Popular video streaming service Netflix has celebrated a high stock price for the past year, but the party has finally come to an end. Over the last 12 months, NFLX has more than tripled, earning it the title of best-performing S&P 500 stock. Tuesday, the stock closed at 221.60, but it has fallen more than seven percent as of this writing (205.85), while the entire S&P 500 is down just one percent.
Writing on The Street two weeks ago, Jake Lynch called Netflix's stock "indefensibly high." While a smart business idea and model, Netflix has already picked all the low-hanging fruit, Lynch argues. Going forward, things are only going to get more difficult. "Netflix is approching monetary hurdles, ranging from contract renegotiation to a transition to Web-based streaming content," Lunch wrote. "Many media executives are baffled by Netflix's stock performance, including Jeffrey Bewkes, CEO of Time Warner, who quipped to the New York Times, regarding the market's optimism for Netflix: 'It's a little bit like, is the Albanian army going to take over the world? I don't think so.'"
For their sake, I hope those media executives were so baffled by its performance that they were shorting NFLX. It's unclear when Tuesday's announcement from Amazon that the online retailer will begin offering its own video streaming service will stop eating into Netflix's performance.