Continuing with its tradition of overreacting to Netflix news, Wall Street on Tuesday pushed up shares of the movie-streaming and online DVD rental company after a Goldman Sachs analyst upgraded the company and increased the target price. Shares of Netflix (NASDAQ: NFLX) climbed as high as 16.11, or 8 percent, to 217.31 before settling back to 216.13 by mid-afternoon. (Also see: For Netflix, Facebook deal with Warner Bros. like a bad movie) According to MarketWatch, Goldman Sachs analyst Ingrid Chung upgraded her rating of Netflix to buy from neutral and raised her share target price to $300 from $210. Tuesday's surge partially offsets the 18.7 percent share decline through Monday since Netflix peaked at 247.55 on Feb. 14. The stock was rocked twice by the unbelievable news that companies everyone expected to compete with Netflix announced they were going to compete with Netflix. Investors were stunned and dispirited that first Amazon (on Feb. 22) and then Facebook (on March 8) unveiled streaming video offerings for customers and users. Clearly this was the beginning of the end for Netflix, and Wall Street responded by dropping shares 13.91 and 11.95, respectively, immediately after those two announcements. Combined, that's more than half the amount Netflix had lost from its Feb. 14 peak. The truth is, investors have become increasingly jittery about Netflix as shares continued to reach new, and seemingly unsustainable, levels. That would explain a lot of the overreaction to the Amazon and Facebook news. It also may explain the street's overreaction to Chung's upgrade. Jittery people jump at things, including good news and reassurances. Which is what Chung offered when she observed in a research note that "the demand for video streaming could be big enough to sustain multiple business models and competitors." Chung also wrote that investors "overreacted" when they fled like George Costanza from the fire at a kids' birthday party in response to the Amazon and Facebook news. (That's my George analogy, not Chung's.) Overreacted, indeed. Chung tries to soothe the market's case of Netflix nerves by noting that the company already has a large customer base (20 million subscribers) and that the percentage of U.S. consumers who watched streamed movies and television is rising rapidly. However, except for some specific numbers Chung mentions, these larger points -- Netflix's market leadership and the clear growth of a vast streaming media market -- were already known to investors before they rediscovered their bullishness toward NFLX. Apparently they just needed someone to remind them. Which, when you think about it, is sort of lame.
Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.