Tag Archives: multi-bagger

NetFlix – Like going to the Buffet with Lobster on the Menu

We have written about NetFlix (NFLX) quite a few times over the past year, and have shared our somewhat bullish outlook. This stock has had an epic fall from grace that all other growth stories will be compared to going forward. The question to ask is if the growth story is over or are we in Chapter 3 of a novel? Time will tell as this NetFlix story is filled with quite the drama and suspense.

On Tuesday CEO Reed Hastings posted this on his facebook page:

A quick boast about record viewing hours. Not really a 'material' event, so dont think there is a need for an 8-k as the genius's over at CNBC think it warrants. But it was enough to re-ignite the fire under a dying stock. The stock ripped $10 to close at $81.72. It was an amazingly strong rally with no substantial pull-back and huge volume. The one that you like to see if your banking on a multi-day run like we are. We thought NetFlix (NFLX) was on the verge of a rally in mid-june, and looks like we are finally getting it. Why?

Well with the huge subscriber base and international growth still on the horizon, we think NetFlix (NFLX) still has huge growth potential.

Lets do some quick math on the 1 billion viewing hours for June. Last reported numbers were for the 3 months ending with December of last year, when there were a total of 2 billion viewing hours. Thats a 33% increase in viewing hours in June from December. So are folks viewing habits changing so much, that they are watching 33% more programming on NetFlix(NFLX)?

So is NetFlix (NFLX) like a buffet and folks are just stuffing their faces with more macaroni and cheese? Thats what this "5 star rated" ANALyst thinks:

Wedbush analyst Michael Patcher said the increase in viewing time might just lead to an increase in content costs for the Los Gatos, California-based company.

"Netflix is an all you can eat buffet, and if the buffet sees its consumption go up by 50 percent and they don't raise price that is not a good thing," Patcher who has an "underperform" rating on the stock, said.

Yeah, this guy has been bearish on NetFlix (NFLX) and Bullish on Coinstar (CSTR) for sometime. A classic heads I win tails you lose scenario. He's all ready to throw a quick analogy to rationalize his gloom and doom prediction on NetFlix (NFLX). Sorry to hear that Michael, but you have it wrong this time just like your $44 price target on FaceBook (FB). Its not about consumption, but the quality of the consumption. You see cheap a cheap product, we see Lobster.

Your telling me subscribers are watching 33% more content then 6 months ago? I am sure there has been an increase in subscribers viewing hours...a result of smart phone and Ipads, but it's not 33%. June was warmer then average... you think folks sat on their ass to watch T.V. shows? Based on the subscriber numbers, each NetFlix (NFLX) streaming customer would need to watch 10 more hours of NetFlix (NFLX) content in June then in December to get the 33% increase needed for the 1 billion viewing hours.

To me it sounds like there were a heck of a lot of people signing up for service. But what do I know, I am not an ANALyst.

By the way, we have the 85, 90 weekly calls as well as the July 24 105 and 110 calls.

Volume tells the story on NetFlix(NFLX) and we think there will be at least 1-2 more green candles on the chart before any pullback, meaning $90+ sometime on or before Monday.

Happy Trading!!!



The Waterfall

How does that saying go? When it smells like shit, looks like shit, tastes like shit, and came out of an a^^hole... it probably is shit... right? Well yeah. So lets apply those adjectives to the world economy: little to no growth in developed economies, huge debt issues in europe, a slowing china economy, a U.S. fiscal cliff, along with political unrest and change in some of the emerging countries. The world economy sure as hell looks like shit and would probably would smell like shit if DEBT had an odor.

Amongst all the macro economic conditions, the markets has rallied off their lows from October of 2011. Has anything really changed since then? Well yes. What changed is that we learned the world Central Banks will continue to throw band-aids onto the wounds - tricks they learned from the 2008 crisis. While retail traders are fixated on the doom and gloom headlines on CNBC, big money is bidding up stocks, knowing they have a security blanket and a friend waiting to pick them up when they fall down.

