Netflix Sets Up for Short Covering Rally Tuesday: Adami

“This was the move the short were waiting for,” says trader Guy Adami. “Netflix sets up nicely for a trade. Expect a short covering rally.”

That’s Guy Adami’s instant analysis to the after hours sell-off in Netflix shares.

The stock sold off 16% afterNetflix reported a first-quarter loss of 8 cents a share on revenue of $870 million.

The company also forecast a net loss for the current quarter of 10 cents to 14 cents per share.

And the company warned subscriber growth will slow.

Of course, that’s not to say there isn’t any reason for optimism. There is.

The results were better than expected. Analysts polled by Thomson Reuters were expecting a 27-cent per share quarterly loss and revenue of $867 million.

And Netflix reported 23.41 million domestic streaming subscriptions, which surpassed the 21.67 million it had at year-end.

"I think there’s an overreaction in extended trade," says top analyst Mark Mahaney on CNBC's Fast Money. “The business has significant seasonality,” he says. “Whether the Street correctly got the seasonality remains to be seen.”

"However, off a major executive mistake last year, two quarters in a row this company has come in at the high-end of its domestic streaming guidance. It seems to me like they’ve got their business nailed down."

At the time of writing, Mark Mahaney had a Buy rating on the stock and a $130 price target.

Even if you like the macro-story, trader Karen Finerman adds that unless you’re a pro, Netflix probably isn’t for you. “The stock almost always makes outsized moves,” she says.

“The valuations make the story at this price very expensive,” she says. “I would not be swinging a bat big in Netflix.”

Trader Guy Adami agrees. His call for a short covering rally is strictly a trade. “Long-term, I think the path of least resistance is still lower.

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Trader disclosure: On Apr 23, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Grasso is long ASTM; Steve Grasso is long AVAV; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long HY; Steve Grasso is long NUAN; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long PRST; Steve Grasso is long S; Steve Grasso is long XLU; Steve Grasso is long ZAZA; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long C; Pete Najarian is long MS; Pete Najarian is long INTC; Pete Najarian is long YHOO; Pete Najarian is long SBUX CALLS; Pete Najarian is long COP; Pete Najarian is long PEP; Pete Najarian is long HPQ; Pete Najarian is long WLT; Pete Najarian is short NFLX; 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; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long NFLX PUT SPREADS; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long RIMM CALLS; Karen Finerman is long HP; Karen Finerman is short AAPL CALLS; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY

Mark Mahaney
Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of NFLX
The Firm is a market maker in the publicly traded equity securities of NFLX

For Will Power
Robert W. Baird & Co. Incorporated makes a market in the securities of AAPL
Robert W. Baird & Co. Incorporated and/or its affiliates expect to receive or intend to seek investment banking related compensation from the company or companies mentioned in this report within the next three months: AAPL

For Dennis Gartman
Dennis Gartman is long Gold

For Rebecca Patterson
Nothing to disclose with wires.