Wednesday, October 10, 2012

Netflix, Inc. (NASDAQ:NFLX) shares plunge on renewed concerns over its growth prospects

Netflix, Inc.(NASDAQ:NFLX) shares have been having a hard time at the bourses. After rising about a third over four trading sessions, the stock plummeted 11 percent on Tuesday on renewed concerns about the company's growth and its ability to get quality content at reasonable prices.

One of the main challenges for the company that provides video streaming content and DVDs on rental basis is the acquisition of content from content providers and keep its costs low.

After a Citigroup survey last week which showed that customer satisfaction with Netflix had improved in the third quarter, sentiments about the stock had been upbeat.

However on Tuesday, Bank of America Merrill Lynch downgraded the stock, which dampened sentiments.

It is the conflicting opinions among various brokerages that has led to volatility in the stock and confused investors.

"It has become a real battleground stock," Nick Gibbons of Gradient Analytics told AP. Gradient is a research firm that has a dim view of Netflix's prospects.

Apart from the rising cost of content from original content providers, Netflix is also facing competition from other entrants such as Amazon.

Netflix is also yet to recover from a steep increase in its prices last year that alienated many subscribers. In August its chief executive defended the acquiring content at a higher price saying that the higher costs justified the good quality content that it was getting.

Shares in Netflix fell $7.99 to $65.53 at the close of trading.

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