Questionable Management Change Prompts Our Exit From This Position
The change does not alleviate content slate questions, and raises subscription and advertising concerns.
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| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
| NFLX | Sell | 2,505 | 71.00 | 0 | 0.0 |
After you receive this alert, the Pro Portfolio will sell 2,505 shares of Netflix (NFLX) at or near $71.25. The trade will close out our position in NFLX shares, which returned ~-17%.Â
Following our opening comments this morning about what we see as a questionable move to instill Peter Rice as Chief Content Officer, we are voting with our feet and unwinding this Portfolio position. While Rice’s resume includes time at Disney (DIS) and Fox (FOXA), in an increasingly competitive arena for streaming, one that includes competitors with multi-tiered business models and deeper pockets, his efforts since 2022 have been rather spotty and he lacks experience in streaming. Rice’s latest effort, The Social Reckoning, grossed an estimated $6.5 million since opening October 9.
We have to wonder, given the talent out there, if this was the best Netflix could do. Our concern is that while Rice has the paper pedigree, he lacks the chops needed to reignite Netflix’s content slate that is central to driving and maintaining subscriptions and attracting advertising dollars.
As we’ve noted many times, consumers will move for the content they want to consume and deem to be “must see.” Yesterday, we pointed out the upcoming line-up at Netflix doesn’t have much of that, and based on Rice’s recent track record, there are reasons to think that may not change soon enough. This suggests we aren’t likely to see meaningful gains in streaming viewership data for Netflix like what is found in Nielsen’s The Gauge in the months ahead.
The wild card in this is Netflix will report its quarterly results this coming Tuesday after the market close. We’ve discussed that there are ~82.2 million shares short, per data from Nasdaq, and that equates to more than two trading days to cover. This suggests to us that if Netflix is able to squeak by with somewhat better-than-expected performance, short covering would likely trigger a pop in the stock. That would include Netflix using its buyback plan to cover over weaker-than-expected operating performance, but as we’ve seen in the past, that is a smoke screen that eventually clears.
At the same time, we’ve seen how the market punishes stocks for only missing quarterly expectations or expected guidance by a hair. That implies more downside risk for the shares is a possibility we can’t ignore.
Reviewing Netflix’s recent earnings track record, it isn’t the clear beat-and-raise company that it once was. Heading into next week’s earnings report, consensus EPS figures for 2027 call for 5%-6% EPS growth, and factoring in the timing of the headcount announcement raises questions over the ability of the underlying business to achieve that level of growth. In other words, the timing of that announcement some two weeks after wrapping the Q3 2026 quarter raises questions.
Taking account of the above, the recent volatility in the market and yesterday’s Bullpen clean-up we did, the bottom-line is there are better opportunities to recover the ground we’ve lost with NFLX shares in companies with stronger competitive positions and better growth prospects.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade’s executed price here. Be sure to toggle the chart to sort by Purchase Date.)
At the time of publication, TheStreet Pro Portfolio was long NFLX shares.
