I am studying for my accounting work now and it is interesting to look at Netflix and look out for red flags.
There are a few accounting tricks such as amortization of license (it’s perfectly legal, but it can be used to manipulate net income), the CFO has already resigned, insider selling shares. These activities remind one of the 2000 dot com bubble. The signs are everywhere, but people are still buying, unconvinced by these red flags, perhaps more convinced by the red envelopes that netflix gives out. Netflix remains one of my big short this year while I find other stocks with similar trends.
If you are shorting Netflix, you have to monitor your short position. For now, it is a safe short candidate, but if it gets to $188, we have to see whether buying a call is a good idea to hedge our short position. The impetus for a sharp drop is when Apple, Google or Amazon finally release their netflix beater model.
Everyone is still waiting for Amazon to start the ball rolling, but I think Amazon is having trouble convincing movie studios to get good rates.
Based on the technical chart above, NFLX will be in the trading books of most shorting computers. Shorters will most probably try their luck to drive Netflix below $208 to hit a target of $188.
Netflix is a good stock only if no competitors ever come in to mess around with them. However, it seems that Apple, Google or Amazon, or even REDBOX will be coming in to disturb Netflix.
Please comment on other short candidate as we await the next market correction which will happen in a few days.
1 comment:
NFLX has managed to be at the top of the list , but along with this the same trends have been recorded by the author for the other stocks as well.
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