'Fast Money' Recap: Netflx Draws Bipolar Views

NEW YORK ( TheStreet) -- The markets rallied Wednesday on the Fed's decision to leave interest rates low until 2014.

The Dow Jones Industrial Average jumped 83.10, or 0.66%, to 12,758.85. The S&P 500 added 11.41, or 0.87%, to 1326.06. The Nasdaq rose 31.67, or 1.14%, to 2323.31.

Melissa Lee, the moderator of CNBC's "Fast Money" show, led off the discussion with Netflix ( NFLX), which was up 13% in afterhours trading on a strong earnings report.

Pete Najarian said he found it difficult to read the stock heading into earnings because the report could have gone either way.

For a breakout of some stocks from a recent "Fast Money" TV show, check out Dan Fitzpatrick's "3 Stocks I Saw on TV."

3 Stocks I Saw on TV

Joe Terranova, who remained skeptical of Netflix, said he would get back into the stock on a pullback to the mid-$90s. He said investors should stay away from the analysts following the stock, noting they have been "whipped all over the place" on fundamentals, technicals and pricing.

Lee pointed out that it will be difficult for investors to get a handle on the stock because of the company's decision to provide less disclosure on such matters as turnover numbers and subscriber acquisition costs.

Karen Finerman said she was staying away from the stock because she didn't fully understand the company's situation. She said she was wary of the stock's stretched valuation and a worrisome short interest issue.

Whitney Tilson, a managing partner for T2 Partners, was optimistic about the outlook for Netflix, which represents the tenth largest position of his firm's portfolio.

He said his firm trimmed a little of its stake into earnings because it had no idea where the earnings would come in. He said today's results reduces the odds of a downside scenario, adding he particularly liked what Netflix said about free cash flow, the positive trend in net subscriber additions and fewer streaming cancellations.

He said the signs point to the likelihood of a return to a growth story and less likelihood of subscriber loss going forward. He said he expects to see short covering on Thursday.

According to Tilson, a long-term market strategist, it will take the company, which will not earning any money this year, at least 12 to 18 months to return to profitability and high subscriber growth. He also said Netflix is a dominant market position in the streaming business, which is growing 30% to 40% a year.

Michael Pachter, managing director for Wedbush Securities, had the opposite view. He said Netflix's investor letter makes light of its problems with diminishing content quality. He also said Netflix faces higher content costs from content providers who want more more money. He said Netflix is making less than $1 per subscriber per month from streaming, while facing higher content costs.

He said Netflix's story makes no sense at all and sees the stock going down.

Lee shifted to another big story for the day: Roche's hostile $5.7 billion bid for Ilumina ( ILMN), which shot up 46% today on the news.

Finerman said Roche's bid is as hostile as it comes, as the Swiss firm is going directly to the shareholders with a tender offer with no financing conditions and probably a plan to nominate directors. "Ilumina is defenseless."

Finerman said Ilumina will probably look for other interested parties. Instead of investing in a stock, she said she preferred investing in the space through the iShares Nasdaq Biotechnology Index Fund ( IBB) and SPDR Biotech ETF ( XBI). She said the space is attractive as it continues to see acquisitions of biotech companies by big drug companies.

Keith Moore, an event-driven strategist for MKM Partners, said Ilumina stock is a ahead of itself in what he sees as a drawn-out battle. He said Ilumina will put a fight initially to get the best price before giving in. He mentioned some other companies that might be interested including Siemens ( SI) but he said Roche represented the best fit.

Lee noted that Sandisk ( SNDK) was down 8.43% in afterhours after a disappointing guidance and comments about lower demand for flash memory. Najarian said he was surprised by the comments considering the boom in tablets and other mobile devices. Terranova said the stock had been on a nice run before today's tumble.

With the Fed'so pledge to keep rates low through 2014, Lee asked the panel for some slow money trading ideas. Finerman said she liked Microsoft ( MSFT) and its nice dividend and decent earnings growth. Terranova liked the TM Corporate Bond Fund ( LQD), while Mike Khouw said tobacco and telcom securities might work.

In the Money In Motion segement, Amelia Bourdeau, a director at Westpac Instituional Bank, said the markets didn't anticipate the length to which the Fed would hold interest rates low. He said the move will provide an extra boost to risk taking, expecially in commodity currencies and the euro. She provided viewers with a trade: long the New Zealand dollar, short the sterling.

Does Obama's ambitious mortgage refinancing plan have a chance of becoming reality? Jim Pethokoukis, of the American Enterprise Institute, said the details of the proposal are sketchy. He said it could affect as many as 10 million homeowners. However the plan needs congressional approval because it includes people who don't have government-backed morgages, he said.

He said the plan will pose a problem for banks and other institutions that own mortgage-backed securities with prepayment risks.

With the markets up so far this year, Larry Mcdonald, senior director for Newedge, presented the case for the bears. Among other things, he pointed out problems with Portugal's 5-year CDs and a bull-bear ratio that is at the highest level in five years.

In the final trades, Terranova issued a warning to those shorting the euro. Nathan advised getting puts in SPDR S&P 500 ( SPY). Finerman said to sell Molson Coors ( TAP). Najarian said Apple ( AAPL) is still very cheap.

-- Written by David Tong in San Francisco.

>To contact the writer of this article, click here: David Tong.

To submit a news tip, send an email to: tips@thestreet.com.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

Follow TheStreet.com on Twitter and become a fan on Facebook.