Netflix Stock Hits 52-Week Low After It Cancels DVD-Streaming Split

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Wall Street observers say investors originally seemed to cheer a strategy shift, but later focused on a recent price hike and the potential need for the company to repair customer trust over time.

NEW YORK - After trading higher during the first half of the day, shares of Netflix on Monday hit a new 52-week low and closed down 4.8 percent as initial excitement over a strategy reversal waned.

The stock finished at $111.62 after going as low as $107.31, a new 52-week low. The closing price gave the company a market value of $5.9 billion.

Early on Monday, the company said it was nixing its recently announced plan to separate its DVD-by-mail from its Web streaming business. That initially helped boost the stock around 7 percent as analysts said Netflix management had listened to negative feedback from customers and Wall Street.

But Wall Street observers said the stock later in the day started falling as investors seemed to focus more on the fact that the firm had flip-flopped and hadn't repealed a price hike, which some said could affect subscriber momentum over the medium-term. Also, the planned separation of the DVD business had led to some hopes of a sale of part of Netflix.

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"There is broken credibility and no asset sale - two pillars bulls lean on," said Janney Montgomery Scott analyst Tony Wible.

Wedbush Securities analyst Michael Pachter during the day downgraded his recommendation on Netflix's stock from "outperform" to "neutral." He also cut his price target to $110 from $155.  

"We believe today's announcement signals an end to the possibility of acquiring Netflix's streaming business," he said.

Lazard Capital Markets analyst Barton Crockett said in a report Monday that "Netflix’s very visible waffling also likely dinged domestic momentum near-term."

Echoed Barclays Capital analyst Anthony DiClemente later in the day: "With today's announcement, we are pleased to see management reverse course with this strategy and importantly listen to its users. But given the amount of negative news flow around recent company initiated actions - including the pricing change, which remains in effect -we believe it could take some time for consumers to come back to Netflix."


Twitter: @georgszalai