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Why Netflix Is Poised to Underperform

Thursday - 3/7/2013, 2:00am  ET

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 has received a distressing two-star ranking.

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

Netflix facts

Headquarters (founded)

Los Gatos, Calif. (1997)

Market Cap

$10.2 billion

Industry

Internet retail

Trailing-12-Month Revenue

$3.6 billion

Management

Founder/Chairman/CEO Reed Hastings

CFO David Wells

Return on Equity (average, past 3 years)

38.9%

Cash/Debt

$748.1 million / $400.0 million

Competitors

Apple

Comcast

Amazon.com

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

On CAPS, 20% of the 9,677 members who have rated Netflix believe the stock will underperform the S&P 500 going forward.

Just last month, one of those Fools, All-Star DJoshuaRubin, highlighted Netflix's valuation as particularly unsustainable:

Just wouldn't pay [$10 billion] for it if I had [$10 billion]. No chance, no way, no how. Not now, not never. Visionary no doubt, could end up being worth that. Service is a mediocre experience -- utterly competent but now uninspired. Maybe this is unfair and Reed adds back some authentic passion for the movie business after completing global infrastructure, but anyone who has ever watched a moving film, and is seated deep in thought only to have the credits rudely interrupted by three crappy film recommendations knows this is a CEO who is way more Bill Gates than Steve Jobs.

Of course, this short pitch doesn't even come close to telling the entire story of Netflix. You're in luck, though. The Fool's brand new premium report on Netflix tells all sides of the story for one of the most compelling tech companies in the world. You can grab your copy now, which comes with free updates for 12 months, by just clicking here.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

This article was originally published as Why Netflix Is Poised to Underperformon Fool.com

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