Netlfix is down over 16% in after-hours trading in light of its earnings report, firmly below the $100 level. Now, I know that a rudimentary bearish post here would be nothing more than piling on the likes of Whitney Tilson and other assorted characters who have been bullish on the internet subscription service which streams television shows and movies. Be that as it may, as far back as October 2011 I was discussing the major sea change the stock had seen. I also drew quite a few comparisons, from a technical standpoint, between the Netflix and Green Mountain Coffee Roasters’ charts.
With that in mind, I might as well complete a thorough analysis of the price action of both firms’ shares. I updated my GMCR analysis earlier today in this post. More importantly, though, is the value in using logarithmic scales for longer-term timeframes when issues have seen dramatic moves. Recall this post from earlier in the month, where I argue that correctly using a logarithmic scale in lieu of an algorithmic one yields evidence that points to much further downside potential in GMCR. Applying the same principle to Netlix, we can clearly see the difference between the two scales on the same exact timeframe.
Thus, even if this current bull market continues higher in the coming quarters, the old leaders will not necessarily keep their thrones. Leadership changes as the bull matures, with GMCR and NFLX now serving as the old, washed-up Las Vegas acts, lucky to procure gigs in off-the-strip lounges.