earnings. HBO owner Time Warner, by contrast, is at 10.9.

I never understand why stock scammers like Cramer (and people like him) never get prosecuted for fraud