Netflix (NFLX) is in the Danger Zone this week. The DVD subscription and streaming video service has changed the way people watch movies and TV shows. However, its current valuation is out of touch with reasonable expectations for future cash flows and profitability. Even in an ideal world, NFLX would be hard pressed to justify its massive valuation, but with its declining margins and competition from Redbox, Amazon Prime (AMZN), Microsoft’s Xbox (MSFT), and Hulu, NFLX simply has no chance at achieving the growth the market expects.
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Avoid These Funds
Investors should avoid the following ETFs and mutual funds due to their 4% or greater allocation to NFLX and Dangerous rating.
Sam McBride contributed to this article.
Disclosure: David Trainer and Sam McBride receive no compensation to write about any specific stock, sector, or theme.