This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Netflix Is Overpriced but Apple Is On Sale

The following five-year chart speaks volumes about how NFLX's share price has run the roller-coaster gamut and why shares tumbled last year after being hit with the fact that in the prior quarter NFLX's quarterly earnings growth had dropped almost 88% and the company was mired in $400 million in debt. Yet in spite of those financial realities the shares are skyrocketing!

NFLX Chart NFLX data by YCharts

Its cash from continuing operating is a big issue, and so is the debt load. On a positive note its still has ample levered free cash flow. Yet, the buying frenzy in NFLX shares over the past two days can't be fundamentally justified by the numbers and the company's comments.

The AP article sited above described it this way, "Investors were euphoric. Netflix's volatile stock soared $36.24, or more than 35%, to $139.50 in extended trading after the numbers came out." Thursday's rally drove share prices intraday up 40% to as high as $149.17, and that's when the selling (I suspect short selling) kicked in.

The article continued, "It would also mark a nearly 80% increase since the company's early December announcement of a licensing deal with Walt Disney (DIS) for exclusive streaming rights to new movies beginning in 2016."

The two-day surge in Netflix's stock has been a gigantic windfall for billionaire investor Carl Icahn. He began accumulating close to a 10% position in NFLX in early September when the stock was trading below $55. This is a big payday for Icahn!

My question involves whether the upside reaction to NFLX's earnings and Hastings' comments involves a short squeeze that will be followed by a rational program to begin to short the stock at these outrageous levels?

Yes, the two million-plus increase in new subscribers in the fourth quarter gives Netflix something close to 27.1 million U.S. subscribers for its streaming $8-per-month service.

Yes, as CEO Hastings said, he believes the U.S. streaming service eventually will have 60 million to 90 million subscribers, although the fact is he hasn't even established a timetable for reaching that goal. Hastings and the Board of Directors don't know how long it will take to win that many subscribers.
3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 0.00%
NFLX $82.79 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs