Netflix stock investors should chill until the short press ends

<p>Netflix (NASDAQ: NFLX) is now worth more than Walt Disney (NYSE: DIS). Just like Babe Ruth said 90 years ago, when he signed a contract that would pay more than President Herbert Hoover, the NFLX stock has a better year.

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Netflix reported earnings of $ 709 million, $ 1.57 per share, on revenue of $ 5.77 billion for the quarter ended March. More importantly, it received 15.77 million paid subscribers, an increase of 23% from last year to 182.9 million.

The new subscriber figure was twice as much as expected. Most of the growth came outside the US, a competitor in the market has barely touched.

Netflix is ​​Chill

Wait, I hear you say. A market value of $ 187 billion for a company that just reported a profit of $ 709 million? A price-to-profit ratio of 85 in a world where Microsoft (NASDAQ: MSFT) is trading at 30?

It’s a new kind of sense of quality. Where in the past crises investors rushed into US dollars or hard assets, today they rush into everything that resists the new coronavirus. Netflix resists the virus like nothing else.

As one author put it, “it’s no longer a subscription to Netflix.” The company’s streaming entertainment service is replacing cable TV at a cruel pace. AT&T (NYSE: T) is now worth only $ 25 billion more than Netflix.

Netflix once had ambitions to be a cable TV channel, like AT & T’s HBO. It once tried to be a movie studio like CBSViacom’s (NASDAQ: VIAC) Paramount. Consumers are now concluding their $ 150 a month contract in cable contracts and switching to Netflix’s $ 13 per month service. Many also receive $ 10 per month Amazon.com (NASDAQ: AMZN) Prime, which comes with free shipping. Add to that the Disney package with Hulu and they still spend a fraction of what they were before.

Netflix says it has enough new content to reach 2020, even though its production has been stopped by the virus. While rival studios come from reaching the public, Netflix gets viewers without spending money.

As good as it gets?

The problem, says Netflix Bears, is that this is as good as it gets. Once home orders have been removed, people turn off their TVs and go out.

That’s why the latest move up to Netflix may be a short press. The share’s short volume ratio on April 22 was 30.33%. It is higher than Tesla (NASDAQ: TSLA), the former short champion. Just a few weeks earlier, on April 9, it was under 19 years old.

Netflix management knows that their advantage will pass, so they raise a billion dollars in debt, in dollars and euros. It will result in long-term debt of more than $ 15 billion, on assets of $ 35 billion.

Netflix is ​​also taking the opportunity to burn its image. It puts 35-40 hours of documentaries on Alphabet’s (NASDAQ: GOOGL) YouTube service, where they will stream for free.

Netflix is ​​also becoming more transparent on viewers’ figures, figures that previously ended up as state secrets. Spenser Confidential, a film starring Mark Wahlberg, was seen by 85 million households during the first quarter. The documentary series Tiger King was watched by 64 million. The Spanish language La Casa de Papel, or Money Heist, was seen by 65 million. A typical prime time show on TV is lucky to see 10 million.

The conclusion of the NFLX stock

You will have a better grasp of the real value of the NFLX stock when the short press ends, when traders and speculators return home

When short-term interest falls, the share price will fall. Only then should you choose whether you want to invest. Only then will you see the true value of the Netflix share. I guess it will happen when big states like California and New York start lifting their quarantines.

However, the real value of Netflix will still be huge. Once this value has been revealed, Netflix should be a stock worth investing in.

Dana Blankenhorn has been a finance and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available in the Amazon Kindle store. Write him on danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. At the time of writing, he owned shares in AMZN and MSFT.