Should a sell-side analyst call Netflix (NFLX) 'a worthless piece of crap'?

May. 3.05 | About: Netflix, Inc. (NFLX)

The blog site Thomas Hawk's Digital Connection recently posted a fascinating dialogue between Davis Freeberg and Wedbush Morgan analyst Michael Pachter. Freeberg questioned Pachter's Sell rating on Netflix (ticker: NFLX), while recommending that investors buy Blockbuster (ticker: BBI) and Movie Gallery (ticker: MOVI). Pachter's response and the 26 (and counting) comments that follow are interesting, amusing and sometimes informative.

Quick comment: A few months ago, Pachter made headlines by branding Netflix as 'a worthless piece of crap'. Here's what he said:

Netflix is a worthless piece of crap with really nice people running it.

I don't mean that they're doing anything wrong. They have a wonderful idea, but it's not a sustainable business. I wish they would make it — they deserve to make it. But in the Internet, all the success stories tend to be multiple channels, [offer] multiple products, or have a
brick-and-mortar component. At the end of the day, there's only one line of business going on at Netflix.

Here's what the NASD has to say in its Series 63 exam under the topic: Professional Conduct and Prohibited Transactions:

Firms and agents are also prohibited from:
- Spreading rumors
- Using flamboyant language
- Promising services with no intent or ability to perform
- Recommending unregistered non-exempt securities

I don't know exactly how the NASD defines "flamboyant language" but I imagine that calling a publicly traded company a 'worthless piece of crap' would qualify. Ultimately, time will tell when Pachter is right or wrong.