Netflix may be heading for a fall–at least in terms of its share price, according to The Wall Street Journal’s Brett Arends. (Please note that the WSJ is behind a pay wall and not all readers may be able to access the story.)
"These are boom times for Netflix. It’s been one of the big winners from the recession. Last quarter’s revenues were 31% higher than a year earlier. Earnings were up 35% and had doubled since the summer of 2008," Arends writes.
But there are three things that may make investors nervous about the stock: that it’s become expensive in relation to earnings; that CEO Reed Hastings was named "businessman of the year" by Fortune; and that Hastings got into a public debate with a hedge fund manager who is shorting his stock.
The latter is "never a good sign," Arends writes. "I remember watching Overstock.com Chief Executive Patrick Byrne rage against short-sellers while his stock tanked. The only correct way for a chief executive to handle the bears is to make them lose money by keeping the share price rising."