Leonard Brecken Sees Netflix (NFLX) Accounting "Games" Pushing it Below $70
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Price: $71.71 -2%
Rating Summary:
57 Buy, 26 Hold, 2 Sell
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Today's Overall Ratings:
Up: 14 | Down: 24 | New: 9
Rating Summary:
57 Buy, 26 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 14 | Down: 24 | New: 9
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Leonard Brecken of Brecken Capital LLC said in an interview with CNBC on Friday that there are some accounting issues with Netflix Inc. (NASDAQ: NFLX) that analysts covering the stock may be overlooking. Brecken is short on the digital media content distribution company.
The comments from Brecken come just days after the most notable short on the stock, Whitney Tilson said he was out.
"The company is overstating its case-flow net income. This company grew about 30% on the top line, while its accounts payable grew well over 100% to completely wipe out the cash flow for 2010," Brecken said.
"This company is not generating any free cash flow from their businesses. The company is claim to have tens of millions of subs for streaming. The correct way of accounting is to spread that cost across that streaming base that are using it today, not over two or three years."
Brecken sees these accounting issues hitting investors in the second or third quarter when Netflix saturates the key demographic of ages 24-35.
Brecken sees Netflix's accounting "games" catching up with the stock, dropping the price under $70.
Amazon.com Inc. (NASDAQ: AMZN) is seen by Brecken as the coming competition for Netflix, with the online retailer coming in a matter of weeks not months.
Shares of Netflix are continuing to push higher despite Brecken's warnings, as the stock is up 1.86 percent to $227.35 in midday market movement on Friday.
The comments from Brecken come just days after the most notable short on the stock, Whitney Tilson said he was out.
"The company is overstating its case-flow net income. This company grew about 30% on the top line, while its accounts payable grew well over 100% to completely wipe out the cash flow for 2010," Brecken said.
"This company is not generating any free cash flow from their businesses. The company is claim to have tens of millions of subs for streaming. The correct way of accounting is to spread that cost across that streaming base that are using it today, not over two or three years."
Brecken sees these accounting issues hitting investors in the second or third quarter when Netflix saturates the key demographic of ages 24-35.
Brecken sees Netflix's accounting "games" catching up with the stock, dropping the price under $70.
Amazon.com Inc. (NASDAQ: AMZN) is seen by Brecken as the coming competition for Netflix, with the online retailer coming in a matter of weeks not months.
Shares of Netflix are continuing to push higher despite Brecken's warnings, as the stock is up 1.86 percent to $227.35 in midday market movement on Friday.
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