Netflix Leads Technology Stock Rebound; Will It Last?

Of all the technology stocks that made healthy gains on the market this
morning, Netflix (Nasdaq: NFLX) needed it the most.

It has been a rough few months for Netflix — and that’s putting it
mildly. The world leader in online movie and TV show subscriptions has
seen its stock plummet since it announced in July that it would be hiking
prices and splitting its DVD-by-mail and movie-streaming service into two
businesses, the latter of which would have been operated by
Netflix subscribers and shareholders alike hated the move, and as a
result its stock has been in a three-month freefall, descending from a
52-week high of $304.79 in early July to a low of $107.63 in late

Desperate to reverse such ugly momentum, Netflix
formally announced this morning that it was scrapping its Qwikster
. The news sent its stock up more than 8 percent in early
trading, although at mid-day the technology stock has begun to falter.
Netflix wasn’t the only technology stock that was up this morning.

Thanks to record pre-order sales of its new iPhone 4S, Apple
(Nasdaq: AAPL)
stock was up nearly 4 percent as of noon
today.Insituform Technologies Inc. (Nasdaq: INSU) and
Micron Technology Inc. (Nasdaq: MU) were both up more
than 5 percent in early Monday trading. Cisco Systems (Nasdaq:
and Research In Motion (Nasdaq: RIMM)
were other tech stocks that continued to rise after making big gains last

Though tech stocks have thrived over the last week, the gains made by
Netflix earlier today may be a case of too little too late. Thanks to the
whole Qwikster debacle, the damage has already been done. Even with
today’s early gains, Netflix’s stock price was still down roughly 60
percent from its early July high.

The company’s very public Qwikster proposal and its accompanying price
hike angered subscribers and
eroded confidence in the Netflix brand. Co-founder and CEO Reed Hastings
tried to perform major damage control, sending an email to subscribers in
late September that opened with the mea culpa, “I messed up.”

That’s putting it mildly, Mr. Hastings, in my opinion.

By the time he issued this apology public sentiment had already turned
against Netflix. Worse, the company is losing subscribers — about 1
million of them had jumped ship as of September. Once a hot growth stock,
Netflix squandered all the gains it had made in the market over the
previous year in a matter of three months. What’s more, the future is
very uncertain right now.

This chart, courtesy of Yahoo! Finance, paints a pretty clear picture of
Netflix’s precipitous drop since July:

So while technology stocks like Apple and Cisco Systems may be good buys
at the moment, Netflix’s early-day market success on Monday is likely
fleeting. By 3 p.m., in fact, Netflix stock was actually down 3 percent
for the day.

The company’s decision to abandon its idea of splitting into two websites
was wise. But it didn’t come “Qwickly” enough to stop hundreds of
thousands of subscribers, and investors, from jumping ship.

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