Would you buy, or stay out?

Netflix is the leading movie-rental service, and it is mid-leap from mailing DVDs to streaming over the internet. It is growing fast and profitable, with more than 25 million subscribers. But seven weeks ago it raised prices sharply for customers who want both DVDs and streaming, and those customers are furious. The stock is richly valued and has slipped from its July peak.

• •The growth is real and accelerating. Revenue rose 29% in 2010 to $2.2 billion with $161 million of profit, and subscribers have jumped about 70% in a year to more than 25 million as streaming takes off. This is a profitable company winning the shift away from physical media.
• •But management just picked a fight with its own customers. On July 12 it broke the combined DVD-and-streaming plan into two, effectively a 60% price hike for subscribers who want both. The backlash is loud and still growing, and no one yet knows how many people will actually quit.
• •You are paying a premium price for a company in the middle of a self-inflicted mess. At $233 the stock trades near 79 times last year's earnings — priced for flawless execution — even as it hands critics a reason to doubt it and licensing costs for streaming content climb. Great businesses can still be bad stocks at the wrong price.