I recall that one of our subscribers was involved with NFLX, so I wanted to update my view. What I learned during that downturn is how risky the company is. They have made huge content commitments that could bankrupt them if they don't grow their digital subscriber base. It's not fair to look at their balance sheet and say "no debt". Actually, they have $400mm cash net of debt, but they have a high amount of payables for content as well as non-current liabilities. This isn't a prediction that they will go bankrupt but rather a shout-out that there is a lot of risk IF THINGS GO BAD. With that said, there is always talk about competitive threats (AMZN, cable companies, etc.), but the company still has the best value proposition.
So, what about the stock, even considering that there is some risk? After all, I called it out on the way down at higher prices I think, as the model was transitioning (the on and then off move to split the biz as they put through price hikes). Back in the summer, the stock was expected to earn over $9 per share in 2013, but now it is forecast at just 2.59 (down sharply from levels just a month ago). The valuation seems to imply that someone will buy NFLX, because it's difficult to justify 50PE otherwise. Even on 2014 ($4.54 is an estimate - not sure how valid), it seems like a stretch.
So, what about the technicals? Big short-squeeze on, no doubt. Where might it stop? The gap from late October was filled, and the overhead now is some resistance in September of 137.50. Not sure it gets there. Next would be about 150. If I rode this stock down and back up, I think I would get off the merry go round. The stock left a big gap recently, which raises the risk profile. With options, one can sell the June 135 Calls near 16 if one wants to hold on but hedge a bit and lock in a potential sale at the next resistance.
So, to me there are fundamental, valuation and technical issues here. Tough stock to short, and buying out-right puts is very expensive. If one wants to be involved negatively, selling a call spread might be the way to go (i.e. selling March 125 near 12 and buying March 145 near 5 to collect the difference of 7 as the stock stays unchanged or declines and to risk a max loss of 13 at 145). I guess you could use some of that premium to buy an out-of-the-money put, but they are expensive. The March 115 costs almost 7. The stock would really have to fall to 105 or so to make that even worth the time.