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Technology Stocks : Netflix (NFLX) and the Streaming Wars -- Ignore unavailable to you. Want to Upgrade?

To: EdR who wrote (56)	8/29/2003 4:15:39 PM
From: Glenn Petersen	Read Replies (1) \| Respond to of 2280

Another nice day. Still no news. It looks like the stock is being fueled by rumors and a large short position. fool.com What's Lifting Netflix? By Jeff Fischer (TMF Jeff) August 28, 2003 On no news, shares of online DVD-rental operation Netflix (Nasdaq: NFLX) have soared 33% from $25 to $33 in the last eight trading days, hitting new highs along the way. Volume jumped to more than double the average some days, with 2 million shares trading hands. The stock market has been weak over the same period, so why the ascent? First, a strange rumor was floated that Wal-Mart (NYSE: WMT) would make a buyout offer for Netflix, a notion so unlikely that investors should not seriously consider it. Netflix wants to remain independent and Wal-Mart has little cause to purchase it -- despite Netflix's 1.1 million subscribers outgunning Wal-Mart's fledgling competing service. Just the same, the crazy rumor may have helped the stock start to move, but the ultimate rocket fuel pushing it upward is probably short covering -- a bona fide "short squeeze." As of August 8, nearly 8.3 million shares of Netflix were sold short (meaning borrowed from a broker and sold in hopes of a price decline). This means that 50% of the company's available shares were sold by short sellers and need to be repurchased, creating eventual buying pressure. As of July, the short interest on Netflix was even higher, so already some buying from capitulating short sellers has helped the stock move upward. Plenty of potential buying pressure remains. The amount of short interest on the stock equates to 12.12 days of Netflix's average daily trading volume -- high enough to place it seventh on the market's list of most heavily shorted stocks as a ratio to average daily volume. This means that should good news arrive, or if momentum keeps pressing the stock to new highs, many more short sellers might start closing their positions and the stock could see many more days of higher-than-average volume and buying pressure.