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Netflix Obliterated After Guiding To Half Expected Q4 EPS, Streaming Adds Hit Brick Wall: Stock Down $100
Curious why Netflix is being obliterated after hours, plummeting to 5 month lows, down some $100, or 24% after hours after reporting earnings? The answer is highlighted in the Q3 investor letter, and specifically the red highlighted number, which is NFLX' guidance for Q4 EPS:
The problem is that the $0.44 guidance is about half of the $0.84 expected.
And that's not all: the 4.00 million net additions is about 700k below the expected, with domestic and international streaming adds of 1.85 million and 2.15 million, respectively, are below the 2.15 million and 2.38 million expected. In other words, the growth is over, and now the time has come to focus on actual earnings and cash flow... which sadly don't exist.
From the letter:
We added about a million new members in the US, ending Q3 with 37.22 million members, with lower net additions than our forecast and versus the prior year. Domestic streaming revenue of $877 million, in-line with forecast, grew 25% y/y and faster than membership due to the expansion of ASP from the price changes implemented in Q2.
Separate from forecast variability, year on year net additions in the US were down (1.3 million in Q3 2013 to 1 million in Q3 2014). As best we can tell, the primary cause is the slightly higher prices we now have compared to a year ago. Slightly higher prices result in slightly less growth, other things being equal, and this is manifested more clearly in higher adoption markets such as the US.
We are forecasting Q4 US contribution margin to increase almost 500 basis points on a y/y basis, but to decrease slightly sequentially, as it did last year from Q3 to Q4, due to significant sequential increases in content and marketing expense.
In September, we had a very successful launch in France, Germany, Austria, Switzerland, Belgium and Luxembourg, adding about 66 million1 broadband households to our addressable market. In recent days, our app has gone live on set-top boxes from SFR in France and Deutsche Telekom in Germany, and we expect deployments this quarter from Orange and Bouygues in France, and Belgacom in Belgium. We’ve had more success, more quickly, with MVPD set-top boxes in these new markets than anywhere else in the world.
As expected, we have a full quarter of new market expenses weighing on our international contribution margins in Q4, increasing contribution loss from Q3 to Q4. Our international markets launched prior to this year (Canada 4 years ago through Netherlands 1 year ago) are now collectively profitable on a contribution basis and will continue to help us fund new markets. Moreover, contribution margin from our first expansion market, Canada, now approximates the US.
Starting in January, we have to pay higher VAT in most of Europe due to changes in European law (country of origin to country of destination). We will absorb these increases rather than pass them on to our members. This absorption will be reflected in slightly lower international contribution margin/profit starting in Q1 than we would otherwise have.
And then there is the whole free cash flow thing:
Finally, it wasn't just the guidance: Q3 domestic streaming adds was only 0.98 million, about 40% below the 1.37 million expected.
End result: the stock is in absolute freefall, down 24%
Expect epic liquidations from some of the largest NFLX holders tomorrow:
Don't worry, though: the future for NFLX is rosy, after all it's not like HBO is launching a standalone internet only service to compete directly with NFLX in a few months...
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Gold, silver, bitcoin.
NFLX really should not have risen from $60 to $480 in the first place, if it were not for Icahn and his followers. Hoep we get another Season of "House of Cards" at least.
The TW/HBO deal is also pushing this down.
Screw NetFlix
http://www.gutenberg.org/
However, I prefer a printed and bound book.
I've been burned on puts so many times on stupid NFLX, and of course now that I'm out this happens. Perfect. Congrats to the new millionaires.
Still can't believe this thing is above $100. Almost shorted it as it crossed $200, glad I have a policy of not going against the market when the printers are turned on.
Holy fuck, look at the October 18th (this friday expiry) put option volume for strikes all the way down to 330, somebody knew there was going to be a blowup....calling Mary Jo White and her gang of SEC fuckers....wow, looks like another pay day for some HF manager named Joshua Weinberg, paving the way for his emergence as one of the great minds on Wall Street next year....MUTHAFUCKAS
<= This is my shocked face.
Hey! That's my line!
calling budfox calling budfox
And the PE is still over 100..... Bawwwwwaaaaahhhhhhhh
Check out this email I sent and the date I sent it. Proly just a concidence.
From: Chris Close [mailto:noreply@jotform.com]
Sent: Friday, September 26, 2014 10:16 AM
To: info@futurestrader71.com
Subject: FT71 - Contact from Chris Close
FuturesTrader71
Question
Answer
Your Name
Chris Close
Your E-mail Address
cclose1411@gmail.com
Subject
Other
Existing FT71 Member:
No
S5 Member:
No
Your Message
Hey Man,
My name is Chris Close. Thanks for taking the time to reply.
I appreciate and follow your posts.... I am a relatively small trader.. Mostly options.. 600k account. Have been following and profiting from nflx drop recently and have been watching options very closely...
Have been thinking IWM/MOMO looks a lot like March and so have been looking to put some out of the money puts on in NFLX. Well.. this AM someone loaded up on OCT 14 410, 400, 390, 380 puts... Price jumped 200%++... on puts when the stock climbed 6 bucks... What the heck man? I have never seen anything like that. 200%+++ up on puts when stock rises?
