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Long-Time Netflix (NFLX) Bear Drops Coverage

December 31, 2013 11:36 AM EST Send to a Friend
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Albert Fried & Company dropped coverage on Netflix (NASDAQ: NFLX) to end 2013. Analyst Rich Tullo admits he's been wrong on the name, having an Under Weight rating on the stock while it has been among the best performers in the stock market.

In his mea culpa, Tullo said he thought investors would assign a rational risk weighting to a Company with competition such as Amazon, HULU, and even VOD all of which are growing faster in time shifted video in his view. He also sees Netflix having exposure to the Original Serial Drama Bubble. It is also in the lowest quartile among peers in terms of EBITDA margins and the breadth of its original content is average at best, he said.

Tullo quotes Roman philosopher Marcus Tullias Cicero, who once said: "No one has the right to apologize for suffering borne by others."

"I made an honest effort, the work was good but I have been wrong on this stock (like no other)-that is what it is," he added. "Thus I am dropping coverage on NFLX shares because as a sell side analyst the risk reward coefficient has been working against me and I prefer to generate alpha."

While Tullo is not covering the stock any longer, he issues a warning for those that own it and said thank him in 2014 if short thesis work's out.

"While I still think NFLX shares are not worth much as compared to the current price I am dropping coverage and therefore my price target. I note, I did lay out a pretty compelling short recommendation, so please give Albert Fried and Company some credit if the short story works for you in 2014 even though we are early."




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