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Netflix Could ‘Go Crazy to the Upside,’ Whitney Tilson

Up 33% ytd, Netflix is emerging as the best performer in the S&P. And hedge fund manager and CNBC Contributor Whitney Tilson thinks gains are just starting.

Tilson has been bullish on Netflix since the stock traded around $77 late last year. And although the stock has already made a sizeable move, he tells us, “it’s a long way from the point at which I’d sell it.”

He gave us 4 reasons for his bullish outlook:

1. Street over reacted to the downside and nobody wanted it on the books at year’s end

2. Rumors of buyout are swirling and with less than a $5 billion market cap, Netflix makes an easy acquisition for a number of large players

3. Launched services in UK and Ireland, a real international growth story that nobody has paid attention to.

4. CEO Reed Hastings says US subscriber growth is growing again

It’s worth noting that Tilson looks at Netflix as an investment, not a trade. “I’m in this with a multi-year horizon,” he says.

Although he concedes there are variables in this equation, Tilson feels reasonably confident that Netflix has a great deal of growth in store - because video streaming is growing rapidly both in the US and overseas. .

“As long as Netflix has dominant market share and no new competitors to erode its competitive position – we see no reason why Netflix business won’t grow at 30-40% - the same rate as the industry.

“And if that happens the stock should go crazy to the upside,” he says. “We bought with the belief that it’s trading at a deep discount to intrinsic value.”

Both Fast traders Pete Najarain and Steve Grasso agree with theme; Najarian says he’s spotted bullish options action in Netflix, which suggest institutional investors shares Tilson’s expectations.

Grasso, however, would not play it with Netflix. “I’d buy content providers,” he says. “Just because streaming is growing doesn’t mean the business goes to Netflix.”

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Trader disclosure: On Jan 9, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian is long AAPL stock and calls; Najarian is long C; Najarian is long JPM calls; Najarian is long WFC calls; Najarian is long MSFT; Najarian is long INTC; Najarian is long YHOO; Najarian is long BMY calls

For Whitney Tilson
Tilson is long NFLX
Tilson is short CRM

For Josh Brown
Fusion Analytics is long AAPL
Fusion Analytics is long COP
Fusion Analytics is long JPM
Fusion Analytics is long LULU

For Brian Kelly
Shelter Harbor Capital is long
Shelter Harbor Capital is long TSM
Shelter Harbor Capital is long KRE
Shelter Harbor Capital is long IWM
Shelter Harbor Capital is long XHB
Shelter Harbor Capital is long GLD
Shelter Harbor Capital is long SLV
Shelter Harbor Capital is long short
Shelter Harbor Capital is short Dax
Shelter Harbor Capital is short Eurostoxx
Shelter Harbor Capital is short CS
Shelter Harbor Capital is short UBS

For Shaw Wu
Sterne Agee makes a market in AAPL shares

For Jeff Kilburg
Kilburg is long Long 10 yr
Kilburg is long 30 yr
Kilburg is long TLT

For Abigail Doolittle
* No disclosures

For Mark Mahaney
Gregory Hertz, CFA, CPA, Associate, holds a long position in the securities of AOL, Inc.
Patrick Feeley, CPA, CFA, Associate, holds a long position in the securities of WebMD Corp.
William Reinhardt, CFA, Associate, holds a long position in the securities of Google Inc.
Steven J Fullerton, Associate, holds a long position in the securities of Google Inc.
Neil A Doshi, Associate, holds a long position in the securities of Google Inc.
Rohit Thapliyal, Associate, holds a derivative position in the securities of Amazon.com Inc.
Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of Akamai Technologies Inc, Ancestry.com, eBay Inc, Netflix Inc, Yahoo! Inc. This position reflects information available as of the prior business day.
Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Ancestry.com, Google Inc, Groupon, Inc., WebMD Corp, Active Network Inc, Bankrate Inc.
Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from Orbitz Worldwide Inc, eBay Inc, Google Inc, Groupon, Inc., WebMD Corp, Active Network Inc, Bankrate Inc.
Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Yahoo! Inc.
Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from AOL, Inc., Monster Worldwide Inc, Orbitz Worldwide Inc, Akamai Technologies Inc, Amazon.com Inc, eBay Inc, Expedia Inc, Google Inc, Groupon, Inc., IAC/InterActiveCorp, Priceline.Com Inc, Tree.com, Vistaprint NV, WebMD Corp, Yahoo! Inc, Active Network Inc, Bankrate Inc in the past 12 months.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Bankrate Inc, Ancestry.com, Active Network Inc, Groupon, Inc., Orbitz Worldwide Inc, eBay Inc, Google Inc, WebMD Corp, Yahoo! Inc.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, securities-related: AOL, Inc., Monster Worldwide Inc, Orbitz Worldwide Inc, Akamai Technologies Inc, Amazon.com Inc, eBay Inc, Expedia Inc, Google Inc, Groupon, Inc., IAC/InterActiveCorp, Priceline.Com Inc, Tree.com, Vistaprint NV, WebMD Corp, Yahoo! Inc, Active Network Inc.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, non-securities-related: AOL, Inc., Monster Worldwide Inc, Orbitz Worldwide Inc, Amazon.com Inc, eBay Inc, Expedia Inc, Google Inc, Groupon, Inc., IAC/InterActiveCorp, Priceline.Com Inc, Vistaprint NV, WebMD Corp, Yahoo! Inc, Bankrate Inc.
Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from Bankrate Inc, Ancestry.com, Active Network Inc, Groupon, Inc..
Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability which includes investment banking revenues.
The Firm is a market maker in the publicly traded equity securities of Monster Worldwide Inc, Akamai Technologies Inc, Amazon.com Inc, Ancestry.com, Blue Nile Inc, eBay Inc, Google Inc, Groupon, Inc., HomeAway, Inc., IAC/InterActiveCorp, Netflix Inc, OpenTable, Inc, Priceline.Com Inc, ReachLocal Inc, Tree.com, ValueClick Inc, Vistaprint NV, WebMD Corp, Yahoo! Inc, Active Network Inc, Bankrate Inc.




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