Categories: Tech News

Netflix Burns Short Films As ‘Extreme Bear’: Shares Rebound 50%

Investors who have bet against Netflix Inc. in the last few months they might be licking their wounds.

Investors who have bet against Netflix Inc. in the last few months they might be licking their wounds. The streaming giant’s shares are up 50% from their lows in May, boosted by the promise of new features to reignite growth, better-than-expected quarterly results and the runaway success of the latest installment from the sci-fi thriller “Stranger Things.”

This hurts short sellers, who borrow stocks and sell them, hoping to buy them back at a lower price to profit from the difference. Since mid-May, they’ve seen $996 million in losses in the market, according to S3 Partners.

At its low in May, Netflix was down 72% for the year as the company faced increasing competition, customers whose finances are being hit by rising inflation, the possibility of ‘a global recession and the end of the pandemic-fueled streaming boom.

“The decline was extreme,” said Neil Campling, head of technology, media and telecommunications research at Mirabaud Securities. “The stock reached extreme oversold levels and traded at a massive discount to trend valuation, peers and history.”

Of course, with stocks still down 59% in 2022, shorts that have been bearish since early 2022 still have $2.69 billion in market value gains, according to Ihor Dusaniwsky, managing director of predictive analytics at S3. Partners.

The recent surge in Netflix shares reflects optimism about the start of a long-awaited version of the streaming service that will include advertising, a crackdown on password sharing and a better-than-expected loss of subscribers. the second trimester. The company also forecast growth in its subscriber base after two quarters of contractions.

Bears backing out of their bets may have added fuel to the rally. In the past month, short sellers have bought about 2.4 million shares worth $599 million, according to S3 Partners. That represents an 18% drop in the total amount of shares shorted as Netflix recovered.

“Netflix shorts have actively reduced their short exposure following the most recent earnings call, looking for the worst to be over and for this quarter to reflect better earnings and/or user growth,” Dusaniwsky said.

Netflix stock is still cheaper than usual after its rally. They are priced at less than 23 times projected earnings over the next 12 months, well below the 10-year average of 80 times. The Nasdaq 100 is at 24, while the S&P 500’s price-to-earnings ratio is 18.

Others are bracing for some volatility as competition concerns and rising costs aren’t going away anytime soon.

“These stocks may perform very well over the next 12 to 24 months, but there will probably be a better entry point in the fall,” said Matt Maley, chief market strategist at Miller Tabak + Co.

Technical letter of the day

Shares of Tesla Inc. they are up around 48% from the lows hit at the end of May. George Soros’ investment firm added a new $20 million position in the electric car company, according to a regulatory filing on Friday. Shares, down 12% this year, rose in premarket trading on Tuesday.

Top Tech Stories Apple Inc. fired many of its contract-based recruiters last week as part of a push to curb hiring and spending at the tech giant, according to people with knowledge of the matter. Apple set a September 5 deadline for corporate employees to be in the office at least three days a week, marking its latest comeback attempt after Covid-19 spikes delayed its plans several times. Tencent Holdings Ltd. plans to sell all or much of its stake in food delivery giant Meituan to appease Beijing and lock in profits, Reuters reported, citing four sources with knowledge of the matter. Shares of Meituan and other Tencent investees fell on the news. Meituan fell more than 10% in Hong Kong, while Kuaishou Technology fell more than 5% and Bilibili Inc. fell to 4.7%.

Twitter Inc. was ordered to hand over files from its former head of consumer products to Elon Musk on spam and bot accounts the billionaire has cited in an attempt to abandon his $44 billion purchase of the social media company . Investment firms Tiger Global Management LLC and Soros Fund Management pile into some of the biggest tech companies weeks before tech majors boost optimism that Federal Reserve tightening won’t be as aggressive as previously thought , show the latest presentations of the 13F.

Peloton Interactive Inc. plans to redesign its bikes so customers can ride them at home and will explore allowing users to stream their content to rival training machines, part of a broad turnaround bid under chief executive Barry McCarthy.

The valuation of fintech giant Ant Group Co. it was cut back by global investors who bought private shares ahead of its suspended initial public offering. The semiconductor market enjoyed a massive surge in orders during the pandemic, sending sales and stock prices to new highs and triggering a global scramble to find enough supplies. There was hope in some circles that the boom could be sustained for a few more years without a painful setback, but chipmakers now face a familiar problem: growing inventory and shrinking demand.


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