Netflix – A House of Cards – Short Target $150 ?

Netflix’s (NASDAQ: NFLX)  biggest earnings surprise in years sent the shares plummeting the day after results were released. The fallout last Thursday included the worst stock rout in three years, with the stock declining 12% to erase about $16 Billion in market value.

No need for me to repeat what others have stated on the numbers – plenty of analyst coverage on the internet to read. It’s mostly all negative with downgrades and downward revisions.

I like to look at things from a personal perspective.

It seems when I go to search for a movie or something new, I’ve seen all the good movies and shows already. I know many others are saying the same. It’s great when you first sign up but after stint of binging there is not much new to watch.

Netflix is carrying a massive debt of $12 Billion. They will need to raise more debt just to pay down the debt – seen this movie before and it ends really badly.

The company lost customers (in the US) for the first time ever. I’m about to ditch my subscription – again. I’ve been asking myself if the new customers Netflix acquires are indeed new, or just old ones who got tired of their content and chose to give it another shot – just like I did.

Where is the magical ‘big data’ pill that was supposed to, with a high degree of accuracy, pump out successful shows and series, such as House of Cards? Is the house of cards crumbling?

Four new competitors entering the space – ouch.

Netflix user experience really sucks. Why can’t they for example let us delete movies we have seen or movies we are not interested in from our search. Why can’t they show us the entire library of films?

The shares are trading 52x forward earnings, while other tech-giants as Apple are valued at 15x. At this point of the cycle, we don’t see this multiple as sustainable, and it is about time for a tech-reality check with true Wall-Street valuation.

Netflix has enjoyed a cult following shareholder base that has pushed up the valuation to lofty levels. Those days are now over. We see the shares losing 50% by year end 2019 to $150.


Contrarian's Mind

Born in Toronto Lived in Nassau,Bahamas - Palm Beach,Florida - Las Vegas,Nevada and now residing in beautiful Barcelona,Spain. I back bright entrepreneurs with big ideas related to Artificial Intelligence, Machine Learning, realtime platforms and price discovery. Make everyday remarkable!

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