Time To Dump Netflix?

After Netflix shares rose to record levels earlier this week, billionaire investor Carl Icahn (pictured) chose to sell 3 million of his estimated 6 million shares in online video distribution company. Citing a "457% return" as being more than enough to walk away from the stock, Icahn's announcement resulted in a 2% in the company's share price.
While Icahn still retains 2.7 million shares in the company, about 4.5% of shares outstanding, this move begs the question: is Netflix at its peak?

The stock was trading at $58 per share just last year. What made analysts so bullish on the stock in such a short period of time? A lot of it has to do with Netflix "originals" like House of Cards and the fourth season of Arrested Development. But I'm not as convinced.

As a consumer, I love the "upload an entire season at once" model that Netflix uses for its original content. It allows me to binge watch a program, uninterrupted by weekly wait times for traditional television shows. However, from a business standpoint, I believe the model is weak. By releasing a program weekly on television, programmers can maintain a  steady interest in a show, resulting in a steady audience stream. But by giving consumers everything at once with the Netflix model,  you get periods of high interest followed by periods of nothing. I used a free month membership to watch the fourth season of Arrested Development, and then cancelled it because no new shows in the Netflix pipeline interested me. Although original content can bring in subscribers interested in watching Netflix exclusive shows, retaining monthly subscribers is the key to the Netflix business model, something I'm not sure that Netflix originals can accomplish.

-Aureen Sarker (Photo Credit: Variety)