Netflix (NASDAQ:NFLX) crashed on October 9, tripping the Nasdaq breaker and marking over 20 percent loss in share value over the last three months. The stock, which was seeing something of a rally in the previous week — 35 percent over the last six trading days through Monday — got slapped with a downgrade to “underperform” from Bank of America.
“We now believe the risks outweigh the reward. This quarter reminds us a lot of last quarter, with heavy short covering driving the stock up post-quarter-end on no or limited news; a set-up we don’t like to see in any hyper-volatile stock like Netflix,” said BofA analyst Nat Schindler, according to The Wall Street Journal’s Market Beat.
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Schindler also points to concerns over increased competition from giants like Amazon.com (NASDAQ:AMZN). The e-commerce superstar recently signed a clever deal with premium television provider Epix. The deal has Amazon paying a flat rate for content, with increased payments only if the number of subscribers rises above a certain level. The model is more elegant than the current flat-fee structure that is widely used. Epix previously had an exclusive deal with Netflix, which has expired.
However, despite apparently crushing a possible competitor, Amazon is trading over 2.5 percent down on Tuesday. Concern could be mounting regarding the company’s Kindle Fire line in the face of the much-hyped Apple (NASDAQ:AAPL) iPad Mini. Also announced today, brick-and-mortar competitor Wal-Mart (NYSE:WMT) is teaming up with the United Parcel Service (NYSE:UPS) to test same-day delivery of goods ordered online.
A Wal-Mart spokesperson told the Wall Street Journal that nearly half of orders placed online are picked up in store. In 2011, Amazon was testing locker-based pick up at 7-Eleven, although the venture seems to have been abandoned. If Wal-Mart can figure out how to walk the line between online and in-store sales, the company could have a powerful model on its hands. That is, customers placing orders online, wanting to save on delivery and opting for in-store pick up, and then being lured into buying more things when they retrieve their item.
“Relative to the competitive landscape, we have a unique advantage because we have a national footprint of stores combined with our online site that enable programs like site to store, pay with cash or pick up today,” said the Wal-Mart spokesman.