Netflix, Inc. (NASDAQ: NFLX)
Netflix recently enjoyed massive gains after the board of directors approved a 7-1 stock split. However, today, the company’s stock declined dramatically as Billionaire Carl Icahn announced that he had sold his remaining shares in the company. Today, we’ll talk about why the news of the stock split caused NFLX to increase in value, why Carl Icahn sold his remaining shares in the company, and what we can expect from NFLX moving forward.
How Does A Stock Split Help A Stock To Grow In Value?
Stock splits aren’t uncommon in the market at all. As a matter of fact, last year, Apple did a very similar split; sending their stock price skyrocketing. So, what is it about a stock split that gets momentum going on a stock? The answer is that stock splits high-value stocks more accessible to the average investor. Considering that NFLX is currently selling at well over $600 per share, it’s easy to see why the average investor would pause before purchasing 10 shares of the company. However, that wouldn’t necessarily be the case with share prices below $200. As a result, demand for the stock will rise; ultimately causing its price to increase.
Why Did Carl Icahn Sell His Remaining Shares Of Netflix?
Early this morning, billionaire Carl Icahn announced that he had sold his remaining shares of Netflix. In his Twitter announcement, Icahn said that “$AAPL currently represents the same opportunity we stated $NFLX offered years ago”. So essentially, Icahn sees more upward potential in Apple than he does in Netflix. While at first glance, the timing may seem a bit off, when we dig deeper into trends after splits, it’s understandable.
Throughout history stock splits have caused many stocks to gain in value rapidly. However, there is generally a point after massive gains from a stock split that a reality check sets in and the stock declines. So, considering that, it’s understandable that Icahn would take his gains from yesterday and get out before the reality check had a chance to take his profits.
What We Can Expect To See From NFLX Moving Forward
Moving forward, I’ve got mixed opinions of the stock depending on how you look at it. Here’s how I see it…
- Short Term – In the short term, I’m expecting to see more declines as investors following the money start to question the stability of the stock at current prices. As much as I disagree with the fact that billionaire movements move the market, we can’t discount the fact that they do. So, get ready for short term losses in the stock.
- Long Term – In the long run, I’m expecting things to be a bit more bright. The reality is that Netflix has a consistent history of producing gains and topping expectations. Now, with a stock split, NFLX will be more accessible to the masses; ultimately increasing demand and helping to move the stock up in the long run.
What Do You Think?
Where do you think NFLX is headed? Let us know in the comments below!