NFLX
I am getting killed on my shorts right now as netflis just posted a new 52 week high, but I honestly believe it is over valued. Using its current 7.99 online streaming subscription program, it is going to be very difficult to post the kind of earning future earning that investors are expecting, while keeping in mind that there are only 115 million households in america, meaning to post $1 billion in earnings at there current 7% margin they would need about $14 billion in revenue. Their service is feasible for about 70 million of those 115 million households. To post thier earning they would need to sell their product to close to 18 million of those housolds meaning about 1 in 4 people who could afford it would have to have it. Keeping in mind their are free services and compitition out there. To me this seems very unlikely. Are any of you guys making a play on netfilx?
Cramer said earlier it was a $300 stock. But that makes it all the more likely to fall to $200.
you gotta be careful with nflx, never really know how high momentum's gonna take it. but the fundamental analysis is right. they're doing some tricky things with their accounting to beef up earnings, but they can't keep it up forever. i might just buy some long-term puts if i were you. or even put a strangle/straddle on
Two things: 1.) You said "115 million households in America" - consider the qualifier in that sentence. It's a big world out there, and some people are using the international argument to justify the valuation. 2.) I agree NFLX is ridiculously overvalued, but the stock isn't really trading on fundamentals right now. Good luck catching that falling knife. The valuation is absurd, but it's been absurd for months and keeps getting more ridiculous. People have been trying to short the hell out of it for nearly half a year now and keep getting murdered. When a stock isn't behaving rationally, I'm staying away.
Disclaimer: Long NFLX with a trailing stop and think shorting this stock is particularly dangerous. The T2 short covering perspective is interesting if you havent seen it. I dont think you are necessarily wrong in your analysis but it is not a position that I would take.
http://www.marketfolly.com/2011/02/why-whitney-tilson-covered-netflix.h…
i would wait to short it. think about how many times you would have been wrong shorting the ridiculous valuations of the dot com bubble.
Fundamentals in this market? you would stay loosing. Cover your shorts my friend and ride the train.
Ive been longing JDSU since early Jan and thats done some wonders for my ROI.
why has jdsu been killing it so much in the past yr? is it still a long in your opinion?
sorry didnt mean to threadjack. im short nflx as well via long dated puts, taking a beating. nflx is clearly going to fall, the question is when. once they have a big earnings miss, all bets are off.
Thanks for the great input guys. I honestly do believe netflix is a great company. Everyone I have talked to including my self, says they love their netflix subscription. My problem with the company lies in the 83 PE ratio, which is after posting record earnings.. At a PE of 20 I would mortgage my house and buy NFLX Calls, at a PE of 30 I would buy NFLX, at a PE of 40 I would give it a part in my portfolio. A PE of over 83 that is damn insanity! Also interested by JDSU, not done much research but their financials aren't pretty.
I sold 1 Jan12 230 call back when NFLX was in the 210s. Given my entry price, I lose money if NFLX is above 260 on Jan 2012. I think NFLX will stumble through this year, especially the second half of it.
Please note this is a very small position for me, so I can withstand NFLX running up a lot, lot more than where it is now. I will buy some way OTM puts on NFLX before earnings releases, as I think on one of the earnings releases it will fall like a brick (probably the Q2 or Q3 release). In the meantime, keep the position very small (because NFLX is a dangerous short).
Options are the way to play NFLX imo.
Yea I agree with alexpasch If you are worried about the crazy downside to shorting just buy a bit of put options instead
I hope someone had bought some puts on the day this thread was posted haha, they would have made out pretty good!
Et quia vel eos neque illum quasi. Ut ex vel iure sit nihil ducimus culpa quia.
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