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Here Is Not Why NFLX Is Soaring After Hours
One look at NFLX in the afterhours and one can see the latest and greatest short squeeze in action (courtesy of 14% of the float being short) in a stock which is no stranger to epic moves up as shorts scramble to cover, and just as epic moves to the downside when reality peeks through the hopium clouds every now and then.
After opening at $163/share, the stock has been squeezed nearly $50 higher and at last check was trading somewhere around $210, rising to nearly $12 billion in market cap resulting in a P/E multiple of #Ref!, taking it back to a price not seen since early 2011.
What is the apparent catalyst? It's not revenue: the firm made $1.02 billion in sales in Q1, precisely as much as Wall Street expected. It certainly wasn't the laughable actual (under $1 million) or pro forma EPS (from which the company decided to exclude early debt extinghuishment loss costs, but did not exclude the additional debt-associated liquidity on its balance sheet).
What the squeeze appears to be focused on instead, is what took the stock into the stratosphere the last time around just before the management realized it needed to generate some cash as well: rising subscribers, or specifically an increase in total members as of March 31 to 36.3 million, up by 3.05 million in 3 months, and more than some had anticipated.
Of course, this number is just barely higher than the 2.95 million increase in customers the firm generated a year ago and we won't mention that the rate of increase of international subs - the alleged golden mine for Netflix growth - at 1 million in Q1 2013 was less than the 1.2 million in Q1 2012 and much less than the 1.8 million in Q4 2012.
So congratulations Reed Hastings with the user growth, driven by the free trial period associated with House of Cards, and other original content. We hope you can retain them.
However as there is no free lunch, what is the bottom cash flow line associated with this once again rapid customer expansion? For that we go straight to the company's own definition of Non-GAAP free cash flow which starts with operating cash flow, removes cash associated with DVD content library acquisitions, removes CapEx and nets out other assets. The result?
And in the company's own words:
Free Cash Flow of negative $42 million was $45 million lower than our positive $3 million in net income in the quarter primarily due to payments for Originals and non-originals content in excess of the P&L expense, partially offset by the loss on extinguishment of the debt (a financing activity) and non-cash stock compensation expense. The investments that will continue to weigh on our cash flow relative to net income are Originals and non-Originals content (ongoing) and our Open Connect conversion (primarily in 2013).
So we know what is not responsible for the surge in the stocks: the actual cash bottom line. And since the company plans on investing just as heavily in the future into origianl content expect cash to continue to bleed at a pace of $40-50 million/quarter or more.
The question then is: once the company hits user saturation, and there are only so many people in the US and globally who will pay $7.99 a month to watch its content, original or recycled, how will it upconvert its profitability and start truly making money?
Of course, for the time being this question is irrelevant: NFLX appears to have discovered the magic of the Amazon business model, where the worse the actual bottom line, the better the stock performs.
Then again, this is one movie we have all seen before, and we all know how it ends.
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Bane of my existence..
Free Cash Flow of negative $42 million was $45 million lower than our positive $3 million in net income in the quarter primarily due to payments for Originals and non-originals content in excess of the P&L expense, partially offset by the loss on extinguishment of the debt (a financing activity) and non-cash stock compensation expense.
Good for 26% ah!
Icahn should be fairly happy.
Imagine if the news was actually good!
Netflix is now amog the new elite GDB generators that will be adding billions to the US Economy! Fucking awesome!
Arrested Development, FTW!
I learned the hard way to not short this beast....my arse still hurts.
GOld and Silver for this gentleman only.
More importantly Netflix soon to be part of the GDP calc
http://www.zerohedge.com/news/2013-04-21/us-gdp-will-be-revised-higher-5...
I'll tell ya, after removing the non-english, redundant liberal news channels, promotional advertising, and cultural BET-type channels from my cable I had only about 10 of the 200 channels I was paying for.
I said fuck subsidizing all the same people I already subsidize through taxes- so yes, we now do Netflix.
Amen AF! I pulled the plug on DirecTV about 5 months ago because of the redundant government run news channels (all the news that fit's the Rats views) and the mind numbing trash on american tv such as Jersey Shore, Bridzilla, etc. All we wanted were a few ala carte channels such as the History Channel, Military Channel along with a few others. Now we watch movies via Netflix and are able to avoid the propaganda by visiting sites such as Zero Hedge and Karl Denninger's Market Ticker.
I get my movies and shows through torlock.
Icahn knows how to make a stock run. Save for Motorola he's been hard to bet against. That said I can't wait to short this s.
and 20 ES points tomorrow
Netflix is ONLY a stock which trades on an exchenge...or more properly I guess something that is pumped or dumped depending on who needs what, but as far as an actualy product it's complete shit.
Stupid idiots made 5 cents per share for entire Q, That's represents 20 cents per year rate
so congrats $2 stock at 10 p/e actually trading at $200, no question asked.
Nothing to see here. Just buy and hold :)))
Not well!
Couldn't see this coming.
/sarc
Spacey rocks, and what most miss about why Netflix chose to make House of Cards - user preference data mining. Tick tock DC, the two party shell game has about run its course.
I like Netflix, kids love it, worth every $8.
The stock, however, is likely the new darling of the AAPL pumper hedgy crowd, the red cherry slot machine in the corner near the bar.
Moves like this just keep demonstrating what a complete casino the markets have become.
I dropped it a year ago -now use Redbox.
yep, NFLX is good for a bit when you first sign up, but runs out of good stuff quickly, most of it is old crap. Amazon Prime, same thing. Redbox doesn't have a whole lot of current content either. Redbox is sneaky w/ the low rental prices, I wonder if people keep movies 2, 3, 4 days cuz they are so "cheap" and end up paying $4.50 or higher for each movie. A good biz model approach I think.
blockbuster was actually great when you had a store near you and you could trade in movies while they mailed you more but many stores shut down ruined that.
