Watch now as Communications analyst Andrew Freedman discusses his bear thesis for Netflix (NFLX), while explaining how shares plunged over 35% after they reported earnings Tuesday evening.
“Look, this has been a slow motion train wreck for years. Management's consistently moved the goalposts. Every single time they had a weak quarter, they either scoffed at competition or kind of alluded to it, but never really owned up to it,” explains Freedman. “But this was a capitulation quarter. 100%. They just admitted and owned up to everything we've basically been saying, and the key points of the bear case for a long time.”
“There's more competition. And so you really enter a death spiral where margins come under pressure, costs continue to go higher, there is no more growth, and you have limited pricing power. You're one of the most expensive streaming services in the market with some of the I don't say the worst content, but at least relative to peers. Your content isn't performing as well.”
“So if things don't get better and I have no confidence that they can actually execute against their plans to launch an ad supported tier, they said it could take up to a couple of years. You know, if things don't get better, the stock can be well below $200.”
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