A chasm is developing between long and short analysts. Some are predicting a major deflation of the Netflix stock bubble, and others are predicting a return to the stratosphere. WHO IS RIGHT? Here is a quote from Valuewalk: Analysts at Cantor Fitzgerald have raised their price target on shares of Netflix, Inc. (NASDAQ:NFLX) to $180 per share and reiterated their Buy rating on the stock. Their price target comes out in stark opposition to the target set by Wedbush analyst Michael Pachter, whose target is $55 per share.
Well, someone is going to lose money on one side of the other of this prediction. I wouldn't want to be going "all in" on either side. Of course, there are those who believe in emotional pump and dump trading which yielded some good returns when Netflix was above $190. Now Netflix is around $160 - only a 30 point drop. Most long investors can probably afford to ride Netflix down to $120 or $100...at least that's the way they seem to be behaving. Lots of people think the stock will soar again. So okay, if the stock returns to $180 you only lost $10 from the 52 week highs. If the stock drops to $55 you can take comfort that $55 is closer to what most analysts consider "fair value" based on the fundamentals - but of course that would mean a loss of $135 from the $190+ high. So which analyst is right? $180 or $55?
Who cares? Netflix money is mad money like gambling money. You throw it on the table, hope the stock hits 200 and the PE ratio hits 700 and then hope for a shockingly great earnings report. Can't wait for earnings, by the way. Someone is going to lose big time on this stock. Can't wait...it's like watching a financial soap opera.
Wow, NFLX bounced to 176 and back to 162...thank goodness there isn't any manipulation going on in the stock or the swings would be even greater...lol. I made a point many eons ago that when Coinstar's management came out with guidance that there were only 12 blockbuster films slated for this quarter compared to 25 blockbusters in the same quarter last year, they guided for a relatively flat quarter because of this. Yet, Netflix said nothing about this.
My interpretation is that the same lack of major films this quarter will affect Netflix at least temporarily. That's why I am on the short side of NFLX and totally out of Coinstar until the quarterly release resolves this question. I don't want to make any decisions about either of these stocks until I see the impact of the huge cost of original content at NFLX and the impact of the blockbuster drought on Coinstar. I like this stock sector but tend to buy on weakness and I think $48 is a good price to buy CSTR and I think NFLX is unrealistically valued with a PE over 600 although I'm a Netflix customer and pleased with the service overall.
I agree with their market leadership, but I feel the stock is inflated based on fair value as measured by financial metrics. A PE of 625 with a 12 cents a quarter earnings result is hard to justify for any company - the market is littered with the carcasses of high flying stocks whose values were not justified by the financial results. I'll wait for this quarter's results which will determine if Netflix is the real deal...or not. The results will speak for themselves, one way or the other.