Netflix ‘A Worse Company’: Pachter

Netflix's fundamentals don't look good, and investors should stay away, Michael Pachter of Wedbush Securities said Wednesday on CNBC.

"This is a worse company today than it was a couple of years ago," he said. "They have destroyed their DVD business, which is the source of three-quarters of their operating profit. They are chasing windmills overseas, and the content owners are never going to let them make money there."

On "Fast Money," he said that Netflix "did something very clever in the fourth quarter" by cutting spending.

"That lower spending was lower tech spending, lower marketing spending," Pachter said. "I don't get how investors think that one-time tweaking of their spending is worth $5 billion. Nothing changed. I mean, all they did was become profitable. People thought they were going to lose a little bit of money, like $10 million. They made $13 (million). Who cares? I don't get it."

Pachter noted that Netflix had "very good" subscriber growth in the United States, but that investors were overstating what that meant for the bottom line.

"They're valued like they're going to make $30 per domestic sub, and they make about $2.50, so they have a long way to go before you can justify this valuation," he said. "I don't see it going higher."

He held a "sell" rating on Netflix stock and a price target of $55 per share.

Pachter's call came a day after Mark Mahaney of RBC Capital Markets laid out the bull case for Netflix stock and shared what he believed to be catalysts that would propel the stock to $210 per share.

"I love Mark. He's an incorrigible optimist," Pachter said. "I'm more of a cynic."

(Read More: Netflix Has Two 'Great Secular Drivers': Mark Mahaney)


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