Amidst a flurry of wall street analysts scrambling to be the first to UPGRADE and raise their Price Targets on Netflix (NFLX), how about we take a step back and look at exactly WTF is causing all this frantic buying in NFLX stock today, and why I believe that NFLX will eventually go down the path of ENRON. Now keep in mind, I’m not accusing NFLX of illegal or fraudulent accounting practices, but rather taking an objective look at Netflix’s business model and what is causing these spikes in Netflix’s subscriber base each quarter; apparently, an increase in subscribers is why NFLX is UP today, which is a load of bullocks and I don’t buy that theory even for a second; Just look at the Short Interest on NFLX and you’ll know exactly why NFLX is UP today.
Apart from being Carl Icahn’s Sperm-Bank, that he occasionally uses to squeeze out the short, NFLX has a flawed business model and the whole Online-Streaming sector/industry is rapidly approaching a saturation point, as more and more serious/legitimate competitors like Comcast, Amazon, Crackle etc… are flooding in to take advantage of this Online-Streaming f*ckfest. On top of that, Netflix’s content is out-dated and the company has bet a huge amount of it capital/cash flow/leverage on producing “ORIGINAL” content. Even though their new content is good, like House of Cards and Arrested Development (Coming Soon), it’s not enough to attract new customer and retain existing ones. To add to Netflix’s misery, their business model which offers new customers a 30 Day Free Trail, is just straight up idiotic. Why? Confession: Every 12 months, I call NFLX and request a 30 Day Free Trial, and then I watch every possible piece of garbage offered on NFLX, and cancel my subscription just before my Free Trail Period is up. I think it’s safe to say that I’m not the only one guilty of doing this. I did it just recently for House of Cards. And that ladies and gentleman, is what is causing a SPIKE in Netflix’s user base each quarter. It’s a Loop-Hole (more like a Black-Hole) that will eventually force NFLX to file Bankruptcy, if it doesn’t fix it ASAP.
Not just that, Netflix’s new idea of dropping all the episodes of it’s original content like House of Cards for users to binge on, is absolutely ludicrous and will blow up in Reed Hastings face like a nuclear bomb, and he wont even see it coming. I mean seriously, if you were given an option to watch all the episodes of your favorite TV shows + a 30 day Free Trail, why the fu*k would you pay $8/month. You could do what I do and watch all the episodes and then just cancel your subscription.
Just like ENRON’s huge bet on VOD and Fiber Optics imploded causing the company to go Supernova, I believe NFLX is also going down the same path. Though times have changed and the accounting standards now are even more stricter than they were back then, there are always some loop-holes that can be exploited to deceive investors into believing that the company is making sh*tloads of money quarter after quarter, when in reality, the company is about to go bankrupt.
As for the Technical case for NFLX, here’s what happened the last time NFLX went parabolic:
DEJA VU ???
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