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Netflix Is Overpriced but Apple Is On Sale

As CEO Tim Cook expressed it during the company's conference call, "Turning to cash, our cash plus short-term and long-term marketable securities totaled $137.1 billion at the end of the December quarter compared to a $121 billion at the end of the September quarter, a sequential increase of almost $16 billion."

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

If you want some explosive facts that speak to how bright Apple's future is and how valuable a company it is, just take a look at this remarkable video, compliments of Bloomberg. If you're a serious investor or looking for a stock that's just plain undervalued, watch it twice.

Lest you think I'm digressing, let me jump right on to the main topic concerning Netflix. If you think this company (and I speak as a subscriber) is worth 99 times its forward (one-year) earnings, I have a bridge I want to sell you.

In watching the action it seemed like those who were betting big against NFLX were buying to cover their short positions, and that carried over into Thursday's trading session. These are the classic symptoms of a massive short squeeze.

Yes, NFLX has attracted over two million new subscribers, and it posted a profit of 13 cents a share. The Street had been looking for a net loss. So that and the other details was supposedly enough to cause after-hours trading of the stock to rise almost 36% after going up 5.57% during regular trading on Wednesday? Give me a break!

An Associated Press article on Wednesday described the earnings report and the market reaction this way:

The results announced Wednesday served as a resounding endorsement of Netflix CEO Reed Hastings, who has been spending heavily to license more compelling movies and TV shows in hopes of warding off intensifying competitive threats.
Companies such as Amazon.com (AMZN) and Coinstar's (CSTR) Redbox have expanded into streaming video to Internet-connected devices to compete with Netflix.

In respect to Hastings' strategy, it's been met with understandable skepticism and yet it has done quite well. But did it really pay off that much during the final three months of last year? This is starting to smell like deja vu all over again!

Remember the overpriced high-flyers from the recent past like First Solar (FSLR) and Chipotle Mexican Grill (CMG)? We know what happened after they went ballistic.

When I warned about them being overpriced, many commented that I didn't understand. Oh, but I do understand why companies become overpriced and how lucrative shorting operations can set the stage for a massive price run-up followed by a big fall.

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