Here's a very funny column from Greenberg... not merely entertaining, either.
If the market takes a real nosedive in the coming year or so, it would be prudent to assemble a list of shortables.....
Might NFLX be a good short at some point? Well.... I dunno, having not done any real DD into things, but I do note that the chart is not the stuff AAPLs are made of.... and NFLX's forward P/E is 80. Of course, that pales in comparison to TZOO (109) and OSTK (153). TZOO, incidentally, has a price/book that has now escaped the gravitational pull of the solar system (146!).
But before anybody construes any of this as a suggestion that these are ripe for shorting.... take warning: 59% of NFLX float is held short, and 43% of OSTK float is short. Personally, that's the sort of thing I like to see in long positions, not short positions.
But that's nothin'--- a full 75% of TZOO's float is short. What's more, they don't really have a float, it is more like a nano-float. There are 2.1 million shares, but the average (3 month) daily volume is over 3 million shares! There have been sessions recently when the entire float has changed hands more than FOUR TIMES! Any questions why the mo-mo crowd is all over this one, or why this stock is up over 1500% in a year? Going forward, I suspect this one will be one wild, wild ride. Anyhow, here's Greenberg:
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Does Netflix Have a Handle on its Business?
Plus: Overstock, Tempur-Pedic and Orthodontic Centers
By Herb Greenberg, CBS MarketWatch.com
SAN DIEGO (CBS.MW) -- If ever there was proof that Netflix management doesn't have a handle on its business, which is a nutty business at that, it came in the form of a press release Wednesday that raised and lowered forecasts.
This is a company that in recent months raised prices, lowered prices, raised guidance, lowered guidance and now gives us a little of everything -- and for the life of me, I can't understand why investors would cheer this news.
I'm guessing the stock did a post-close bounce Wednesday was that as a result of slicing prices recently -- after having raised them -- Netflix (NFLX: news, chart, profile) announced that ending subscribers in the fourth quarter will be in a range of 2.45 million to 2.65 million versus its original forecast of 2.3 million to 2.5 million. Revenue will also be a bit higher and subscriber churn (using Netflix's curious method of calculation) will be somewhat lower.
At the same time, however, the high-end of expected net income and earnings per share are being snipped by $1 million and a penny a share, respectively. Since when is that good news?
Never mind that all of these numbers are considerably lower than the fourth-quarter outlook dished up by Netflix in July, before the company turned its business plan upside down. If anything, the most recent earnings outlook is proof yet again that that the more business Netflix does, the less money it makes -- especially if Netflix gets back the high-use subscribers who initially left after Netflix raised its prices.
But silly me for talking about earnings in an environment where the last thing anybody worries about is the amount of money a company is making. What matters most is doing whatever it takes to jump-start stocks, something desperately needed to do in the wake of W.R. Hambrecht analyst Bill Lennan's report Tuesday that described Netflix's model as being "fatally flawed." As one keen observer of the market scene put it, "The game is to get the stock up. Lower the bar. Raise the bar. Sidebar. Hit in the head with a bar." The latter of which is the way I feel after watching this stuff for awhile.
Tip to Netflix CEO Reed Hastings: Why not stop with the guidance and let your performance speak for itself?
And tip to the many readers who weren't fond of my column earlier this week quoting analyst Bill Lennan's "fatally flawed" comments -- especially those readers who say they simply love doing business with Netflix: Just because you like the food at a restaurant doesn't mean it's a good investment.
Underwhelmed by Overstock: When we last met on the subject of Overstock.com (OSTK: news, chart, profile), I was giving a rundown on my bizarre e-mail exchange with its CEO, Patrick Byrne:
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Bizarre banter: Not long ago I pointed out the bizarre and arrogant behavior of Overstock CEO Patrick Byrne via his e-mail response to a critic.
Now hear this:
On Wednesday in my subscription newsletter, Herb Greenberg's RealityCheck, I wrote about how Overstock (OSTK: news, chart, profile) had canceled an analyst meeting scheduled for Thursday at its headquarters in Salt Lake City. The cancellation was via an e-mail and said the meeting was canceled due to "an unexpected situation." The company then said it would have more information next week.
Early in the day (5:49 a.m. my time -- 6:49 a.m. theirs) -- before writing the piece -- I e-mailed Byrne and several spokesmen. I figured they'd see it and reply first thing.
Here's what I wrote:
"Hello, I had a question:
"Did you cancel a day for analysts at your headquarters? If so, when was [it] scheduled and why was it canceled?"
