Is A Netflix Stock Split A Good Idea?

Netflix, Inc. NFLX has indicated that it might issue a massive stock split. Investors are already happy with the stock's current performance, so is a split really necessary? "Yeah, it's a good idea," Needham analyst Laura Martin told Benzinga. "Usually stocks go up on a stock split because more people can buy the stock." Wedbush analyst Michael Pachter was somewhat indifferent on the matter. "Stock splits are largely irrelevant, but help retail investors buy the stock," Pachter told Benzinga. "I don't care either way."

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No Stock Split Needed?

Investors were delighted by the news that Netflix achieved a new milestone last quarter. The streaming video giant surpassed the 60 million user mark by acquiring nearly five million new subscribers. While investors are attracted to Netflix's subscriber growth, users are attracted to the service's growing content lineup. Netflix's newest show, "Daredevil," is one of many exclusive programs developed for the service. "Daredevil has received solid ratings (Metacritic 75), but not good enough to be a huge driver of subscriptions," said Pachter. "I think it will attract fans of the comics, but that is a niche audience. The Metacritic score suggests to me that word of mouth won't be strong enough to be a huge driver." Martin isn't sure if Daredevil will contribute to future subscriber growth. "Content is hard," she said. "There's lots of content. They're certainly pushing it hard when you go to Netflix. It shows up in 'recommended for you' [and] 'trending now.' It shows up in a lot of their discovery algorithms high up so they're pushing it hard." If nothing else, Martin expects many subscribers to watch the first episode. "If they like it, they'll keep going," she added. "And if they don't, then they'll just watch the first episode and then they'll stop." Without any independent ratings on individual Netflix shows, it may be difficult to figure out how many people actually watched Daredevil. There is one way to determine if the show is an overall hit, however. "No matter what they say, if it's good they'll renew it -- and if it's not, they won't renew it," said Martin. Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.