How to trade Netflix, Inc. (NFLX)

Netflix, Inc. (NASDAQ:NFLX) has posted impressive second-quarter results with earnings coming in at $1.15 a share at the back about $1.34 billion in revenues that beat estimates of $1.33 billion. Despite posting impressive second-quarter results, AdvisorShares portfolio manager, Brad Lamensdorf, in an interview on CNBC reiterated a short position in the company’s stock, citing the company’s outdated business model.

Netflix, Inc. (NASDAQ:NFLX)

Brad Lamensdorf has a lot of concerns on the company’s model that is 50% reliant on the DVD model which according to him is a ‘dying business’. Lamensdorf also raised concerns about the company’s use of most of its revenue to pursue international growth without converting some of it into free cash flow.

“When you look at their business model, when you really look at what they have, 50% of their business is in the DVD business which is a dying business. It is going away,” said Mr. Lamensdorf. It is not the first time that the analyst had maintained a short position on the company reiterating they did the same before Carl Icahn, got involved with the company.

Mike Olson of Piper Jaffray on the other hand, reiterated a ‘Neutral’ rating on the company’s stock echoing Lamensdorf concerns that most of the investors are mostly focused on free cash flow. Investors have also been watching how Netflix, Inc. (NASDAQ:NFLX) is driving its sub growth especially with the ongoing focus on suburbs, which are expected to drive the stock in the coming months.

“In general, right now investors are just focused on specifically sub growth and so if they continue to drive the subads that are going to be what is driving the stock. I think long term this is going to turn into a story that is more about cash flow and valuation,” said Mike Olson.

Netflix, Inc. (NASDAQ:NFLX) is currently performing extremely well in the domestic market with the ongoing expansion in the international market also looking good. As the company rolls out into more countries according to Olson, profitability levels could slightly be affected but as long as subs growth are there the stock is destined to continue growing.

Disclosure: none

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!