Shares of Netflix, Inc. (NASDAQ:NFLX) sure look expensive nowadays, don’t they? I mean, seriously, who would want to buy a stock that trades at more than 650 times trailing earnings?
Apparently, plenty of people.
Netflix’s new deal
In fact, Netflix, Inc. (NASDAQ:NFLX) bulls were out in force Wednesday, as the stock traded up nearly 6% after the company announced deeper integration with social-networking giant Facebook Inc (NASDAQ:FB). In the very near future, then, U.S.-based Netflix users will be able to automatically share what they’re viewing with their Facebook friends — a feature that, as fellow Fool Rick Munarriz pointed out, has already been incorporated in each of the other 44 countries in which Netflix operates.
So what’s the big deal? To be sure, the U.S. market represents nearly 82% of Netflix, Inc. (NASDAQ:NFLX)’s more than 33 million subscribers, so the added global visibility it can garner from allowing the bulk of its customers to automatically share their viewing habits among Facebook’s 1 billion-plus active users could be substantial.
For Facebook users’ sake, however, I should hope Netflix can find a way to at least give its users some semblance of control over exactly what’s posted to encourage the use of the new integration (short of allowing us to simply not use it, that is). For instance, some gentlemen might not be quite ready to admit they really enjoy their marathon viewing sessions of My Best Friend’s Wedding. Or, as is the case in my household, my Facebook friends probably might not appreciate that 99% of our Netflix viewing consists of LeapFrog Enterprises, Inc. (NYSE:LF), Dora, Curious George, and various The Walt Disney Company (NYSE:DIS) movies.
Streaming heats up
That said, Wednesday’s Facebook news still doesn’t change the fact that Netflix, Inc. (NASDAQ:NFLX)’s well-funded competitors continue going to increasing lengths to bare their teeth.
Just last week, for example, Redbox parent Coinstar, Inc. (NASDAQ:CSTR) raised eyebrows by selling $350 million in bonds. Of course, the company was light on details, saying only that it intends to use the money for “general corporate purposes, which may include but is not limited to maintenance or repayment of outstanding debt, acquisitions or other investments, and payment of other corporate expenses.” That still didn’t stop many investors from at least hoping some of that cash will be allocated to content purchases for its new Redbox Instant streaming service — the beta version of which, incidentally, launched on Thursday by offering one month free trials to new members.
Even more worrisome for Netflix, Amazon.com, Inc. (NASDAQ:AMZN) CEO Jeff Bezos has said that his company is currently spending more than $1 billion per year on content for its Prime streaming service. Of course, Bezos has had no qualms making his long-term plans of broader Web domination crystal clear from the very beginning, so patient Amazon.com, Inc. (NASDAQ:AMZN) shareholders have been more than willing to put up with temporary losses and sky-high valuations as they wait for the real payoff down the road. What’s more, Amazon.com, Inc. (NASDAQ:AMZN) Prime not only undercut’s Netflix, Inc. (NASDAQ:NFLX)’s prices at less than $7 per month, but it also provides free two-day shipping on millions of items on the site and allows members to borrow one electronic book each month from its Kindle Owners’ Library.