Netflix riding a rollercoaster of investor emotion

The good times apparently didn't last long for Netflix (Nasdaq: NFLX). The company's shares rose 35 percent over six trading days through Monday of this week, buoyed in part by a report last week that customer satisfaction was on the rise.

The rally started when Citi Research analyst Mark Mahaney claimed more customers are satisfied with the video streaming service and things were looking up after a stiff price hike and some other unpopular moves sent the stock spiraling.

It got another boost Monday when Morgan Stanley analyst Scott Devitt dismissed any challenges from Amazon.com's (Nasdaq: AMZN) Prime Instant Video service as "overblown" and said Netflix has more streaming content available, a Hollywood Reporter story said.

"Previously, we were very concerned about Amazon.com's Prime Instant Video offering," Devitt wrote.

A lack of concern was good for the company's stock, which climbed to $73.52, its highest price since July 24. Things were looking up… until Bank of America Merrill Lynch brought the ride to a crashing halt by downgrading the stock on Monday.

"We now believe the risks outweigh the reward," BofA analyst Nat Schindler wrote in a note to clients covered by the Wall Street Journal. "This quarter reminds us a lot of last quarter, with heavy short covering driving the stock up post-quarter-end on no or limited news; a set up we don't like to see in any hyper-volatile stock like Netflix."

Apparently people listened, as the stock dropped 8.2 percent to $67.57 and Netflix fell into negative territory for the year. As of Tuesday afternoon, the stock was trading at $65.73, down another 7.9 percent from the start of trading.

Schindler also resurrected concerns about the Amazon.com competition and said he was not that confident that Netflix will meet subscriber expectations.

"Early this year, Netflix put out a 'soft' guidance target of 7 million net subscriber additions to its domestic streaming business. From our conversations, as well as Street estimates, it is clear that few if any believed this number from the get-go and fewer believe it now," he wrote.

For more:
- see this Associated Press story
- check out this story in the Hollywood Reporter
- read this Wall Street Journal story

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