The stock market is an auction, meaning "fair value" is whatever the current price is. One party sells because they believe price is going lower; the other party buys because they believe price is going higher. The belief can be based on fundamentals, indicators, technical price levels, analyst opinion, recommendation of a friend, newsletter, etc. If you have a fundamental opinion about a company and the "unfair" value of its stock (too high or too low), and are trading for the longer term to prove your opinion correct and produce a profit, the thing that matters most is that you have a risk management plan on your position, and an account large enough to weather irrational exuberance or panic in the market that runs price against you in the meantime. http://www.businessinsider.com/whitney-tilson-short-netflix-2010-12
Yes ... you should short stocks that are going down ... not thos going up. Shorting it would be trading counter trend and trying to pick a top. This is a high risk short. There are less risky ways to make money on both the long and short side.
The problem of shorting netflix now is their international growth. Even though the us market might slowdown, they have huge growth potential outside of the usa considering all digital web delivery. Canada show it can work. So maybe buy a few puts instead, but even those are crazy expensive right now. I agree with the other poster, not touching this pig anymore since i dont trade intraday. There are far better trades out there with less risk than this hot potato. Why do you have 10,000+ posts then? does it mean you can't trade?
Surf's up for NFLX right now but they are using accounting trickery to generate their numbers. There's going to be a crushing down day some day down the road but for now enjoy the ride. This is AOL type accounting all over again.
They currently have 12 million subscribers and ship out 2 mil. dvds daily. That is a lot of volume which can go straight to the bottom line as long as they can get their price. PE is 50 on 2011 estimates, which is in line with the growth they are experiencing. A sales slowdown is what I would be looking for, instead of accounting problems and does the business model have staying power? AOL had their day in the sun, in what became a commodity service. I would be on the lookout for that also.