Tech & VC 16 Jan 2007 04:30 pm
Netflix Stock on Pogo Stick
The Netflix announcement this morning is certainly exciting, but not as exciting as the story of NFLX stock. Check out this chart:
Before the opening on Friday the 12th, a JP Morgan Analyst downgraded NFLX to “Overweight” from “Neutral” due to increased competition. As a result, NFLX closed down 6.7% over the close from the previous day.
The next business day (Monday was MLK), Netflix announced this new download program. It was reported before the bell (the first comment at TechCrunch was 2:36am, which I supposed is PST). So, NFLX opened at 24.24, which is the exact same price that NFLX closed on Thursday at, prior to the downgrade from JP Morgan. The download service announcement perfectly wiped out the damage of a downgrade!
However, as the day went on and the blogosphere buzzed about the new service, investors sold off NFLX back to with $0.02 of the Friday close, which resulted in another 6.7% loss. So, NFLX lost 6.7% on Friday, then gained it back in after-hours trading before Tuesday, and then finally lost it all again in trading today (Tuesday). Wild!
Shorting at the closing bell Thursday, then going long at the closing Friday, and going short again at the open Tuesday would have resulted in a 20% gain by now.
3 Responses to “Netflix Stock on Pogo Stick”
on 16 Jan 2007 at 4:45 pm 1.jeremy said …
i doubt even the best fund managers can time the market half that well. it seems that the blogosphere has been doing a lot of complaining lately. im willing to be you can build a big business solely around complaints.
on 16 Jan 2007 at 4:50 pm 2.Andrew Parker said …
I absolutely agree that fund managers could never be that clairvoyant, and I don’t mean to imply that anyone could have pulled off that combination of long and short calls. However, I made the 20% gain comment to exemplify the size of the recent swings. Pretty awesome.
on 16 Jan 2007 at 5:38 pm 3.jeremy said …
im actually a little surprised that the stock was on a downtrend like that. i would imagine that the announcement would force people to cover their shorts which would artificially stabilize the price. i thought the drop would occur one or two days from now.