Many have you have noticed me recently shorting $nio and $tesla. Today, I’d like to explain my reasoning behind shorting Netflix, my favourite short in $NSDQ100 (which I’m also shorting – thus 3N – Nasdaq, Netflix and Nio).
First of all, Netflix has been benefiting hugely from the Covid-19 pandemic. Since the pandemic is almost over, the H2 will be significantly less positive for the company. 10M subscribers joined during the crisis bringing the total to 193M. The guidance for Q3 2020 is only 2.5M new subscribers (source: last earnings call) and imagine if they do not hit this number…
Secondly, people have been stagnating so much, that now is slowly becoming the time to get out there and do something. And if people in some parts of the world still have to be stuck for whatever reason, it’s time to build a website on WIX and get a freelance job, not wasting your life watching a black box. Furthermore, the number of shows and content will not be enough for the demand soon and don’t forget that these shows have to be shot as well – which was a big challenge during the covid-19. I read a fascinating article about it in FT and it only reinforced my opinion.
Thirdly, there is fierce competition and my assistant put few days of work to look deeper into the industry. The conclusion is that $WD Disney+ growth (10M subscribers on day 1 (!), as well as best studios and content) will soon overtake Netflix (see the graph attached) and another blow will come from $APPL Both of the companies I’d love to have my portfolio once the US stock market goes through some shock therapy. Consequently, Netflix will likely loose its pole position, first to Disney and then to Apple, to land at number 3 only (and who knows about HBO and Amazon Prime).
Here in Luxembourg, people like HBO as well and I’m hearing the content and quality is much better. Amazon Prime is also quite popular due to the behemoth giving free access with their Prime package that gives 1-day free delivery. My Copiers and friends told me that they’ve been experiencing issues with Netflix recently and it seemed like they were not ready to deal with the incoming number of new subscribers. Better for them to take a step back, come back to realistic numbers and for the stock price to do the same.
Netflix states themselves that H2 2020 will see slower growth compared to last year. Add holiday season to that, along people being out and about and you’ll have a potent weapon. The leadership team seems relatively strong, but the recent changes may add some turbulence.
Again, this is another difficult one to short, similarly to Tesla that everyone loves here. However, at 200B+ valuation (currently exceeding Disney and not far from Tesla) – this is a clear short for me and a long-term one. I’d love to have entered the short at 550 and if we go there, I will certainly open a new one.
Warmly,
MJ
Marcin Jasinski
Entrepreneur & CEO Advisor
+352 661 10 80 10
www.mjtheconsultant.com
Portfolio and Wealth Management
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