Herb Greenberg initiated an interesting discussion today, saying he was "very useful" Wedbush Morgan analyst Michael Pachter to go on CNBC today in his pessimistic view on Netflix, ahead of its results are announced this afternoon. David Wilkerson, Pachter details of the analysis, with the context:
With the stock hovering in the range of $ 80 in April 2010, Pachter lowered from underperform to play with a target price of $ 73. Even after seeing the action to capture the $ 240s, Pachter is sticking to its assessment, and a price target of $ 80.
It is a very aggressive price, Pachter said that Netflix is set to more than two thirds of impairment losses, despite a subscriber base of about 23 million Americans. But is this really a bold Pachter? It takes courage to tell him this, and if so, why?
Part of the answer to this question is buried in a symmetric market: the trend towards more investors corresponds to an upward trend on the side of the analyst. Most investors' long-only and even those who tend to move from one strategy to 120/20 or 130/30 short: almost always much longer than the positions they hold short positions. Consequently, the global market and prejudice against someone who has a "sell" recommendation.
And when it comes to screaming hot issues, such as Netflix, which is even more true. These files are usually not taken as part of a long-term diversified portfolio of names, which are held by momentum traders who want to buy and sell higher. They tend to be very emotional in their trade relations and the feeling of driving, and can be very aggressive towards anyone who might damage the feeling.
In addition, Wall Street is used to boil the pass / fail duality: when you say that the stock will fall, you're right when it does, and if it is not bad. Intelligence analysis, or the idea that all these things are probabilistic while rarely gets lip service. Therefore the technical analysis of Wall Street, see: no intellectual sense at all, but it works just as well as - or better - an analysis based on fundamentals. (Which, while not saying much). And it all matters.
It is also impossible for anyone to see the difference between the price of "buying and selling" first, and "long / short" on the other. A "sale" is not the same as a recommendation to go short. NFLX on the sale of $ 250 is a measure of risk aversion, you are a volatile and overvalued inventory, taking what is probably huge profits, and say they prefer to sell too early than too later. runs $ 250 NFLX, however, is a very risky decision which can damage very badly. But when an analyst says "sell", everyone starts talking about his "short" and says things like "how is your short coming with Netflix, Mikey?".
One thing that certainly has a "sale" is, of course, is to thwart the management company. And that is where the distinction between the issuance of a "sell" in a private report released on the one hand, and loudly proclaim her analysis on CNBC, on the other side. The television audience is not only experienced investors: it is a much wider audience than that, and business management to even think hate the idea that his company is ready for a wide audience . So if you go to a bearish case is presented on television, get ready for many, if not all of their access to trading losses.
If you have a public matter very bearish, on television, in a highly visible consumer brand with a lot of material, which is far from your neck if you are an analyst pointed. That is what Greenberg was, yes, to a level that the task Pachter opinion on Netflix and are willing to remember that the call on CNBC. But it is easy to see why most analysts of proof is not difficult to obtain in these situations. "Customers are always angry when you're wrong," Greenberg said in a brief interview this afternoon. "A big boy from the crowd is a value investor. A short takes his life in his hands. "
Finally, if not spectacular fall from Netflix - as calling a tenant seems to have noticed the top of the market, Netflix - still not a hero. Sufficient time is bad because people can say that I was sure that the law in time. And probably a credit if they followed his own advice perspicaciousness Pachter, then give him the credit he deserves.
So well done for the tenant to stick to their convictions. I hope you do not expect to get them.
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