Is Netflix, Inc. (NFLX) a House of Cards?

To some seasoned investors, however, all of this good fortune can seem like as much of a cause for the jitters as for celebration. When something seems too good to be true on Wall Street, it’s because the investment usually is just that.

Is Netflix representing a one-company bubble, which is capable of bursting and causing wreckage at any time? Ask Michael Pachter, who follows Netflix for Wedbush Securities. Pachter remains an unapologetic bear on the company.

On April 22, CNBC.com had Pachter saying about Netflix:

I think that all investors have to do is look at the last page of their investor letter, and you can see that revenue sequentially went up $49 million and content cost went up sequentially $16 million. That is unsustainable. If I can notice that in the first half-hour after the call, I think every content owner can see that. Netflix is not paying less for content. That’s not sustainable.

What would it take for Pachter to admit he was wrong about Netflix, Inc. (NASDAQ:NFLX)?

On CNBC’s program Fast Money, Pachter noted, “I think they have another quarter of this, and then if they continue to do this in the September and December quarters, I throw in the towel and I’m wrong.”

But Pachter is concerned, for now, about Netflix’ negative $41 million cash flow for the first quarter.

Explain to me how a company that loses $41 million a quarter is worth $12 billion. The only way they can do this is to exploit the content guys. It’s not going to happen. The price of content’s rising much faster than people think.

To sum up his skepticism, Pachter told CNBC, “I think people are buying into the house of cards that is Netflix.”

Touche, Mr. Pachter.

Or is it? We’ll see. It would be entertaining to watch a hard-bitten Wall Street analyst admit he was dead wrong about such a provocative stock. That spectacle would be what they call in the trade “great television!”

Why, you know what? It would be worthy of becoming a series on … Netflix, Inc. (NASDAQ:NFLX).

The article Will Netflix Merely Prove to Be a House of Cards for Investors? originally appeared on Fool.com and is written by Jon Friedman.

Fool contributor Jon Friedman does not own shares of any companies mentioned. The Motley Fool recommends Amazon.com, Apple, and Netflix. The Motley Fool owns shares of Amazon.com, Apple, and Netflix.

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