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Netflix Shares Reach Record High

24 Mar, 2008 By: Erik Gruenwedel

Life is good for online DVD rental pioneer Netflix Inc.

Shares of the Los Gatos, Calif.-based service March 24 reached a record high of $39.65, due to ongoing praise from Wall Street, before closing up $1.93, at $38.17.

Michael Olsen, media analyst with Piper Jaffray, described Netflix's 2008 guidance as too conservative and raised the company share price goal to $40 from $36.

In a research note, Olsen said catalysts driving shares of Netflix higher in the near-term included its Web site, which Piper Jaffray said had increased in traffic 18% over the past 90 days, compared to a 6% decline at Blockbuster Online.

Ironically, technical problems (“service outage”) rendered the Netflix's Web site unusable throughout the day.

Analyst Olsen said DVD by mail represented less than 20% of Netflix's current movie rental market share, which he said afforded the service “a lot of room to grow.”

The report also said the Blu-ray format should prove to be positive as it indicated a continued use of packaged media.

Last week, New York investment firm Cantor Fitzgerald & Co. upgraded from “hold” to “buy” the fiscal outlook for Netflix.

Michael Pachter, media analyst with Wedbush Morgan Securities in Los Angeles, said the current state of the U.S. economy combined with a lag at the box office would continue to bolster DVD rental.

“Box office has stabilized, so DVD rental should be flat or up slightly the next several months,” Pachter said.

Despite the negative comparisons, Blockbuster stock increased 25 cents to close at $3.55 per share.

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