Having hit an all time high last week, and repeatedly crushing skeptics such as David Einhorn and his short basket, Netflix appears simply unstoppable. It did stop, however, and drop nearly 2% moments ago when short seller Citron Research tweeted that it's time to short the stock back to $300 as "content spend is unsustainable in the long term."
"Stranger Things happening at $NFLX. Wit mkt cap up $17 BIL in a week and short interest. at 10 year low. Citron thinks the stock can be shorted back to $300. Content spend unsustainable long term. Great article today's FT tinyurl.com/y9cwvqbu Congrats to bulls, historic run."
Stranger Things happening at $NFLX. Wit mkt cap up $17 BIL in a week and short interest. at 10 year low. Citron thinks the stock can be shorted back to $300. Content spend unsustainable long term. Great article today's FT https://t.co/jTM8lGoWdp Congrats to bulls, historic run— Citron Research (@CitronResearch) March 12, 2018
Of course, Netflix's "unsustainable" content spending is a very familiar thesis and is hardly news: we made this point last August in "Netflix Is Spending Twice As Much As Amazon On Content", when we showed not only NFLX's soaring debt load, which is needed to fund the company's content library in lieu of cash flow...
... but also the massive cash content spend compared to its biggest peers: a strategy meant to gain market share without any regard for the cost, and which works until i) central banks raise the cost of capital, ii) investors realize they've been drinking Kool-aid for years.
In any case, for now Citron has managed to hit the stock, which is lower on the day...
... although like on every previous occasion, this will likely just become another invitation for algos to BTFD.