Shares of Netflix Inc. (NASDAQ: NFLX), an Internet subscription service streaming television shows and movies, tumbled on Tuesday after the company gave a disappointing forecast for subscribers to its U.S. streaming business. But, Whitney Tilson of T2 Partners saw the sell-off as a great opportunity to buy more NFLX shares.
The sell-off was sparked after NFLX released its first-quarter results late Monday. The company said that due to seasonality factors will pressure the number of new subscribers in the second quarter even though it expects to make up for the difference in the second half of this year.
In a research note to clients, Anthony DiClemente of Barclays Capital, said that he is cautious on second half streaming net adds, which would need to be about 4.8 million to reach management’s guidance for 7 million net additions in 2012. DiClemente further said that he believes increased competition and a lack of tailwinds from videogame-console proliferation and video-store closures layer in additional risk to the 7 million.
DiClemente’s views were echoed by investors as they sent Netflix shares down sharply lower on Tuesday.
Netflix shares fell 13.9% on Tuesday and are down nearly 1.50% in today’s trading. Despite the sharp fall, NFLX shares are still up nearly 25% this year.
In fact, it has been bit of a rollercoaster ride for NFLX shares in the last two years. It was only a while back that NFLX was one of the best performing stocks. In 2011, shares of the Los Gatos, California-based company even touched a new all-time high of $304.79. But since then everything has been downhill.
Some bad decisions by the management hurt NFLX stock, sending it down to $62.37. The stock made a recovery this year but once again tumbled on Tuesday.
But some investors see Tuesday’s pullback as a great buying opportunity and one of them was T2 Partners’ Tilson. Tilson told CNBC on Tuesday that the fund added to its holdings of Netflix despite lousy second-quarter guidance. Tilson said that second quarter is a typically sour period for Netflix and that the company’s strategy and fundamental strengths haven’t changed. He said, “When a stock gets cheaper and the story stays the same, we actually add to it, which is exactly what we did with Netflix.”
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