Feed the bulls

27 January 2011 By Robert Cyran Follow @rob_cyran

The Internet video company keeps defying media honchos questioning its business model and short sellers piling into the shares. Now with 20 mln subscribers and growth still surging, Netflix looks solid. But less disclosure and the CEO’s rant against doubters are worrying signs.

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Netflix shares were up 14 percent in early trading on Jan. 27, a day after the company reported quarterly profit and issued revenue guidance that exceeded Wall Street's expectations. Netflix said after the market closed on Jan. 26 that it had added about 3.1 million net new subscribers, taking it to 20 million. The company is targeting a domestic operating margin of about 14 percent for the next few quarters.

About one in five Netflix shares is shorted. In a blog post late last year, Netflix Chief Executive Reed Hastings took on the short sellers and argued in detail why they were wrong. "Shorting a market leading firm as it is driving a huge new market is a very gutsy call," Hastings wrote.

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