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Short NFLX

|Includes: Netflix, Inc. (NFLX)

I think Reed Hastings did a fabulous job building this company and I recommended this stock on this blog several years back when it was at 10.

A hedgie friend once said, never short a stock because of how expensive it is. Agreed and lesson learned :) That said, I do think that if you combine how pricey a stock is with market sizing you have a good short opportunity.

How many households in the US:115 Million
How many households in the US have televisions?112.8 million
Given Netflix's current price $172, what percentage of households should have Netflix to justify current price: 50 million: THIS IS CRAZY. This is where market sizing comes up. To think Netflix will be in every 2nd household is nuts in my opinion. Can they eventually improve margins by saving postage? Yes but content deals are expensive. They would be really underestimating their competition.

For streaming service NFLX can quickly rollout worldwide: Marketing efforts will need to expand. Plus there is initial resistance and numbers will be slow.
They are expected to strike great deals and win against content creators, Apple, Amazon and every cable service out there.

31.6% shares are short

Disclosure: Short NFLX