Whitney Tilson: Why We Covered Our Netflix Short(seekingalpha.com) |
Whitney Tilson: Why We Covered Our Netflix Short(seekingalpha.com) |
75x trailing earnings in the current economic environments SEEMS expensive to me. I'd be willing to bet (but not with real money) that it will be cheaper in 12 months. Of course, as a Netflix subscriber, I'm glad the streaming side of things is going so well.
Maintaining a short position is expensive. And even if you can afford it, holding it for too long can kill any upside you get when it finally does collapse. I can say that Gold is overvalued but I won't short it, and be perfectly consistent in saying that, because I admit that I have no idea how long it'll take for the bubble to pop.
Short positions on companies like Netflix should be initiated using capped-loss derivatives instead of assuming the unlimited risk of selling the company's stock short.
Buying a long-dated put option is often the best way to short something, assuming you have conviction.
That said I wouldn't buy NFLX either. But I wouldn't want to be short when 1/3 of the float is. If AMZN buys them out that would be the mother of all squeezes.
Basically, to justify the current value, The 5 year CAGR has to be way, way higher than 30%
It seems the same to me as well, but markets seem to disagree. The riskier the bet, the more willing today's market seems to be willing to accept it.
The market isn't rational, and it's going to be irrational with a lot more force than I can muster.
If you insist on doing this, do it soon after the house of cards start to fall, but not before.
But kudos to this guy for adjusting his firmly held thesis. When money's on the line, it seems people are willing to reject their prior wrong beliefs much more easily.
I haven't changed anything on my end that I'm aware of. Still, I can't believe this is all on Netflix's end, can it?
I'm a Netflix streaming subscriber and even though it's so cheap - I'm considering canceling because they don't bring enough new content online for me to get value from the service.
Exactly. It's like the early days of DVD -- you had people whining and moaning about the lack of Star Wars or Titanic, when there were already more great films in release than you'd ever have time to watch. Netflix streaming works the same way -- you can't turn on the TV with the intent of watching a specific Hollywood A-list movie, but if you turn on the TV with the intent of watching something good, you will not be disappointed.
I'm finding Netflix streaming over the $99 AppleTV to be an incredibly better deal than paying $70-$80 a month for digital cable.
Hastings made the right bet by focusing on the streaming. That's clearly the future and I'm glad they are planning to go ahead with streaming delas with full steam. Hope the studios realize this and partner with them.
Yes, anyone can stream videos. But not everyone can buy the rights, which are sold in exclusive windows.
Every title is only licensed to one entity in each window. This system was designed for pay-TV channels that wanted exclusive rights, and the studios found that it was a good way to maximize revenue. So after a movie leaves the theaters, there are a series of these licensing windows, each lasting about 1-2 years. This is why a movie that's on HBO will never be on TBS simultaneously.
Buying content within a window is essentially like an auction. The highest bidder wins. It's possible to enter the market, but to do so you actually need a lot of capital to bid and win content.
studios... will simply change the licensing costs
Reed publicly stated that a major goal in the future is to pay studios more for content. And that's only fair as we increase the number of viewers.
Disclaimer: I work at Netflix.
I think Amazon has sufficient capital to go to auction, also, in general, capital comes 'cheap', if someone has a business plan with a reasonable shot at success they can get VC money. If your expectation that a barrier to entry is purely capital costs, well...you better hope no investors want to back a competitor, there is plenty of money out there.
>Reed publicly stated that a major goal in the future is to pay studios more for content. And that's only fair as we increase the number of viewers.
Well, from a business perspective fairness isn't what matters, he should strive to retain as much of the 'pie' for Netflix as possible. His concession that he 'wants' to pay content producers more seems like PR, more likely he has no choice. It is good and fine to say you want studios to make more money on content, but I don't think history has shown either the movie or music industry care terribly much about how much profit their partners make, and they can drain any profit by increasing licensing costs anytime they want no? The more successful you are in streaming it seems the more you are exposed to this risk.
I still know some people that think a company with a $4 share price is 'cheap' regardless of earnings, cash flow, or book value (and conversely, that high price stocks like AAPL or GOOG are 'expensive'). Not saying that is the case here, but there are plenty of people that make a similar mistake comparing P/E without considering growth rates.
Yes, I know low P/E strategies do well, and margins of safety, danger or trying to model growth rates more than a couple years out... but I'm not trying to turn HN into an investing forum :)
Thank you for calling me out on that!
Alternatively, you could probably write a script to bounce back and forth. It would be pretty trivial in Linux; I'm not sure how it would work with OS X (ironically, my OS of choice :) or Windows.
(though, I wonder if youtube suffers when google dns is used. I could see arguments both ways)