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Despite the video streaming service gaining 183% year-to-date, Netflix (Nasdaq:NFLX) always seems to have its detractors. The latest argument: its subscriber base didn't grow enough in the second quarter. It's tough having to be perfect, but that's the world it lives in. This is a stock that continues to divide investors. Here's why that's a good thing.

Too Much Of A Good Thing
If you're like me, whenever things get too good in your life and everything is going your way, you immediately start to wonder when reality is going to smack you upside the head and send things spiraling downward. That's just the way life is. I get the same impression with Netflix. Although its stock is rolling along beautifully at $250, a headline from USA Today had its stock "plunging" July 23 on less than stellar subscriber growth. There were at least three other mainstream media outlets with the same hysterical headline. About halfway through the trading day, its stock was down less than 5% on about double the normal volume. Perhaps the sensational headline makes for better readership--but it certainly doesn't provide an accurate picture of what's really happening to its stock. In the scheme of things this a minor blip.

SEE: Netflix Results Are Always About Tomorrow

People tend to forget that Netflix was trading as low as $52.81 as recently as last August. Since it became a public company 11 years ago, it's had two major declines in its stock price. The first was a 74% drop over eight months between February and October 2004. The second saw it lose 82% of its value over a 13-month period between July 2011 and August 2012. So, despite these two major setbacks, it's been able to achieve a total return of 38% over the last 11 years--which isn't too shabby. Long-term investors like Warren Buffett feast on this type of setback. Berkshire Hathaway (NYSE:BRK.B) has lost half its value or more on four occasions over the past 48 years. When you consider the intense competition in Netflix's industry, I think it's done amazingly well. Any major pullback should be welcomed by investors keen on making money on its stock.

Analysts Be Damned
We all do it. We're about to make a bet on a company and then we read some analyst's downgraded the stock so we shy away. The pros expected 700,000 new subscribers domestically in Q2--the company delivered 630,000. That's a 10% miss. But is it? Reed Hastings points out in its wonderful experiment that was its Q2 earnings interview that Netflix's total members at the end of Q2 was 29.81 million domestically, right between its guidance of 29.4 million and 30.05 million. I'm not sure where analysts came up with the 700,000 figure but the company's guidance was right there in its Q1 earnings release. The fact that analysts choose to make up their own numbers is a big reason why you shouldn't listen to these people. Financial modeling is voodoo science. Most of the time you're better to listen to the people who work the business on a daily basis. They know far more than any of us.

Investopedia contributor Stephen Simpson wrote a good article July 23 about Netflix's Q2 results explaining why its business is a good one but its valuation is broken. Essentially, Simpson sees a value of no more than $175 per share. Once you factor in competition from Hulu, Amazon (Nasdaq:AMZN) and even Apple (Nasdaq:AAPL) and Google (Nasdaq:GOOG), he sees a near impossible task of moving the margins much higher due to the rising cost of content and very little pricing power given the competition. It's hard to argue with his rationale.

SEE: Hulu Results Are Always About Tomorrow

However, put away your spreadsheet for a moment and simply think about the Netflix business. What do most Americans do more of than anything else? Watch TV. There are those who argue that the company's original content isn't doing enough to contribute to the growth of the business--in essence, it's an expensive waste of time and money. But that misses the point. Netflix is trying to build a network that's open 24 hours a day providing customized viewing choices. My wife and I are currently watching Orange Is the New Black. The LA Times estimates it will get around 4 million viewers when all is said and done--a pretty good number for a business that's produced just five original series (Lilyhammer, House of Cards, Hemlock, Arrested Development and Orange Is the New Black) so far.

How many failures have the major networks had? More than they care to remember. Netflix doesn't need home runs every time out in order to be successful. Once it realizes a show isn't catching fire it ceases making new seasons and the content becomes another TV show to watch when you're bored. The networks have to keep playing the same stuff over and over and we the viewer have no option but to watch it. Case in point--our local cable company sent out countless letters last year reminding me that I either had to get a free adapter for the digital signal or rent a set-top box with on-demand Pay-TV. I chose neither. Well, the other day I realized that channels 42 through 50 were no longer available in analog and as result were nothing but fuzzy static. We didn't miss a thing. Now, I will admit it's not the smartest move in the world financially but it points out how utterly useless traditional television has become.

Bottom Line
For those who bet against Netflix, whether you're shorting its stock or simply expressing a negative opinion about their service, I ask that you continue doing so. I believe Netflix has a bright future. However, when there is no pushback from investors, it's a clear sign life is too perfect. Therefore, let the divide that exists between the shorts and longs continue to upset the apple cart. Without it, Netflix is lost.

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