Simon Hobbs gave Crockett the first chance to speak. Crockett used the opportunity to tell viewers that "Netflix is becoming a TV network company," which provides for a much higher margin business. And because they have signed a couple exclusive deals and consumers like Netflix, margins, along with earnings per share, will continue to increase and the stock will continue to rise.
In response, I noted that it doesn't take a rocket scientist (or Wall Street analyst) to have predicted NFLX would hit $300 (it actually made an intraday high of $298.92 on Thursday). I even did it.
I proceeded to make what I think are the most important points at this juncture in the Netflix (and NFLX) story:There's a disconnect between company and stock. The notion that Netflix is just like Time Warner's (TWX) HBO is demonstrably false. Off-balance sheet obligations, now at $6.5 billion, have outpaced revenue by a margin of more than 5-to-1 over the last 2.5-to-3 years. Off-balance sheet debt is up 550% over 2.5 years, while revenue is up 106% over the last three. Reed Hastings refuses to discuss churn -- or even look at it -- so he doesn't think anybody else should and nobody says anything about it.
CNBC's Kelly Evans made a good point in response: Who cares if they're not exactly like HBO? Valid. We might be splitting hairs, although I would argue that exclusivity windows, which HBO has for life specifically because it actually produces its own content, matter. But that aside, if it works, why does it matter how Netflix gets there? Fair enough.But I had to ask -- is it even working in the first place? How do we know Netflix originals are hits when the company refuses to provide viewer data? Crockett responded by calling my analysis "thin" and claiming I wasn't making "a coherent argument." Honestly, that was shocking, given the data points I offered in response to his vague discussion of improving margins because "Netflix is becoming a TV network company" and consumers like the service. Based on my conception of what a Wall Street analyst should be, I sounded more like one than he did. I mean I had numbers, which, given my qualitative bent, isn't something I usually choose to bring to the table.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV