Why Citron Research Hates Netflix (NFLX), Inogen (INGN), Likes This Social Media Company

Netflix, Inc. (NASDAQ:NFLX)

Citron’s latest report took aim at Netflix, calling for the stock to retreat by 13% to the $340 mark. Such a pullback would still leave Netflix with gains of 70% in 2018 and would only pull the stock back to late-May levels. Unlike in Inogen’s case, Citron’s report did nothing to slow the relentless advance of Netflix shares, which gained 3% on the day it was released.

Citron’s case against Netflix, Inc. (NASDAQ:NFLX) focused on the glut of wealthy competitors in the streaming space or about to enter it, including Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOGL), Walt Disney Co (NYSE:DIS), and Amazon.com, Inc. (NASDAQ:AMZN). According to Citron, none of those competitors even need to beat Netflix for the company’s stock to start feeling the pain, all they need to do is slow Netflix’s growth.

Citron also notes that if Wall Street began to judge Netflix as a media company rather than as a tech company, which is arguably how it should be classified, its numbers don’t look at all elegant when compared to the overall revenue and free cash flow generation of media behemoths like Disney and Comcast Corporation (NASDAQ:CMCSA).

Snap Inc (NYSE:SNAP)

Unlike Citron’s two aforementioned bearish calls, the market has actually responded most strongly to the short-seller’s bullish call on Snap Inc (NYSE:SNAP) at the end of May. Snap shares have jumped by 23% since then to top $14, having already closed nearly half the distance to Citron’s $17 call.

Citron believes that shorts have stayed in the stock for too long, pushing shorted shares near record highs even as the stock had already plunged to record lows, pushing its valuation down to obscenely low levels. In fact, in little more than a year, Snap has gone from being the most expensive social media stock to the least expensive, trading at an enterprise value of just 3.4x estimated 2021 sales. That’s nearly half of Twitter Inc (NYSE:TWTR)’s 6x figure, despite Snap growing revenue at more than twice Twitter’s pace so far in 2018 and having more users (and far more users in the coveted teen demographic).

Citron believes Snap may not last long as a public company, given how attractive it looks as a takeover target for a larger tech company at its current valuation. Consider that Alphabet Inc (NASDAQ:GOOGL) reportedly offered as much as $30 billion for Snap two years ago and the company has done nothing but triple revenues and double its daily active users since then, yet currently has a market cap of just $17 billion. But most importantly of all for the bull case…Kylie Jenner is back on Snap!

Disclosure: None