How Do You Say Movies In Spanish?

To answer the question, it's "peliculas", but it could also be Netlfix NFLX. Screendaily is reporting that the online movie giant is going to potentially expand into Spain, a country rife with piracy. The company, led by Reed Hastings, is supposedly going to enter the country next year, in January. Pedro Perez, president of the local producers association FAPAE, confirmed the move by Netflix. “Netflix has already broken into the US market gaining 26 million subscribers so far and they expect to have 30 million before the end of the year who are paying between 8 and 10 dollars a month,” said Perez. This comes just a month after Netflix announced it would be expanding into Central and South America. Netflix is currently in Canada, the only other market besides the U.S. Netflix has proven to be incredibly disruptive, putting Blockbuster into Chapter 11, and continuing to defy expectations, adding subscribers at a record rate. However, shares are well off their 52 week high, which was hit on July 13, at $304.79. Since then, we have seen tumultuous times in the financial markets, and the company reported earnings that did not satisfy Wall Street expectations. As such, shares have lost nearly a third of their market cap since hitting their 52 week high. Entering Spain may prove to be extremely difficult, as the country has more than 400 million illegal downloads per year. This compares to just 100 million tickets sold in movie theaters. Attempts to shut down the sites have failed, which is one of Netflix's major concerns. Consumers have to ask themselves this major question. Are they going to pay $15 per month for older content when they can get newer content for free, even if it is illegal? After the earnings report in July, shares were hit hard, as the company has continued to defy gravity for seemingly forever. At 34 times 2012 earnings, shares are not cheap. But the company is growing revenues at 51% year-over-year. From a technical look, Netflix's chart is not pretty. The 200 day moving average is getting dangerously close, at $225, and if that gets broken, there is no support until $175. Bears have been very vocal in this name, from Whitney Tilson, to many others. So far, all have been proven wrong, but it looks like their day may come sooner rather than later. Oso is bear in Spanish, and bull in Spanish is toro. It looks like the oso's may win this battle, no matter what market Netflix enters next. Get your popcorn ready, the show is about to start. ACTION ITEMS:

Bullish:
Traders who believe that Netflix will be able to enter Spain successfully as they have the U.S. market might want to consider the following trades:

• The drop in NFLX shares may be unwarranted, if it can keep delivering the growth it had recently. Sure content costs are up, but Reed Hastings and crew have made that point well known.

Bearish:
Traders who believe that content costs are likely to continue to rise and growth will slow may consider alternate positions:

• Put on a pairs trade. Short Netflix and go long Coinstar CSTR,, which could benefit from Netflix's demise.
  
  

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