Noster Capital’s Pedro De Noronha thinks Netflix (NFLX) stock, which is trading at 243 times FY2014 earnings estimates, and more than 60 times FY2015 forecasts, is overvalued and overhyped.
NFLX hit another all-time high Thursday, printing the tape at $458 per share before pulling back a bit. The company is now worth nearly $27 billion ; based on Friday’ closing pps of $448.37. Such a market cap is not warranted, according to De Noronha, who basis his argument on the premise that the company’s business model is not sustainable.
“I think when you look at these overhyped stocks, and Netflix is just one of them, if you compare it to the dotcom boom where you had Amazon (AMZN) and so on, everybody knew Amazon was a good service, everybody saw Amazon turn into a gigantic company that pretty much serves every kind of thing you need. But it was the wrong price, just like it is the wrong price now for Netflix,” Noronha said on CNBC.
The Street is mixed about its views towards Netflix ; and for a good reason. With a t12 P/E that high, investors have to ask themselves if the ticker’s current pps is rational and justified.