Netflix, Inc. (NFLX) & Reed Hastings: One Key Lesson

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A buy?
Now that I’ve stroked Hastings’ ego and laid my coat in a puddle for Netflix, Inc. (NASDAQ:NFLX) to step on, I’ll go ahead and say buying the stock is not a good idea. My reason is not because of Hastings, content costs, competitors, or any complaint about the business. It’s my original complaint — valuation. Netflix is trading at 70 times this year’s projected earnings. If you were to buy a taxicab that generated $10,000 a year in revenue, would you pay $700,000 for it? If you were in New York, probably, but that’s not the point. Ever the penny-pincher, I can’t stomach paying 70 times anything.

Reed Hastings and Netflix have shown something rare in the corporate world — the ability to say “I’m sorry,” and the talent to move forward. Expect bigger and better things from this company, but don’t pay Rolling Stones scalper ticket prices for it.

The article The Lesson of Netflix and Reed Hastings originally appeared on Fool.com.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Netflix.

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