Netflix Bear Sees Content Cliff Ahead

The price of content appears to be a major headwind for Netflix, Michael Pachter of Wedbush Securities said Monday.

"I think that all investors have to do is look at the last page of their investor letter, and you can see that revenue sequentially went up $49 million and content cost went up sequentially $16 million. That is unsustainable," he said. "If I can notice that in the first half hour after the call, I think every content owner can see that. Netflix is not paying enough of revenue to content owners. They're profiting by paying less for content. That's not sustainable."

Netflix, which reported first-quarter earnings after the closing bell, saw its revenue increase to $1.02 billion from $870 million a year ago.

(Read More: Netflix Shares Soar After Earnings Beat)

On CNBC's "Fast Money," Pachter said that two more quarters of better-than-expected earnings would make him admit he was wrong on his bearish case for the video-streaming company.

Pachter also noted that Netflix cash flow for the quarter clocked in at a negative $41 million.

"Explain to me how a company that loses $41 million a quarter is worth $12 billion," he said. "The only way they can do this is to exploit the content guys. It's not going to happen."

Ultimately, content costs would come to bear on the stock, Pachter added.

"The price of content's rising much faster than people think. You're going to see it when this Warner deal kicks in. You're going to see it when the Disney deal kicks in," he said.

"I think people are buying into the house of cards that is Netflix."

Trader disclosure: On April 22, 2013, 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; Pete Najarian is long AAPL; Pete Najarian is long C CALLS; Pete Najarian is long YHOO; Pete Najarian is long BBRY; Pete Najarian is short SBUX PUTS; Pete Najarian is long FB; Pete Najarian is long MSFT; Pete Najarian is long TXN CALLS; Pete Najarian is long CAT CALLS; Steve Grasso is long AAPL; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long BAC; Steve Grasso is long GDX; Steve Grasso is long LFE; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MJNA; Steve Grasso is long PXD; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long S; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long C; Karen Finerman is long JPM; Karen Finerman is long TGT; Karen Finerman is long GOOG; Karen Finerman is long M; Karen Finerman is short SPY; Karen Finerman is short IWM Puts;

For Michael Pachter
Wedbush Securities makes a market in the securities of Netflix (NFLX); I, Michael Pachter, Nick McKay, certify that the views expressed in this report accurately reflect my personal opinion and that I have not and will not, directly or indirectly, receive compensation or other payments in connection with my specific recommendations or views contained in this report.