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SHORT NETFLIX (NFLX); 30% DOWNSIDE
We are hosting a call Today at 10:00am ET to review our short thesis on Netflix (NFLX). We believe investors are overestimating NFLX's pricing power and ability to drive further adoption in the U.S. with looming competition from content goliaths Disney (DIS) and WarnerMedia (T).
We surveyed 1,000 U.S. consumers, and 40% of Netflix subscribers said they were either 'likely' or 'extremely likely' to subscribe to the Disney+ service. With only so much time in a day and wallet share to be had, an increase in the number of streaming video options will dilute NFLX's relative value, resulting in increased churn and slower subscriber growth.
Meanwhile, we think international growth (a key element of the bull thesis) is bound to decelerate following a break-out year in 2018, and the bulls are overestimating the International TAM at NFLX's current price points.