Cramer Questions Wedbush's Bearish Netflix Thesis

Wedbush's Michael Pachter isn't afraid to acknowledge his bearish thesis on Netflix, Inc. NFLX hasn't panned out as expected. The analyst's bearish outlook of the streaming video company dates back three years ago and the stock has risen from around $65 to $160 since then. The analyst reiterated a Sell rating in a new research report which prompted CNBC's Jim Cramer to question the logic behind the call.

Pachter's price target is mostly derived from traditional financial metrics such as discounted future cash flows, Cramer noted during his daily "Mad Money" show on Wednesday. This earns respect from Cramer for being consistent in his view but at the same time he is also "dismayed" the analyst is sticking by his methods of analysis in which investors who listened to his call missed out on $100 per share upside.

"That bit of ideology reminds me of that quote everybody attributes to Albert Einstein about the definition of insanity: doing the same thing over and over again expecting different results," Cramer said.

Or, if Einstein were still alive today and providing financial commentary, he might say, "Valuing Netflix on discounted present value of its future cash flows is insanity."

Cramer's advice to Pachter is simple: The tools he is using is just plain "wrong" and the analyst needs to "find a new one." After all, from time to time there are stocks that defy all traditional metrics and these need to be erased in order to understand the stock.

So what is the right metric to view Netflix? The company's "darned good" record of producing original content that is "much better than everyone else."

"And that matters, especially when worldwide numbers are at stake and some content plays extraordinarily well overseas."

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