Netflix is Getting More Squeezable
Author:
Ihor Dusaniwsky
Managing Director of Predictive Analytics, S3 Partners
Matthew Unterman
Director of Predictive Analytics, S3 Partners
A positive, or at least less bad, quarterly earnings announcement by Netflix Inc (NFLX) has propelled NFLX’s stock price up +7% today. Losing half as many subscribers as expected in the second quarter and projections of subscriber growth in the third quarter, cutting content costs, revenue growth (somewhat impeded by currency fluctuations) and an ad-supported version of the App with a partnership with Microsoft has buoyed its stock price and added to short sellers’ July losses.
NFLX short interest is $2.51 billion, 12.43 million shares shorted, 2.84% SI % float and 2.76% S3 SI % Float (which includes the synthetic longs created by every short sale in the trade float denominator) and a stock borrow fee of 0.30% (General Collateral). NFLX is the largest short in the Entertainment Sector. Short sellers have been active in the stock prior to its earnings announcement with 425 thousand new shares shorted, worth $86 million, over the last thirty days. This was a +3.5% increase in total shares shorted even as its stock price rose +14.9%. Shorts were increasing their exposure into an upward trending NFLX stock price trend expecting a disappointing earnings announcement.
Entertainment Sector Short Interest (as of 07.20.22)
Name
Ticker
SI % Float
S3 SI % Float
Fee
Short Interest
NETFLIX INC
NFLX
2.84%
2.76%
0.30%
$ 2,506,606,897
WALT DISNEY CO
DIS
1.17%
1.16%
0.30%
$ 2,118,275,281
AMC ENTERTAINMENT
AMC
18.87%
15.88%
8.82%
$ 1,591,764,098
SEA LTD ADR
SE
3.85%
3.70%
0.30%
$ 1,481,994,801
ROBLOX CORP
RBLX
10.22%
9.28%
0.30%
$ 1,476,261,780
LIVE NATION INC
LYV
9.31%
8.52%
0.30%
$ 1,434,899,295
ACTIVISION BLIZZARD
ATVI
2.20%
2.15%
0.30%
$ 1,264,883,933
WARNER BROS DISCOVERY INC
WBD
2.84%
2.76%
0.30%
$ 893,914,883
TAKE-TWO INTERACTIVE SOFTWARE
TTWO
4.38%
4.20%
0.30%
$ 826,628,281
LIBERTY MEDIA FORMULA ONE
FWONK
6.05%
5.71%
0.30%
$ 742,144,318
Total Entertainment Industry
-
6.49%
5.82%
1.15%
$ 19,823,011,000
NFLX is the most profitable short in the Entertainment Sector, up $3.08 billion in year-to-date mark-to-market profits, up +98.27% on an average short interest of $3.14 billion in 2022.
Entertainment Sector Short Selling Profitability (as of 07.20.22)
Name
Ticker
Avg Fee
Avg Short Interest
YTD MTM P\L $
YTD P\L %
NETFLIX INC
NFLX
0.30%
$3,137,379,968
$3,083,094,657
98.27%
SEA LTD ADR
SE
0.30%
$2,205,224,719
$2,939,052,833
133.28%
WALT DISNEY CO
DIS
0.30%
$2,567,235,893
$1,142,828,650
44.52%
ROBLOX CORP
RBLX
0.30%
$1,247,918,769
$1,098,747,161
88.05%
AMC ENTERTAINMENT
AMC
3.56%
$1,698,472,255
$965,713,663
56.86%
ROKU INC
ROKU
0.30%
$861,332,176
$874,884,582
101.57%
SPOTIFY TECHNOLOGY SA
SPOT
0.30%
$638,777,309
$603,123,970
94.42%
WARNER BROS DISCOVERY INC
WBD
0.80%
$930,610,152
$569,018,384
61.14%
BILIBILI INC ADR
BILI
0.83%
$758,339,971
$527,920,806
69.62%
LIVE NATION INC
LYV
0.30%
$1,597,596,970
$390,548,154
24.45%
But in July, we saw a reversal of fortune for NFLX short sellers as they are down $514 million in July mark-to-market losses, down -22.73% on an average short interest of $2.31 billion. Both the YTD and July P\L figures include -$175 million mark-to-market loss on today’s -7% intraday price move.
Least Profitable Entertainment Sector Shorts: July 2022
Name
Ticker
Avg Fee
Avg Short Interest
July MTM P\L $
July P\L %
NETFLIX INC
NFLX
0.30%
$2,311,422,434
($513,801,219)
-22.73%
AMC ENTERTAINMENT
AMC
12.95%
$1,441,047,083
($286,003,287)
-19.85%
ROBLOX CORP
RBLX
0.30%
$1,492,496,630
($279,108,593)
-18.70%
SEA LTD ADR
SE
0.30%
$1,431,955,022
($167,794,797)
-11.72%
LIVE NATION INC
LYV
0.30%
$1,321,217,135
($135,893,622)
-10.29%
WALT DISNEY CO
DIS
0.30%
$2,037,467,167
($113,683,222)
-5.58%
CINEMARK HLDGS
CNK
0.30%
$340,834,879
($84,056,882)
-24.66%
ROKU INC
ROKU
0.30%
$632,763,425
($57,209,878)
-9.04%
SPOTIFY TECHNOLOGY SA
SPOT
0.30%
$373,017,959
($55,203,009)
-14.80%
WARNER BROS DISCOVERY INC
WBD
0.30%
$883,030,856
($51,840,825)
-5.87%
These recent losses are making NFLX more squeezable. Although it is not a crowded stock, scoring only a 25.00\100.00 in our Crowded metric, thirty-day losses of -21.41% and seven-day losses of -20.10% is pushing its Squeeze score up to 65.00\100.00. While not technically a typical squeeze candidate, the 40-point spread between Crowded and Squeeze Scores does mean that short sellers may start covering in order to realize some of the mark-to-market profits they earned earlier in 2022.
If NFLX’s recent price strength continues we can expect the resulting short squeeze to force some short sellers to trim their positions and the resulting buy-to-covers help drive NFLX’s stock price even higher.
