NOTE: Hedgephone would NEVER short Netflix here! It’s not a sure bet like shorting it at $300 was… While we are bearish on the long term prospects for the company, the near term could prove rewarding for investors — in other words Netflix is WAAAAAY too hard to figure out long or short…. Rebound, dead cat bounce rallies can be fast and violent!
Netflix has long been a thorn in the side of the movie studios, could they finally put the Red Envelope out to pasture? Look, I know it has been a while since we discussed Netflix here at Hedgephone. We aren’t one to discuss only our winners and we make mistakes often! NFLX net tangible book is actually negative and this is troublesome for fundamental investors.
Here are ten Negatives for Netfix:
1. Too much debt and leverage
2. Negative tangible book
3. Studios dramatically increasing streaming costs and working to stop piracy and internet delivery in general because of margins when they can sell a blu ray DVD for $15 bucks.
4. Studios penalizing Netflix and Redbox for devaluing their products may choose to raise prices on NFLX and Redbox but also increase their viewing window.
5. A Netflix bankruptcy would be positive for movie studios bottom line because demand is still there (for now, think internet piracy).
6. Renewing content deals may cost more than they can recoup net of debt servive.
7. Consumers may simply torrent their streaming video for free.
8. Netflix raised prices to shore up their finances, but it may be too late.
9. This was a company which expanded quickly with stars but can’t obtain projected growth.
10. Because it would be pretty funny and would probably create some jobs for the industry.
