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Netflix Profit Taking Following Barron's Article

Tuesday, 22 Jun 2010 | 11:46 AM ET
Netflix
CNBC.com
Netflix

Shares of Netflix continue to slideTuesday after falling over five percent Monday following a critical Barron's article.

Investors took the publication's suggestion that it's "high time to take profits." The weekly did not advocating shorting Netflix stock , particularly considering how much it has to gain if rival Blockbuster folds (it's currently considering filing for bankruptcy), but it did point out that NFLX shares are trading at a 36 times multiple of 2011 projected profit, far higher than other Internet companies.

Netflix has proven remarkably robust, growing to 12 million subscribers in the US despite a pullback in consumer spending. It's transitioned from a DVD-by-mail company to one that easily and conveniently streams content over the internet. Unlike rivals like Redbox (CSTR), Netflix has consistently maintained a good relationship with the movie studios. And after launching a rival service Wal-Mart gave up on the market. And Netflix has impressed investors by forging a number of partnerships with other services and gadget-makers, making its content available everywhere from TiVo to Apple's iPad and iPhone.

But it's worth noting other companies are recognizing the value in this space. Google is now targeting the living room with its "Google TV" box launching in the fall. And cable companies like Time Warner Cable and Comcast are looking to own the streaming market, and keep customers from "cutting the cord" to their cable service and opting just for a Netflix subscription.

Everyone wants a piece of the living room. Netflix's advantage is the fact that it's already accessible from so many devices and through so many services. The question investors weighed today: whether that's worth $119 per share or $128, the 52-week high.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.