While it was technically three questions, I saw it as one and figured the company would reply. Hours went by and I heard nothing other than comments from other services, such as StreetAccount, which were subsequently told by the company the meeting was canceled because of a "scheduling conflict." (Well, then why didn't they put that in their cancellation e-mail? Good question.)
Then, at 11:50 a.m. an e-mail arrived from Byrne. It simply said, "Hello."
At 11:59 I wrote him back: "And the answer to the second part of the question would be ...?" (Since, by then the company had confirmed to other news services the meeting had been canceled, I figured he would realize I was referring to why it was canceled.)
Thursday, at 11:44 a.m., he wrote back: "It was scheduled for today."
At 11:45, realizing he was trying to play mental gymnastics, I wrote back: "And the third part of the question? Why was it canceled?" (Surely, within a minute he would see a return e-mail.)
So far, nothing, though based on the patter I would guess I'll hear back just before noon today. I'm sure the response will be, "Scheduling conflict." (Well then why, I would wonder, was one of the most bullish analysts on the company told Byrne had hurt his back?)
In 30 years of reporting, this is about as far off the baseline as it gets.
It's interesting to note that not one analyst has reported on the meeting's cancellation.
P.S: My original piece said the meeting was expected to attract dozens of analysts. That was based on what one analyst, who was among those invited, told his clients. The company told callers later in the day only a handful had been expected. All I know is the company has never attempted clear it up with me.
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But it didn't end there. As I noted in the original piece, he still hadn't responded to my final question -- at least he didn't until after the story ran. In a final e-mail, Byrne wrote: "Hmmm. I am mildly curious about this strange worldview of yours. You apparently believe you can write the dumb stuff you write about me, then expect my cooperation later. My interest is piqued: what is your understanding of your role in the cosmos? Do you imagine that human beings hold 'journalists' in such high regard that we owe you answers? Seriously: what makes you possibly think I would give you a straight answer to any question now?"
I responded: "Interpret my stuff any way you want, Pat. I'm a journalist. You run a public company. I'm asking questions. There's no rule that says you have to answer them. That's your choice."
And I meant what I said. Byrne, bully or no bully, is under no obligation to respond to questions from the press.
Historically -- but not always -- companies that dodge questions or attempt intimidation, as does Byrne, do so because they have something to hide. There are exceptions: Going into its darkest days, Tyco spent hours on the phone with me trying to counter my questions. (That was right before I penned a large piece on the company for Fortune, which preceded the formal investigations and ouster of CEO Dennis Kozlowski & company.)
But more likely those who don't respond are like EDS, which instituted a No-Greenberg policy in late 2001 after I started raising serious questions about the quality of its earnings in multiple columns starting when its stock was in the mid-$60s. It's now around $22.50.
Compare that with Amazon.com, whose business model was the focus of this column back in the bubble days. Its P.R. guy always returned my calls and his comments were always noted. Ditto for Starbucks in its early days, when the concern was that opening one store so close to another would eat into the profits of the other. (Starbucks may be the exception on that score!)
These days, investors actually encourage companies to ignore pesky reporters who ask too many questions for fear the answers and/or the questions could harm the stock. (Never mind if they're often questions investors themselves should be asking.) Besides, if the stock falls on false concerns, shouldn't investors view the stock as a bargain? (You would think!)
In the case of Overstock, the "dumb stuff" to which Byrne referred is a recent column that reprinted his vulgar remarks, via e-mail, to a critic. I believe a CEO's psyche dictates the mood and culture of a company. The more bluster, the more likely they blunder.
Bedtime basics: I hear demand for Tempur-Pedic's (TPX: news, chart, profile) sale of stock by insiders was better than expected. Time will tell whether they will have wished they had seen a piece I wrote earlier this week in my subscription Herb Greenberg's RealityCheck about how traditional bedmaker Serta -- almost stealth-like -- is rolling out its competing and lower priced foam bed to retailers in advance of a formal announcement. ...Sucker born every minute: Let's hope its daytraders are scamming one another on the stock of bankrupt Owens Corning (OWENQ: news, chart, profile), which closed Wednesday at $2.31. According to the company's recent earnings announcement, common shareholders will get zip, zilch, zero. (Thanks for the heads up, Richard.) ... Quote of the week goes to: Orthodontics Center of America (OCA: news, chart, profile) CEO Bart Palmisano, who told investors on the company's recent conference call that there would be no question/answer session "because we felt that not having the Q filed, there would just be a ton of questions about numbers and so forth which we would rather just get out at one time." Imagine that -- questions about numbers. So, why bother having a conference call? ... Finally, know any bad CEOs?: I'm looking for suggestions on who the worst CEO of the year is. Thoughts? E-mail me at hgreenberg@marketwatch.com. |
