2-Star Stocks Poised to Plunge: Netflix?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, movie rental service Netflix (NAS: NFLX) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Netflix's business and see what CAPS investors are saying about the stock right now.

Netflix facts

Headquarters (Founded)Los Gatos, Calif. (1997)
Market Cap$6.16 billion
IndustryInternet retail
Trailing-12-Month Revenue$2.66 billion
ManagementFounder/Chairman/CEO Reed Hastings
CFO David Wells
Return on Capital (Average, Past 3 Years)36.6%
Cash/Debt$376.4 million / $235.2 million
CompetitorsApple (NAS: AAPL)
Dish Network (NAS: DISH)
Microsoft (NAS: MSFT)

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 20% of the 9,266 members who have rated Netflix believe the stock will underperform the S&P 500 going forward. These bears include All-Stars ikkyu2 and fellow Fool Seth Jayson (TMFBent), both of whom are ranked in the top 2% of our community.

Just last week, ikkyu2 succinctly summed up Netflix's current predicament: "[A]-flippin', and a-floppin', and running into structural headwinds, lack of a moat, and unfavorable contracts from content producers."

Currently, Netflix even sports a particularly lofty P/E of 30. That represents a clear premium to bigger competitors like Apple (17), Microsoft (10), and Dish Network (9).

Seth Jayson expands on the Netflix underperform argument:

My guess, sub numbers are going to suck wind due to Reed's mismanagement of the whole Qwickster thing. The reversal of course may have come too late, and only further proves (to those looking critically) that Netflix's decisionmaking is far less sage, and far more capricious, than anyone imagined.

What do you think about Netflix, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Interested in another easy way to trackNetflix?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Netflix, Apple, and Microsoft, as well as creating bull call spread positions in both Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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