CNBC’s Jim Cramer has been cautious about Netflix, saying it was a “cult stock.” When high-flying momentum stocks go higher, they tend to reach the heights, until, of course, they disappoint. Then they are flung to Hades. That is what happened to Netflix, which was trading at a sky-high multiple, but said it was seeing a slow-down in subscribers, both domestically and overseas.
Netflix might still recover, but it will take a couple of quarters to see if it has regained its footing. Cramer thinks the stock, which has increased exponentially in value over the years, can be sold here, and bought back at a lower price. That is the risk with momentum stocks, which can do well until they report one bad quarter, and when that happens, selling is justified.