Netflix Inc (NFLX) short sellers cut their short exposure in 2018 by 37%, covering 8.1 million shares of shorts as they lost $2.04 billion, -34.90%, in mark-to-market P\L. In the first month of 2019 we are seeing a reversal of the trend, with short sellers adding 1.35 million shares of new shorts, +9.7%, in less than three weeks. While NFLX short interest has climbed 45%, to $5.36 billion, short sellerâ€™s losses continued to mount this year, down another $1.2 billion in mark-to-market losses in less than a month.
This week, ahead of earnings, weâ€™ve seen an increase of short selling with 360k shares of additional short sales as of this afternoon, +2.4%, and overall short exposure increasing by $541 million, +11.2%.
NFLX short selling had been declining in the latter half of 4th quarter 2019 but began to pick up after the new year, even though NFLXâ€™s stock price began to rally. Short sellers were actively selling into NFLXâ€™s price strength, looking for a reversal back to the price weakness we saw in December. In January, long shareholder stock buying has far out-weighed short seller selling and the stock is up over 45%. Both longs and shorts are trading their thesis into todayâ€™s earnings report and if the stock continues to rally after this afternoonâ€™s announcement, we will likely see a rash of short covering from the short sellers with nearer term trading horizons and overall less conviction. The possibility of short side buy-to-covers trading alongside long momentum and value buys will probably nudge NFLXâ€™s stock price closer to September 2018 highs.
Want deeper insight into the above analysis?
Contact:Â [email protected]
Managing Director Predictive Analytics, S3 Partners, LLC
For more information on S3â€™s reporting, data and analytics solutions, email us at [email protected]. Start your free trial of the BLACK App â€“ the only source of real-time short interest on the Bloomberg Terminal or Thomson Reuters Eikon.
For short side data and access to our research reports go to https://shortsight.com/ .