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

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