In my article from several weeks ago, Netflix and BitCoin have disturbing similarities, I conjectured that Netflix will be a big loser in a stock market upheaval:
My issue with Netflix is its irrational valuation. When the inevitable pop in the bond and stock market occur I fully expect this stock to be the biggest loser of the FANG stocks.
Fast forward a few weeks and I feel that my theory for the time being has been partially vindicated.
Many analysts are pointing at rising yields and a pressurized bond market as the cause of U.S. markets to correct over 10% in the February 5th trading week.
It’s just a matter of time when Netflix faces the wrath of its reckless borrowing:
| 2017 | 2016 | 2015 | |
| Total Current Liabilities (thousands) | 5,466,312 | 4,586,657 | 3,529,624 |
| Long Term Debt (thousands) | 6,499,432 | 3,364,311 | 2,371,362 |
Couple this with all the leverage from speculators that piled into its stock price and you have two ticking time bombs waiting to send this company off a cliff.
In a rising rate environment, those with out-of-whack PERs get hit the hardest, and between the time of this article (written February 10, published February 16) and the Netflix/BitCoin article, I’m not backing out of my conviction that Netflix will be biggest loser of the FANG tech bubble.
The Federal Reserve can try to bail everyone out again with more quantitative easing this time, but I think at this point the valuations are simply too big to bailout without hyper-inflating the currency. Let those that deserve to fail, fail.
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