NEW YORK (Reuters) - Andrew Left has covered his short position on Facebook Inc, due to its booming Instagram business, but is still betting on a decline in Netflix Inc shares, the activist short-seller told Reuters on Monday.
“Instagram has really become a powerhouse - you can no longer deny it,” Left told the Reuters Global Investment 2019 Outlook Summit, citing the way it accurately predicts what people want to buy, making it more attractive for advertisers, the company’s main source of revenue.
Left said Netflix was his only short position among the major technology stocks collectively known as FAANGs: Facebook, Apple Inc, Amazon.com Inc, Netflix Inc and Google parent Alphabet Inc.
He said the video-streaming company was “addicted to debt” and vulnerable to competition from other FAANG rivals that offer streaming services, as well as established media companies such as Walt Disney Co.
“Facebook can do what Netflix does, but Netflix can’t do what Facebook does,” he said. “You can’t think that the rest of Hollywood will throw its hands up and say, ‘OK Netflix, you win.’”
Netflix went public in 2002 and had a modest debt load in its early years, but has issued a net $9.5 billion of bonds - of $10.4 billion total - in fewer than three years to fund content acquisition and creation. Its long-term debt as a percentage of capital has roughly doubled to 65 percent since the end of 2014, .
In contrast, Left said it would be difficult to make money shorting Alphabet and Amazon, as Google was “a cash cow” similar to Apple, and Amazon should benefit from online shopping, a trend not likely to fade in the next five years.
He said he remains long on Apple, whose market value recently topped $1 trillion, calling it a leader in innovation and, eventually, medical technology.
Apple in August filed for a patent for a diabetes management device which monitors glucose levels non-invasively. That would rival similar work being done by DexCom Inc, a medical device company whose stock has more than doubled this year.
“I don’t know how the Nasdaq moves without Apple,” Left said.
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Reporting by Kate Duguid; Editing by Bill Rigby