NFLX

Alert: 5 Reasons Why We Think Netflix’s Shares Will Collapse

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Pictured: The “black space” a Netflix user encounters after searching for movies that include one of Hollywood’s biggest superstars, Jennifer Lawrence. By Brian Nelson, CFA Netflix’s (NFLX) shares are considerably vulnerable. The content distributor’s business model is in jeopardy in light of rising cash content costs amid a subpar product offering, and we don’t believe there is an easy answer to its woes — either ever-higher cash streaming content costs will obliterate equity value over the long haul despite member growth, or a cut in such necessary cash content obligations will hurt its streaming product assortment and therefore member growth and subscriber retention. We’re pointing investors to the low end of the fair value estimate range for shares, the low-$60s, but we believe there may be further downside … Read more

Three Blow Ups after the Close February 4

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The news wasn’t pretty for investors in ConocoPhillips (COP) today, with the oil giant slashing its dividend payout, “The Dividend Cushion,” but the day may have been worse for three high-beta equities after the close, LinkedIn (LNKD), Deckers (DECK), and Outerwall (OUTR). Neither of these companies is in the newsletter portfolios, and we’ve had reservations about their business models for some time, but let’s cover the malaise, if only to look forward to potentially better times ahead…elsewhere. Let’s first start with LinkedIn. The company has been a frequent 1 on the Valuentum Buying Index, “Why Valuentum Buying Index Ratings Matter,” so the potential of an adverse event impacting its shares has long been a part of our narrative with respect … Read more

Excited About Putting Cash to Work…Eventually

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Investors are fretting over a lot of things as of late. China (FXI) announced January 19 that fourth-quarter GDP fell to 6.8%, with many noting that the measure was a 25-year low. Even if you believe that number, which may be a stretch in light of collapsing local stock markets in Shanghai and Shenzhen, the outlook can’t be much better. Steel mills across the country are reeling, and while published housing numbers don’t look that bad, we have a difficult time believing the Chinese banks are in good shape. HSBC (HSBC), Standard Chartered, and Citigroup (C) remain most exposed to what we would describe to be the growing likelihood of a contagion from weakening commodity-dependent sectors in the country. Intel … Read more

The Flight to Safety

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Image Source: Pravine Chester It’s no secret that investors have been disappointed with returns across the equity market in 2015, and this week has not made the unrest any easier to deal with. Money managers across the globe will be looking at a short-term chart of the S&P 500 (SPY), observing that the broad US index has finally broken down from a critical multi-month base, and many will look to “lighten up” on some of their equity positions that they have been reluctantly “letting run” for months. It is no surprise to us why Netflix (NFLX) was one of the market’s worst performers in Thursday’s trading session. The company is trading at nearly 500 times earnings (not a typo), and the low … Read more

Disney’s Disappointment

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On August 4, media giant and consumer spending bellwether Walt Disney (DIS) put up decent fiscal third-quarter results, but concerns about the future of pay-TV left investors a bit cautious on its outlook. We don’t expect a material change to our $94 per share fair value estimate of the company (we have been far below the market price of $120+), and we point to most of the sell off as profit-taking following a very strong multi-year share-price run. During the fiscal third-quarter (ended June 27, 2015), revenue leapt to $13.1 billion from $12.5 billion in the year-ago period (a 5% increase), while diluted earnings per share advanced at a nice 13% clip, to $1.45 per share. On display yet again … Read more

Netflix Crushed, Walmart’s Outlook Disappoints

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One of the most overvalued stocks on the market, Netflix (NFLX), issued third-quarter results Wednesday that sent shares tumbling. The company’s quarterly report wasn’t bad; the firm’s top line was in-line with expectations, and the firm’s bottom line beat consensus. However, the market wanted more. Market prognosticators were looking for the company in the third quarter to add ~3.6 million subscribers, which matched the company’s guidance. Netflix added only 3.01 million–not a bad mark, but disappointing relative to expectations. Remember: value is based on future projections of free cash flow, and what was embedded in Netflix’s stock price before the report needs now to be adjusted downward; hence the decline in shares. Even after the fall in price, however, you … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

I’d rather lose half of my clients than lose half of my clients’ money.

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“I’d rather lose half of my clients than lose half of my clients’ money.” – Jean-Marie Eveillard (First Eagle Global) Josh Brown, who runs the blog The Reformed Broker, wrote an excellent piece today on how irrational clients and customers can bring down even the best of money managers. We think it’s a very informative read. Pasted below is an excerpt from the intro, accompanied by the list of the top 25 most overvalued stocks on the market today on the basis of our research. There is a link to continue reading the piece from Josh at the bottom of the table, too.  Something tells me there are some serious blow-ups on the horizon for professional managers. I feel this … Read more

E-commerce Remains in Secular Expansion

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Thursday brought a plethora of news from the e-commerce space. First, Bloomberg reported that Amazon (AMZN) is raising prices on Prime from $79 per year to $99 per year. The company was quick to note that the Prime Fresh membership fee will remain unchanged at $299, as it continues to test pricing thresholds in the marketplace. We don’t expect much customer defection as a result of the price hike—and especially nothing like that which happened to Netflix (NFLX), which lost hundreds of thousands of customers when it raised prices in 2011. Amazon’s price increase at Prime was necessary, in our view, as it faces rising content (movies) and shipping costs. With more than 20 million US Prime members, the pricing … Read more