I never watch the PPV movies on cable/Sat because they want $5 bucks or more. They think they can charge a lot because they are convenient, I say that is wrong. If they lowered their price point I'd watch a helluva lot more movies on PPV and their revenue would soar because I'm probably not alone in that regard.
Exactly. The wife always wonders why Im such a stickler for returning RedBox movies within 24 hours. Its a 100% increase in price for not doing so. Such is the mathematically challenged.
66,000 documentaries. Heaven for our family.
on netflix? i'll have to checkem out, thanks.
aapl at least makes (made) money and that was actually building stuff (albeit w/ defacto suicidal serfs). nflx cannot make money even though it has neither brick nor mortar (sorry to be so 1.0). and by the way do you know how much streaming content you get outside of the US? Not much or none depending on the copyrights.
Dude I don't know who loves what, but they made $0.05/share per Q
That's good enough for $10 stock at most assuming it's trading at 50 P/E
Where is the earnings???? Where is the money? To Justify 200$ stocks I'd love to see
4-5$ per share per Q Earnings, see the difference? 5 cents? well, then it's $2 stock
I know, such a piss off. I'm still optimistic NFLX will crash over the fall. But gawddamn what is everyone pretending to be so excited about? And what's this tomorrow then? Another 50%? NFLX cross 300 ROFL
Set the bar low enough I guess.
I want my Arrested Development!!!!!!
Not to mention that they probably won't get a free ride on the data pipelines forever.
PE goes from 600 to 200 on er. Thats good.....oh wait
wow my puts are worthless
who? not even worth 15 billion? grrr..i bet i could make more than -45 million -ve cash flow at ZIRP rates on this much...i could just trade slovakian v slovenia CDS in my lunch hour ... and i would book the profits in gold...
ah well..AAPL P/e is only 9...http://finance.yahoo.com/q?s=aapl YAHOOOOOOO!!!!
FORWARD!!!
Millions and millions of people need something to do while they sit on their asses at home and collect welfare and disability.
Asia pacifiic works & pirates content. Germany only buys porn. Greece has no electricty. cf saturation.
you got something against lazy gimps?
obamaphones are old news, give us obamaTV and obamaSat/cable!!!!!
Little help please. I'm somewhat confused by this sentence: "...how will it upconvert its profitability and start truly making money?"
I thought only central banks "make money" ?
No, silly, "only central banks "can create wealth"."
Benny has trained you well, my friend. I feel richer knowing Ben is on the job.
I subscribed only watch House of Cards, and once I saw that I canceled. A real punk move on my part since I was on a trial sub, but, in my defence there was either nothing new in the lineup I wanted to watch, or I'd already seen it.
However, if you are shut in with a full-body cast for a few months and want to do some binge viewing of LOST or Breaking Bad, I do recommend Netflix. It is the ideal medium for binge viewing. Quality and streaming speed are both excellent.
There. I atoned for my sins with a free plug.
Long and strong, baby! Nailed it on the screws!
errrr....what is Netflix?
NFLX is acting like a dot-com stock: company is increasing subscribers while burning money while the stock price goes through the roof.
I think many people were expecting Apple to come out with an "iVideos" television product that would crush NFLX. It now appears that Apple won't be coming out with such a product (or at least not one that Steve Jobs worked on) and this is weighing on Apple while NFLX is getting a break.
I have access to Netflix and think their content is lacking as fas as movies go. But for those who opt out of cable/dish, I guess it fills the void. Just another one of those 1999 type stocks that people cannot get enough off. One day, it might make gobs of money, but I wouldn't bet on it.
Reed Hastings thinks Netflix makes money. Good enough for Wall Street. Good enough for Washington.
This August Netflix thinks of creating 549 new original programs. Although the programs will never be made, the thought generation process will bring in $450 billion in imaginary revenue.
Wall Street investors are then stunned as Netflix surpasses all other corporations in potential revenue and the stock soars to 16 digits. All Netflix shareholders now have enough money to build themselves Death Stars, work begins immediately. Global GDP rings in at some number beyond a Googolplex. Which the algos take as extremely bullish for Google which then trades at one Googol.
People stand and chant, USA USA USA!!!! as the first Death Star is launched from Pittsburgh. A bright green light flashes....
They did earn a nickle. So, on a foward PE of say 30 for growth, stock is worth at least 45 for forward earnings. So what is it trading at..... OH $217.00. That is a little more than I am willing to pay. These markets make Las Vegas look honest.
A nickel today is worth a few extra billion in the future w/ the fed printing so much money. People are forgetting to apply the appropriate bernanke discount rate.
There's a rumour they're going to crack down on account sharing.
http://www.businessweek.com/news/2013-04-22/netflix-seen-cracking-down-on-sharing-to-bolster-profit
so they are going to show everyone how to share accounts? i never thought of that! haha
I hate big [negative] numbers...they make me dizzy.
Ok so because NFLX provided content and owns intellectual property.... that means with the new GDP calculaiton (which would take into consideration intellectual property) will provide the impetus for the Obama Admin and their pack of smirking jackals at the Fed, to announce that GDP is rising!
Thast the Feds printing machine combining with the tax and spend policies of Obama.....is the right policy.
Austerity (nee balanced budget) is absoltely the wrong way to go ! See how easy it is to make the stock market go up ?
My 10 dollar a month subscription is worth roughly 400 dollars of Market cap....... and on my 10 dollar subscription, they earn 4 cents if my mental math is correct..... cool.....
Forget Netflix, look at the performance of Starz!