Einhorn: Netflix overvalued, soared on 'bad news'

Netflix looks considerably overvalued after investors shrugged off its most recent quarterly earnings on hopes for future growth, David Einhorn's Greenlight Capital said, in an investor letter Monday.

"In today's market, the best performing stocks are companies where accountability is in the distant future," the Greenlight letter noted, adding that "apparently Red Ink is the New Black."

David Einhorn, founder of Greenlight Capital.
Adam Jeffery | CNBC
David Einhorn, founder of Greenlight Capital.

Netflix shares—which have more than doubled this year ahead of a 7-for-1 stock split—continued to rally despite the video streaming company posting quarterly earnings that fell well short of Wall Street's estimates in April. The letter also bashed the company's original shows, saying the most recent season of "House of Cards" appeared "to be scripted to compete with Ambien."

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Greenlight Capital fell 1.5 percent in the second quarter, taking it down 3.3 percent year-to-date. Greenlight had a "challenging quarter" for finding stocks to hold, but initiated two "small long investments" in Applied Materials and Bank of New York Mellon in the quarter.

The fund also exited positions in Altice, Conn's, EMC and Marvell Technology.

It also continues to hold a "small position" in Greek bank stocks. The letter said Greek Prime Minister Alexis Tsipras' Syriza party "capitulated" by proposing a new bailout deal last week with "even more austerity."

Greece and its creditors are in the midst of finalizing a bailout agreement after Greek voters rejected a similar agreement in a referendum earlier this month.