If you have read this blog or followed this site for the last few months, you have seen I am a bear at heart, but short term bull. It comes from years of fighting the same thing folks are fighting now. Fighting a tape thats rigged, knowing there is some red button that gets pushed in some office at 3:30pm to protect the markets. Now with the advent of the high frequency traders, you have even more reason to be wary. You have computers trading anything but the fundamentals of the market. It is hard work being a bear, and quite honestly, you can feel a bit evil being one. It sometimes makes me feel like Jack Nicholson in  batman.

But here it is June 25th, 2012, and I think my market sentiment has started to change. Usually making money in the market comes from going against the grain. Buying when folks are selling, and selling when folks are buying. Puts now? Sell? Go short? Isn't that what everyone is saying? In a way, yes. But timing is where folks get things wrong. I was talking about SPY $127.75-127.90 as my line in the sand. We break that and I am full on BEAR... buy the ammo, get the canned goods, and run to a bomb shelter. Well not that serious, but enough to get me concerned.

Last thursdays action was the turning point for me. It looked like folks were 'UNLOADING" shares as opposed to "SELLING" shares. Of course we had our ramp up on friday on light volume, but it was not with conviction. Monday's action confirmed my fears. Looks like we will have some type of waterfall sell-off to $120-$122 in the SPY in the coming week or two. Again, if we hold SPY $127.75-$127-90, then we should be ok. But my gut says we have some acceleration of the selling we have seen, and the market will tumble.

Stay tuned for more analysis, and check out our watchlist before the open. Updated SPY chart below...


FactSet Research Systems Inc. (FDS)

FactSet Research Systems Inc. (FDS) reported some nice earnings this morning, but their Q4 outlook raised some concerns. The stock plummeted at the open to $93.53, an $11+ drop. We think sellers are over exaggerating the outlook and the stock will bounce. We spoke about it in our chat room pre-market, and looked for $100 calls as the strike with the highest reward and lowest risk. Time will tell, nit FactSet Research Systems Inc. (FDS) is currently trading at $96 and trending higher.


Disclosure: we hold $100 June calls

NetFlix (NFLX) – History Repeats itself?

Who can forget the start of 2012 when Netflix (NFLX) went on a 6 day rampage. It was an option traders wet dream as the stock ran from $69 to $99.65 in 6 trading sessions. The Catalyst? Well thats a mystery. Was it the news that folks watched over 2 billion hours of Netflix videos over a 3 month span in the fourth quarter of 2011? Or maybe it was the rumor of a buy out from Yahoo? Either way, the stock exploded and call buyers were rewarded with 1000%+ returns on their positions.

Here it is nearly 6 months later, and we find Netflix (NFLX) in an eerily similar scenario. The stock has been trending down for a few weeks after earnings. Folks are starting to bet on a serious breakdown from support levels as Netflix (NFLX) is losing it's luster. You can see the vultures circling around waiting for an imminent death.

This is the exact scenario we like to buy calls in. Rumors circulated on friday on some type of offer from Verizon (VZ) , which makes no sense, but does bring attention to the stock. We also had a nice insider buy reported after hours.  Not saying these are the ingredients for a massive rally, but they may provide some fuel.

Folks forget that Netflix (NFLX) has over 23 million streaming subscribers, and looking to add over 7 million more in 2012. We will have more on NetFlix (NFLX)monday. For now, check out the chart. If history does repeat itself, we maybe in for a nice return on some calls.

Panera Bread Co. (PNRA)

Starbux (SBUX) announced yesterday they were buying Bay Bread, a small bakery chain from San Francisco.   Panera Bread Co. (PNRA) opened lower this morning on the news, as folks worried that the deal may effect Panera Bread Co.'s(PNRA) growth.

The only thing I think it will do short term, is bring attention to a stock that should be trading closer to $200 then $100.

We positioned ourselves with June $145 calls at .95, and June $150s at .40. The stock is currently trading at $138.76, and think she flies when she breaks the 200 dma at 139.31