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Short the Heck out of a Netflix Earnings Pop: Top Analyst

Shares of Netflix have been on the Fast Money radar ever since the company announced users streamed over 1 billion hours of content in June.

Since then the stock has surged nearly 19 percent.

With the company set to report second quarter results after the bell, how do you trade this stock?

Top Wedbush analyst Michael Pachter says, “short the heck out of it!”

“People will probably see the user metric and the EPS and pile in,” he says. But Pacther believes this is firmly a case of sell the rip.

Largely Pachter believes the Netflix business model is not sustainable. And he calls recent gains a "perverse reaction. The stock should have gone down.”

That’s because he interprets that 1 billion hours of streamed content metric as a sign that content costs will go through the roof.

“Media companies won’t let Netflix stream all they want and not charge more. To think they will is crazy,” he says.

And to make matters worse, Pachter tells us Netflix has the content costs off balance sheet.

“The Street consensus for Netflix next year is $2.15. I say that's too high by $1.65 – the number should be 50 cents."

Pachter goes on to say, "If my estimates are correct Netflix is trading at 150 times next year’s earnings.”


Posted by CNBC's Lee Brodie

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Trader disclosure: On July 24, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Steve Weiss is long EUO; Steve Weiss is long WLP; Steve Weiss is long QCOM; Steve Weiss is short X; Steve Weiss is short AKS; Steve Weiss is short JCP; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long C; Pete Najarian is long JPM CALLS; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LF; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long VLO; Steve Grasso is long XLU

For Boris Schlossberg
Nothing to Disclose

For Michael Pachter
WS makes a market in the securities of the subject company: NFLX
WS managed a public offering of securities within the last 12 months NFLX
The research analyst, a member of the research analyst’s household, any associate of the research analyst, or any individual directly involved in the preparation of this report has a long position in the common stocks.: NFLX
WS or one of its affiliates beneficially own 1% or more of the common equity securities NFLX
WS makes a market in the securities of the subject company: FB
WS managed a public offering of securities within the last 12 months: FB
WS co-managed a public offering of securities within the last 12 months: FB
The research analyst, a member of the research analyst’s household, any associate of the research analyst, or any individual directly involved in the preparation of this report has a long position in the common stocks: FB
WS or one of its affiliates beneficially own 1% or more of the common equity securities: FB

For Jeff Kilburg
Nothing to Disclose

For Steve Milunovich
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided: AAPL
Within the past 12 months, UBS Securities LLC has received compensation for products and services other than investment banking services from this company/entity: AAPL
UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of this company`s common equity securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end): AAPL
UBS Securities LLC makes a market in the securities and/or ADRs of this company: AAPL
UBS AG, its affiliates or subsidiaries held other significant financial interests in this company/entity as of last month`s end (or the prior month`s end if this report is dated less than 10 working days after the most recent month`s end): AAPL

For Stuart Freeman
Nothing to disclose



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