Netflix | WSD Capital Management
March 21, 2018
Nucor Corporation
August 29, 2017
  • Status:  Current


Media   |   United States

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Source: Bloomberg end of day market data; not adjusted for dividends (December 8, 2017).

Returns assume a short investment position on the date that WSD Capital Management published its thesis, and an exit on the date that the WSD Target Price is realized.

Returns do not reflect any taxes, fees or dividend and interest expenses related to short sales.

The returns are hypothetical and do not reflect the actual results of WSD Capital Management’s investment activities, nor is it necessarily indicative of future results of WSD Capital Management’s investment activities.


Netflix (“Netflix”) is the world’s leading Internet television network with over 95 million members in over 190 countries. The company operates through three segments: Domestic Streaming, International Streaming and Domestic DVD.

WSD Capital Management announced its short position in Netflix in August 2016. We believe Netflix’s bet-the-company content strategy and subscriber churn/loyalty will be stress tested as competition continues to intensify and the inevitability of substantially higher subscription fees is factored in.

While the company has a good base for growth due to its first-mover advantage, its current business model burns alarming amounts of cash, which is neither sustainable nor a path to long-term profitability. In April 2017, Netflix disclosed that its off-balance sheet streaming content obligations have risen to $15.3 billion, of which $6.2 billion are due in 2017.

We expect that the company’s management will continue to double-down on a host of very aggressive accounting assumptions that seek to gloss over the deteriorating business economics and flatter its weakening profitability as competitive forces and insider selling continues to intensify.