Netflix (NASDAQ: NFLX) regained some of its value after declining more than 9% to $322. 52 per share primarily due to report that activist investor, Carl Icahn sold a huge portion of his stake in the online video streaming company yesterday. The stock went up by 2.39% to $330.24 per share today.
Icahn trimmed its stake in Netflix to 2,665, 557 shares or 4.5%. The activist investor previously owned 9.4% stake in the company. He started selling his shares on October 10, 11, 14 & 22 at a price range of $304.23 a share (lowest selling price) and $341.44 (highest selling price). He originally purchased his stockholding in the company at $58 per share.
In a press statement, Icahn explained that his investments in Netflix appreciated by 457% over the past 14 months, and it’s time to take some of the profits off the table. Icahn gained approximately $800 million from selling 300 million shares of Netflix. His son Brett was responsible in the Netflix investment and he believed that “Netflix is well positioned for greatness.”
Third quarter financial results
Netflix rallied to an all-time high at $389.16 per share after reporting solid third quarter earnings results last Monday. The online video streaming company posted $0.52 earnings per share on $1.1 billion revenue.
During the quarter, Netflix added 1.3 million to 30 million subscribers in the United States, surpassing the 29 million domestic subscribers of HBO, the cable and satellite television network of Time Warner (NYSE:TWX). Although Netflix exceeded HBO’s domestic subscribers, it doesn’t mean that it is really outperforming the cable and satellite network. Netflix has 40 million total subscribers compared with HBO’s 114 million members worldwide.
Market observers pitched the idea if Netflix could beat HBO after the online video streaming company struck a deal with Virgin Media in United Kingdom and Com Hem in Sweden to integrate its video streaming service on the European cable companies programming. Netflix is negotiating with U.S. cable and satellite network providers to enter a similar agreement.
Stock momentum more than normal
The shares of Netflix performed well over the past 12 months with 395.9% total returns compared with the S&P 500 total returns of 25.17%. Its competitors such as Outerwall (NASDAQ: OUTR), the parent company of Redbox DVD rental generated 43.05% total returns.
During Netflix’s earnings call, its CEO Reed Hastings said, “We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003.” He added that investors are driving the stock with a momentum “more than what they like normally”, and the company cannot control its stock price movement.
Meanwhile, Jana Partners, an activist hedge fund managed by Barry Rosenstein recently revealed a 13.5% stake in Outerwall. The hedge fund is convinced that the stock is undervalued and it is an attractive investment opportunity. In its regulatory filing, Jana Partners indicated its intention to negotiate with the board of Outerwall to explore alternative strategies and execute changes to boost shareholder value.
Outerwall remained a relevant competitor for Netflix because it has 43,000 Redbox Kiosks in the United States and plans to add 1,500 this year. The company recently partnered with Verizon to offer its Redbox instant streaming service to its subscribers.