Netflix burns money and lacks a good business model, says this tech investor
Netflix Inc. reported a good quarter on Tuesday, but the technical investor Gene Munster was not particularly impressed.
"It's not a good business model."
The managing partner and co-founder of Loup Ventures, and former Piper Jaffray analyst, told CNBC's "Fast Money" on Tuesday that he doesn't see how the streaming giant will make money anytime soon. [1[ads1]9659005] In his earnings report, Netflix
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said it added a record 9.6 million subscribers in the first quarter and had a healthy increase in revenue, to $ 4.5 billion from 3, $ 7 billion in the quarter. But it warned that spending would increase, saying it expects about $ 3.5 billion of free cash flow for the year.
It raised a red flag for Munster.
"At $ 10 a month, they would have to add 30 million [subscribers]," he told CNBC. "At the end of the day, it is probably heading towards the end of 2020 before they kind of relieve the cash burn. Now they can do some thing about making some of the content cost a little more efficient. But I think it is generally more competitive for it . "
This competition will come later this year as Apple Inc.
AAPL, + 0.01%
Walt Disney Co.
DIS, -1.62%
and AT & T's
T, + 0.72%
WarnerMedia launches its own streaming services – potentially luring viewers away from Netflix.
Read: How Disney Netflix streaming war will create security damages
Munster told CNBC that he believes Netflix will do well with the competition – "they must have a large market share in the US and globally" – but said the stocks are overvalued, and investors can do better by putting their money elsewhere. "I think there are just much better places to play in tech," he said.
Not everyone feels that way. Last Tuesday, Deutsche Bank analyst Bryan Kraft upgraded Netflix to buy from wait, saying that the company's long-term trend looks good – even with fresh competition.
After increasing 3% in regular trading, Netflix shares were dipped just after hours, after the release of the performance report. The company's share is up 34% year to date, compared to the S&P 500's
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16% win this year.
