Let's Remove the Names and You Decide ($NFLX)

What If This Was an HBS Case Study?  Let's see. UPDATED

Acme Inc:
Doesn't control access to supply of inputs necessary to distribute.
Doesn't control pricing to supply of inputs neceesary to distribute.
Potential competitors have greater power to influence access and pricing of inputs than Acme Inc.
Potential competitors have MUCH greater access to capital, and a far wider range of related products.

One last thing, Acme Inc's real name?  Netflix (NFLX)
Insert whatever industry you want, the facts above are true, and the conclusion would be that Acme Inc is doomed.  When, not if, unless there is a game-changing event (like M&A).

That doesn't mean that you can't make lots of money trading NFLX.  The Acme Inc summary above tells you that extreme caution is necessary in doing so.  You cannot predict the movements because (presumably) there are more people with more money pushing around the prices for their own reasons.  However, if you are long, then you must remember that the facts regarding Acme Inc are incontrovertible until proven otherwise. 

We can talk all about momentum and technicals, which are fine when there is a conflict of information regarding the Acme Inc's of the world.  In the short run, those factors may certainly dominate the price action for a day, or a week, or even longer.  My only point: when the fundamentals are THIS negative, then be quicker than usual and close your position (long or short) if you are proven wrong, given your timeframe. 

That all said, feel free to click on the left, where an advertisement is almost certain to appear, compliments of Google AdSense, for your free trial.  How Yahoo! (YHOO) missed click advertising is beyond imagination.  That it has survived that colossal mistake is no small achievement, I guess.  Perhaps that is the subject of another post.  Nah.  Nothing much more to say than that.

UPDATE: Splitting up the company into two individual parts, one which is dvd/video game delivery and one which is streaming is the best solution among a number of bad alternatives. The dvd/video game can be seen as a commodity, whose competition will include Blockbuster kiosks, GameStop, et al. The streaming business, however, is built to be sold. Its subscriber base can be sold to any number of parties, from the media creators to Amazon to cable companies to TV manufacturers. That is the shareholder-maximizing move. That doesn't necessarily mean that it will be easily sold, but it is clearly an exit path. Management should be applauded for this move, since it does present an alternative. Assigning a multiple, however, is another matter. The issue now will be what multiplier gets assigned to the streaming business. So unless the streaming business gets sold to Apple, which along with an actual TV, could be the entire back-to-front delivery package, the other potential bidders may have large misgivings because of the pricing of access to media. That leaves Google, Apple, or a partnership with Hulu and studios. The issue is that the pricing of the streaming business is highly contingent on the quality of the potential buyer. Absent a buyer, all of the original post remains true, and Netflix ($NFLX) could see much lower prices, even from here.