uploads/2017/12/Year-to-date-Performance-of-Netflix-2017-12-21-1.jpg

Why Prominent Short Seller Jim Chanos Is Bearish on Netflix

By

Updated

Jim Chanos on Netflix

Jim Chanos is well known for his short bets and his various investment ideas. Recently, in an interview with CNBC, Jim Chanos said that he is considering a possible bet against Netflix. However, he said that he hasn’t taken a position on the stock yet.

According to him, the rising price and competition could be major obstacles for the entertainment content provider. He said, “Netflix came out this afternoon and sort of lambasted the change of net neutrality. Yet for years now they have said when asked that the change in net neutrality would not have a material effect on their business. Which is it?”

Netflix’s performance

However, Netflix (NFLX) has posted strong revenue growth in its past quarters. The stock has provided a tremendous performance so far this year. It rose 52.5% on a year-to-date basis as of December 20, 2017. The broader market S&P 500 Index (SPX-INDEX) (SPY) returned 19.8% during the same time period.

Netflix’s 52-week high is $204.38 and 52-week low is $123.60. The stock is trading on par with its 20-day moving average, 1.5% above its 100-day moving average, and 2.3% below its 50-day moving average.

Jim Chanos also added, “Netflix raised prices recently and analysts of course just assume most of that falls to the bottom line. But what if these price hikes really are to offset increasing costs? I don’t think people have put that in their models. The fact of the matter is Netflix is a middleman. They are making and producing and financing more of their own content, but at the end of the day so is everyone else now.”

In the next part of this series, we’ll analyze Jim Chanos’s largest holdings in 3Q17.

More From Market Realist