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What's Netflix Worth?

What's Netflix Worth?
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Netflix (NASDAQ: NFLX) has been one of 2013's best performers: Shares have rallied over 90% since the start of the year. Such a powerful rally in such a short period of time may understandably draw a bit of skepticism, particularly since Netflix is now trading with a price-to-earnings ratio over 600.

Wedbush's Michael Pachter is, to put it lightly, a Netflix bear. He has a $55 price target and an Underperform rating on the stock.

“Deja vu,” he told the hosts of CNBC's Fast Money Wednesday night. “It's in worse shape now than before.”

Netflix was a hot stock in 2011, with shares briefly breaking above $300 before rapidly collapsing into the double-digits. Pachter thinks a similar phenomenon might be at work today.

In a note released back in January, Pachter noted that he was “dumbfounded that Netflix shares continue to rise.”

Pachter believes that, although Netflix has enjoyed an impressive rally over the last few months, the company is in a strategically worse place now than it was a few years ago. Specifically, the company has let its DVD mailing business -- still the cash cow of the company -- fall by the wayside, while at the same time increasing its debt burden.

When I talked to Pachter back before the company posted earnings in late January, he was equally as bearish, but told me that shares would likely rise in the short-term. At the time, Netflix shares were heavily shorted, and a beat on earnings may have triggered a powerful short squeeze.

Netflix's short interest has declined significantly, but is still near 15%. Investors may be inclined to short the company, but if the market is replaying 2011, shares could have much higher to go.

There's also Carl Icahn's involvement. Even with the massive share appreciation, Icahn said on Monday that he hasn't sold his stake. Icahn got involved in the company late last year, and began to push for a sale.

Shares of Netflix traded near $177 on Thursday, down over 3%.

Latest Ratings for NFLX

May 2017PiperJaffrayMaintainsOverweightOverweight
Apr 2017Cantor FitzgeraldMaintainsOverweightOverweight
Apr 2017RosenblattInitiates Coverage OnNeutral

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