Don't Cancel Netflix Just Yet

 | Jul 23, 2013 | 11:35 AM EDT
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This market makes you afraid to sell. As I watch Netflix (NFLX) fall, I keep thinking what if Netflix is the next Google (GOOG)? What if it is the next 3M (MMM)? The next Starbucks (SBUX)? What if it is the next Federal Express (FDX)? Or Coca-Cola (KO)?

These are all companies that let the marketplace down, disappointing analysts, causing downgrades and lots of handwringing. And yet what happens a few days later? They start coming right back and even pass where they were when they reported what we didn't like.

Seriously, was there a quarter more downbeat than FedEx, where the company basically told you that there is no urgency to send freight around the world, something echoed by UPS (UPS) recently when it preannounced and again this morning with the actual quarter? What has the stock done? It was flying high at $109 when it told us how badly things were going and we got a straight shot to $91 and change. After that, we got a methodical rally all the way back to $108. It was incredible, and while you could say it was based on nothing, it did happen.

Or take Starbucks and MMM, two companies that report after the bell tomorrow. I still can't figure out what people originally didn't like about Starbucks that sent it down to $60 after hours from $62, but it obviously didn't hold any water because the stock has moved to $69, well above where it sold when it reported in a methodical pathway.

More problematic is 3M. When that company reports, you have to hope that it bested heavily slashed estimates, the ones that dropped the stocks from $107 to $103 because now the stock is up nine from the slashing. I can't see where business has turned but, maybe, I am being too negative because the stock's been a real horse.

The turn in Google is astonishing. Last week all we seemed to care about was that advertisers weren't paying up for mobile ads and that the Motorola acquisition was terrible. The handwringing about that quarter, which sent the stock down from $912 to $880 and change after hours was astonishing, perhaps the most high-profile disappointment of a loved company to date, with the possible exception of Microsoft (MSFT) -- although the latter wasn't loved like Google, so I think it is a different kettle of fish. It had just crept up too much in light of the Surface tablet's failure.

Coca-Cola's quarter was universally reviled even by management, and the weather and economic excuses rang hollow. But you can't even see the downward move after the quarter any more as the stock has regained all of its losses.

Which brings me back to Netflix. Yes, it didn't get the new adds some were hoping for, but the number was still pretty darned good. Those who thought there would be a huge bump in subscribers because of Arrested Development were certainly disappointed as the company said that there were some people who signed up for it that might not have otherwise because it is a seasonally weak quarter. The talk about the expenses running higher was a little grim. But what happens if Netflix turns out to bed Federal Express, or Coca-Cola, or 3M, or Starbucks, or Google? What happens if it turns out that people are excited about international coming on, or about how the adds are still pretty good, and the critical mass is worth a lot more than what the company is selling for?

To me, there's a case to be made here that the seller's remorse we saw in the aforementioned stocks could grip the shares of Netflix, too. In other words, I don't think you need to rush to dump it. If it follows the patterns of the others, it just might be a buy in a couple of days. Either way, it's certainly worth waiting to see, if only because forgiveness reigns in this market for all but a handful of stocks that have no adherents and, for the most part, are truly dead in the water, at least until the next quarter.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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