Seriously, it seems like the stock has been played up too much. Now the fate of this bullish story entirely depends on how it turns up to market expectations. Investors are getting a bit nervy on the way the management is handling queries lately. They only communicate through one channel and that is email, so investors’ concerns are very much relevant. Well, this is not anywhere close evidence that there is trouble in making but it’s surely a sign.

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Why Short Sellers are eyeing Netflix?

• There are market rumors that Netfix (NFLX) is overstating its subscriber base and thus mis-valuing the company.
• Content costs are on a rise and Netflix will face immense margin pressures when contracts are renewed.
• Bigger players are expected to enter the same market, and the competition will be immense as overall market size is not too huge.
• Insider selling and issuance of debt for conducting stock buybacks is always seen as a troubling factor.

Netflix’s Cash Flow on Books is declining

Analysts’ suspect Netflix to be cooking something fishy with understated content rates, which intern build up a huge gap in the overall expenses, on the income statements. Now, there main concern is what will happen when the company starts putting those expenses on the books.

Well all these concerns are based on market rumors and lack of information support from the company. So far, the management has been successful in building up a great company and their actions tend to curb market rumors every time red flags surround them.

But this time the story is a little complicated as many things like market competition and the business model are not the same. Right now the stock has priced in too many expectations and any analyst can tell you that it is unreasonably ticking higher. On pure valuation front stocks do make outrageous moves, but it doesn’t take a stock market pundit to guess what’s next in such cases.

Is it time to book profits on Netflix (NFLX)?

Investors might be puzzled on what to do with this counter as it is riding higher and has almost tripled in value over the past two years. We have seen many upgrades on this stock as analysts expectations kept on rising all the while. Many bets were placed around the $200 mark, which the stock managed to take out easily on the back of fourth quarter results. So now the question is if the stock can continue its run in the short term?

Well, analysts’ now seem concerned over the current valuations and they feel that investors are expecting foolish levels. Some of the most illogical assumptions made by investors include:

Netflix will capture 80% market share: That’s way beyond what it can do with a subscriber growth on 45% annually.

Some are expecting Netflix to become a mainstream business, which is again not practical to expect from a niche player so soon.

Blinded by bullishness, some even think that the margins will improve going forward. Netflix can barely manage to keep them flat for a quarter or so as content costs are in a fierce upswing.

Netflix (NFLX) Investment Strategy 2011

Considering all these points, my personal belief is that smart money will start moving out of the stock and it may consolidate much lower in wait of next quarterly numbers.

The key level to watch would be around $180, which is much lower than current price. I would not recommend a short position right now but investors can offload a part of their holding and then maybe average out 15%-20% lower.

I insist that one should not go short unless he is a professional derivative trader as this stock is in a bullish trend and it might witness wild swings before the consolidation phase. Such wild swings can easily force small traders to cut their positions. So the right strategy should be to have some cash ready in-case the stock see’s a nosedive. Buying at current market rate is not going to fetch money easily.

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Energy stocks have helped to increase the stock market’s overall value during the first week of March. Thanks to higher oil prices and demand in the energy sector, energy stocks appear to be good investments, and a safe investment during a troubled economic times like now.

Energy Stocks Are in the game now

Several sectors are proving to become good investments in the first quarter of 2010, including bank stocks (Bank Stocks Up in Q1 2010). Energy stocks are also becoming very popular and very profitable for investors. Thanks to higher oil prices and high production claims from energy companies, the stocks of energy companies are beginning to rise and they are bringing the Dow Jones up with them. Thanks to stocks like energy stocks, the Dow Jones has moved into positive territory for the year so far.

Crude Oil Prices Are rising

Crude prices are on the rise as the price of oil rose by 98 cents over the first week of March, settling in at $79.68. Several stocks within the energy sector are also providing to be bright spots including:

1. BP: With its plans to boost its oil production, the company saw its stock rise to $54.
2. Hercules Offshore Inc.: This company saw smaller losses than what was expected and the stock rose by 17 percent to $4.67 as a result.
3. EQT Corporation is buying 58,000 acres in Pennsylvania for energy production for $280,000 and that has helped the stock rise by two percent to $45.75.

The production of crude oil is also rising by 700,000 barrels in the coming weeks, with the stockpile of gasoline increasing by 600,000 barrels as well.

Energy Stocks are here to stay

Many investors are looking for stocks to invest in, and while banks stocks are recovering, some see them as still too risky to go after. For the investors who want stocks that seem to be going up over the past year, energy stocks lead the way. While the energy stocks listed here are examples of stocks that have done well, they are by no means the only ones. ExxonMobil is the example of another company that has done well over the past year and shows no signs of slowing down.

Investing in today’s market can be worrisome, and that pushes many investors into safe territory like energy stocks. Proof of the improvement in the energy market is seen in the various oil indexes around the United States.

• The New York Stock Exchange Arca Oil Index rose by .6 percent
• The New York Stock Exchange Arca Natural Gas Index rose by .9 percent
• The Philadelphia Oil Service Index rose by .9 percent

The Dow Jones also rose thanks to the strength of the energy market, which gives hope for investors in the future.

Many people do not want to invest in the stock market these days because they see it as dangerous. However, there are many sectors that are doing well, with the banking and energy sector being two of the fastest growing.

Further Reading

Companies That will Rise After Recession in 2010

After-Effects Of Recession on US Economy

How does Oil Prices Fluctuate