Netflix still a player

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My, how the mighty Netflix has fallen.

Funny, though, even after the stock was whacked for 24% on a single day this week, it's still outperforming the companies that supply it with the movies it rents to consumers.

Netflix is up 24% for the year after its big swoon, while Time Warner is down 9%, News Corp. is off 13%, Disney is down 1%, Viacom is off 10% and Sony is down 19%.

Even Lionsgate, a rare film studio to see its shares rise this year, has underperformed the suddenly struggling Netflix.

"Struggling," of course, is a relative term, especially since there was much to like about the first-quarter report that Netflix issued this week -- the one that sent its shares tumbling.

Netflix met expectations of 21 cents per share in earnings and $326.2 million in revenue, with 8.2 million subscribers. It even set a record by adding 764,000 net new subscribers in the quarter. Neflix, taking advantage of reduced competition from Blockbuster, also lowered its subscriber acquisition costs from $47.46 a year ago to just $29.50.

Plus, Netflix raised its end-of-year subscriber guidance by 200,000 to somewhere between 9.1 million and 9.7 million.

Apparently, though, investors decided to focus on the bad news of shrinking operating margin and a tiny readjustment in full-year profit guidance, which used to be $1.18-$1.30 per share but is now $1.16-$1.29. Some of those deteriorating numbers are due to Netflix's investing in new technologies like Internet delivery of movies and Blu-ray discs.

While investors re-acted in dramatic fashion, Wall Street's bullish analysts didn't change their tunes much, an exception being Credit Suisse, which lowered its opinion on the stock to "neutral."

Recent bull Michael Pachter of Wedbush Morgan, on the other hand, reiterated his $40 target, saying that "Netflix appears to have regained its ability to attract new customers through advertising and a continued focus on quality of service and selection."

Those in the middle, like Alden Mahabir of Utendahl Capital Partners and Youssef Squali of Jefferies & Co., remained on the sidelines, though Squali dropped his target a buck to $31.

In doing so, though, he acknowledged "downside protection" for investors, given Netflix's $150 million in unused stock buyback capacity.

Netflix stock closed 5.6% higher Thursday at $33.02.
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