![]() Take a look at the stock price pre and post stock split. In fact, it was in consolidation of a couple of weeks before slowly rising.Īnother company is Under Armour ( UA ). The stock did not rise quickly as most would believe. Prior to the split, the stock had a rapid rise. Let's look at a recent stock split that is still fresh in everyone's mind, Apple ( AAPL). I believe his words are still wise and applicable to all stock splitting scenarios. Though he mentions it for constant stock splits. In fact, the big players and institutions such as mutual funds may be using this opportunity to sell off. In addition, William O'Neil of investors business daily has noted that investors should be alert if excessive stock splits come after huge price advances. According to a passage from the book, Stock Market Logic: a Sophisticated Approach to Profits on Wall Street, "one of the great popular myths on the Street is that stock splits are usually followed by dynamic upside price movements." It is better to wait and be patient because price will not immediately take off and leave you behind. Had you entered into a position in Netflix's stock, you would have most likely been frustrated. What does this image show us? It shows us that the hype of the split ran the price of the stock up. The image above is NetFlix's first stock split. I will take a look at Netflix's previous split and a few of the companies and the typical behavior that occurs before the split and after the split. The small investor can finally buy the stock at an affordable price. Aol and Borders are used as examples, which now seem rather appropriate as Netflix’s stock crashes through charts much as those two companies’ did.The Netflix ( NASDAQ: NFLX) announcement made me be happy. He stated that his recent moves were to prevent his company from moving before its too late. Netflix’s slide from grace is exactly what Reed Hasting said he was trying to avoid. Reed Hastings Sunday night blog post stated in part that while the now two companies are done with price increases, the decision to completely separate DVD and streaming will help both businesses by letting “each grow and operate independently.” Qwikster was then announced, which will continue the task of servicing and mailing DVDs - and now games, too. These shifts come as the company announced late last week that it lowered its Q3 subscriber projection by a million subs spanning both the streaming and DVD rental business. Last Friday, Caris & Company even downgraded shares of Netflix from above average to simply average. Barclays now labels the Netflix stock as overweight and repriced their target from $285 to $260. A media snarkfest ensued while the stock price continued its nose dive.īoth Goldman Sachs and Barclays Capital recently lowered their price targets on shares of Netflix, with the former pricing the stock’s 6-month, DCF-derived target price at $270, down from $330. ![]() Then late Sunday night Netflix took it even farther and announced that an entirely new company, Qwikster, would handle the DVD mailers while Netfix would do just streaming. Most should know the storyline by now: Netflix split the company into two separate divisions two months ago and raised the price of a popular subscription. ![]() Sure, it’s still the top consumer of internet bandwidth and the de facto leader in video streaming services, but the company’s stock has lost a year of growth in a matter of two months, or rather, two decisions. On July 12, 2011, just one day prior to Netflix’s all-time high price of 304.79, the company announced a radically different corporate structure and also raised the price of the most popular subscription plan by 60%. Over the past two months the company watched subscribers leave along with 55% of its market cap from the same time period - which now places their valuation at its 52 week low of $7.46B. And with the sound of Wall Street’s opening bell, Netflix quickly dipped below its 52 week low, opening at $141.40 but falling within a few seconds under $140.
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