Netflix (NASDAQ:NFLX) Playing Accounting Games Says Leonard Brecken

In an interview with CNBC Friday, Leonard Brecken of Brecken Capital LLC accused Netflix (NASDAQ:NFLX) of playing accounting games, which he believes will result in shares in the stock plummeting below $70.

His comments must be taken with the fact that he's short Netflix at this time.

Brecken asserted, "The company is overstating its case-flow net income. This company grew about 30% on the top line, while its accounts payable grew well over 100% to completely wipe out the cash flow for 2010.

"This company is not generating any free cash flow from their businesses. The company is claim to have tens of millions of subs for streaming. The correct way of accounting is to spread that cost across that streaming base that are using it today, not over two or three years."

Brecken believes the accounting issues will effect the stock in the second or third quarter, citing their key demographic being saturated.

Also noted was the emergence of Amazon.com Inc. (NASDAQ:AMZN) as a major competitor, which should happen much sooner than thought by shareholders, according to Brecken.

As far as competition, I think over the long term Brecken is correct in that Netflix will struggle, especially as the delivery system goes digital.

As to the accounting "games" mentioned by Brecken, it remains to be seen if that becomes a factor at all. Obviously this is the reason he shorted the company, and he's attempting to enlist supporters in order to help push the price of Netflix down, now that it's running away from him.

Netflix was trading at $230.30, gaining $7.10, or 3.18 percent, as of 1:09 PM EST.