This Day On The Street
Continue to site
ADVERTISEMENT
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 Momentum Must Reverse Soon, Claim Short-Sellers: StockTwits

NEW YORK (TheStreet) -- Netflix  (NFLX - Get Report) shorts are shocked. Shares of the on-demand video company are up 31% in the past month, and the stock shows few signs of losing momentum.

But a majority of investors on StockTwits.com say it's just a matter of time before Netflix sells off -- fast. 

Sentiment on the stock is 57% bearish, according to StockTwits analytics. The reason is that Netflix's multiples just don't make sense to fundamental traders. The company has a near-$26 billion market cap and trades at nearly 63 times forward 2015 earnings. That's an unheard-of price-to-earnings ratio for a media company. Disney  (DIS) trades at 18 times 2015 earnings, for comparison. 

$NFLX This is just prime for a major pullback. Must be insane to buy up here ? Mark Smith (@darwinlives) Jun. 6 at 10:02 AM

$NFLX Adding to short list here. Fundamentals don't support the valuation, highly unlikely to have long term gains from here. ? Sean (@LSValue) Jun. 6 at 09:48 AM

Netflix gained recent positive momentum from two announcements: price increases and European expansion. The company raised its price for streaming content from $7.99 to $8.99 a month.

It also announced plans to expand beyond Northern Europe into other broadband-heavy European countries including Germany, Austria, France, Belgium and Luxembourg. And some bullish investors believe that Netflix's European prospects give the company plenty of upside.

$NFLX buy every dip!!! ? DJS (@Dsteigerct1) Jun. 6 at 09:27 AM

But most investors on StockTwits.com say Netflix can't sustain its valuation. Content costs and competition will ultimately eat into Netflix's profits, they argue, and the bulls driving the stock higher will realize that it can't grow into its valuation.

Netflix spent $65.93 million to acquire DVD content in the last three months of 2013. That's up from $48.28 million from the same period a year ago. It spent another $14.9 million on its DVD library in the first three months of the year, though that was slightly less than the $21.2 million it spent during the same quarter in 2013.

1 of 2

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
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
NFLX $566.08 1.38%
AAPL $132.65 1.82%
FB $81.91 0.47%
GOOG $555.37 -1.71%
TSLA $231.55 6.01%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs