Pachter raised his 12-month price target to $60 for Netflix shares, up from $50, thanks to better-than-expected earnings. That's the lowest target price of analysts surveyed by FactSet, which lists a consensus target price of $117.67 a share.
He said Wall Street seems to be foolishly ignoring the fact that Netflix is burning through cash and will "have virtually no value in the future." CNBC reached out to the companies for comment.
The entertainment technology company posted third-quarter earnings per share of 12 cents — compared to 7 cents a share in the year-earlier period — on revenue of $2.29 billion. The company said it gained 370,000 net memberships in the U.S. and 3.2 million internationally, a total of 3.57 million, handily beating the 2.3 million the company forecast.
But the company used $462 million in net cash for operating activities during the quarter, more than twice the $226 million used in the second quarter.
"Reed [Hastings, Netflix CEO] keeps giving investors what they want, which is subscriber growth," Pachter said. "Props to them. They're buying subscribers at a clip of negative $2 billion a year? Good for them, but if they don't make money, I don't understand the share price at all."
It said it will expand its content budget to about $6 billion in 2017, with a focus on content both owned and produced by Netflix. The company's chief content officer, Ted Sarandos, said in an earnings conference call that while original content requires more cash upfront, the trade-off is worth it for more efficient, higher-quality content.
But Amazon also said in July it would double its video content spend in the second half of this year, and triple its spending on original content. If it comes down to a spending war, Amazon's $30.4 billion in second-quarter revenue dwarfs Netflix's $1.97 billion, Pachter points out.
Though Netflix dominated the Emmy nominations this year, Pachter wrote in a research note that he is skeptical the company can "successfully build a content library that will justify its high level of spending."
"They're making a big bet that they are better than Hulu — and Amazon and FX and USA Network and AMC — at developing this stuff," Pachter said. "And yet I think they completely lack the internal expertise to compete."
Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.