Top stock Netflix meets match in short seller?

Published Thu, Sep 3 20156:00 AM EDT

Netflix fell as much as 5 percent Wednesday after Citron Research tweeted it was time to short shares of the high-flying video streaming company. Netflix is the best-performing stock in the S & P 500 this year, up 117 percent. Citron is one of the few research shops whose calls to bet against stocks can move those shares. "Citron stayed away but finally time to short $NFLX. Comp heating up and doesnt have another trick like $AAPL $GOOG $AMZN. Back to $80" — @CitronResearch CNBC has received confirmation from Andrew Left, the founder of Citron Research, they have started a short position in Netflix. Citron Research has been successful with many of its negative calls including several reports on China-based companies. The firm is most well-known for their report on Longtop Financial Technologies in April 2011, which questioned the veracity of the company's financial statements. Citron was later validated by the market as the shares were delisted and the SEC revoked the company's registration. Shares of GoPro are down 50 percent since Citron's skeptical report in November of 2014. However, Citron has not been perfect. The firm wrote a negative report on Zillow in 2012 before the stock tripled in less than two years. Read More These battered stocks are China-proof Along with the Citron news Netflix shares are down 11 percent for the week on a series of new developments on the video streaming competitive front. Sunday — Netflix posted a blog post explaining they would not be renewing their movie licensing agreement with the Epix cable network to focus on more original content, which meant subscribers would lose access to such high-profile franchises as "The Hunger Games" and "Transformers." Monday — Variety reported Apple met with Hollywood executives exploring the acquisition of original content to compete with Netflix. Wednesday — Amazon announced it would allow Prime members to download videos to watch offline on iOS and Android devices. Netflix is currently trading at 300 times next year's earnings estimates. As a pricy stock with high expectations, any negative news can have an inordinate impact on the stock price. Netflix is already down 18 percent from its early-August high. Apple's entering Netflix's market is a scary risk, investors say. Also, nimble traders are noticing the negative price action and are turning bearish on high-beta names such as Netflix. Read More Is Netflix the next momentum name to fall? "Netflix faces the same challenge so many high-growth tech firms face," wrote Steve Cortes, senior macro strategist at BGC Partners. While "the subscriber base is growing well, the cost associated with each new sub is also growing." He added, "I don't so much have a view on Netflix as I am more bearish broadly on high-beta Tech. The momentum chase can be just as powerful on the downside as the previous virtuous cycle upward can feed on itself into a vicious cycle downward, where selling begets selling." So if a bear market is here, it may not be too kind to the bull market leader.

Jonathan Nackstrand | AFP | Getty Images

Netflix fell as much as 5 percent Wednesday after Citron Research tweeted it was time to short shares of the high-flying video streaming company.

Netflix is the best-performing stock in the S&P 500 this year, up 117 percent. Citron is one of the few research shops whose calls to bet against stocks can move those shares.

"Citron stayed away but finally time to short $NFLX. Comp heating up and doesnt have another trick like $AAPL $GOOG $AMZN. Back to $80" — @CitronResearch

CNBC has received confirmation from Andrew Left, the founder of Citron Research, they have started a short position in Netflix.

Citron Research has been successful with many of its negative calls including several reports on China-based companies.

The firm is most well-known for their report on Longtop Financial Technologies in April 2011, which questioned the veracity of the company's financial statements. Citron was later validated by the market as the shares were delisted and the SEC revoked the company's registration.

Shares of GoPro are down 50 percent since Citron's skeptical report in November of 2014.