Thanks for your time and any thoughts.
--Chris
Phone
(512) (999) 0549
Is this urgent?
NFLX will be one of the poster stocks for bubble v2.0 after it bursts (it's not even close to having done so, yet (think 40% to 50% correction), but we're nearing that point with increasing velocity).
--- A company having a business model incorporating no proprietary technology, very low cost barriers to entry, not owning its distribution pipeline, and essentially having no moat....
Everyone will again see just how fast illusory Fed printed "wealth" gets vaporized.
E*Trade Baby won't you understand it all.
They should not have figured in the Ebola Deaths to account for the increase in disconiinued subscriptions........
Or no internet at the bug out.
Guess Wile E. Coyote looked down again! :>D
waiting is nine tenths of the job. always sell the highest high; never mind the sentiment; or anything else. never short anything because it's going down; that just means you waited too long already; the further it goes down the more dangerous it gets.
don;t do options. get a futures account and trade the index future.
don;t do options. get a futures account and trade the index future.
i can't believe ichan got bagged like that...isn;t he one of the masters of the universe
Ironic that their hit show is called "House of Cards" Kind of reminds you of their stock, no?
No, of course it shouldn't have. that's what they call momentum trading I think; people buying what other people are buying; it's completely crazy.
Cash, Bonds, Gold
Buck fonds!
You invest in children's slavery?
YEAH BITCOIN! CRYPTO-ANARCHY FOREVER!!
Many people I know have been ditching NFLX recently or not signing up in the first place. They're going different ways- to Amazon Prime, Internet-only watching whatever they can find online, or cable bundle deals which have been pretty competitive recently.
I use Netflix becuase way out here the inteerwebs are not too good, I need my bandwidth, for like, real work LOL!
That being said, I get TONS of damaged DVD's now, nearly one every two weeks (I consume DVDs at the rate of 4 - 5 per week) I have been thinking for weeks now that the quality control is down and their disk-washing thingie was broken and they didn't bother to replace it.
Netflix, soon to be another rip-off company.
cable bundle deals which have been pretty competitive recently
Competitive with what?
TV is for retards who like being brainwashed. Seriously, people should not come and bitch here about how badd and corrupt things are if they watch TV. Their viewership keeps the elites in control.
Oh, give it a rest. A good comedy show like Scrubs (God I love that blond) or South Park gets your mind off the real scary crap for a few hours.
1) Netflix streams too slow (at least on mine slower then Hulu and YouTube);
2) movie seclection is dismal unless you want to wait for a DVD in the mail;
3) many great movies are free now on the internet; and,
4) some sites like Amazon Prime have a much broader selection at relatively lower price.
I don't see how this stawk ever crawled back up over 100 in the first place.
@ Fredie
I TOTALLY AND 100% AGREE!! I hate mainstream Hollywood crap and LOTHE the fucking television!
Netflix has a HUGE collection, and I use Netflix to watch mostly Old Classics, Horror, Sci-Fi and some indies. I was in the Matrix for like 30 years so the Sci-Fi and Horror addiction is hard to shake :)
I also figure the folks that run Hollywwod make very little dough from me if any at all, based on the amount of movies I watch, and, I never pay for their media in any way other than Netflix. I do not watch cable.
Is that like eat, sleep, poop?
If NFLX opens down this much tomorrow and Flushes Down more, some Lucky Guys are going to have a Comma Day.
A Comma Day is when a Comma is Added to your new, bigger Net Worth.
"Run (not so) Silent, Run Deep" is a great movie to be streaming tonight..... oooga, oooooga...dive..dive...dive
20 hours later it's at 93/1 P:E. That's a bargain? That's a bargain!
My new financial investment strategy is to explain things to my 13 year old. If he says it's nuts, don't do it.
COME HERE, ROBOTRADER!
Priced to perfection in an imperfect world. Reality bites.
With a P/E >130 what could go wrong?
Wake me when it hits $60.
I assume that's when your Jan, 2015 puts will be far in the money? My strike price is at $100. I know I'll lose. I heard Yellen loves Netflix. :(
Why? what are you going to do then?
'S&P Breaks Below Key Support, But Usually Rises'.....no shit that's an actual CNBC headline I just saw.
Dar you go Sheep dog. Have CNBS and Netflix merge and then call them shitflix.
Dam. that is funny. might be a little hard to advertise.
Wish you had a screengrab of that CNBC headline!
It's on my phones 'market headlines', not sure how to grab it but right below that is the headline 'Gartman Says- 'Im Out For Now'....no shit.
MOAR PORN MOVIES to woo subscribers
Person FJ I say MOAR instead of more so I can look cool. I really fail at it, though.
Would someone please explain to me what the 'moar'/more cross over is..like where did it come from? I must have been drunk that night.
Bet you don't speak "jive" either...
I'm eagerly awaiting advice from Cramer.......
Cramer says he loves watching Netflix with his kids while drinking SodaStream (down 59% TYD). So it's definitely a buy, buy, buy!!
What a tool.
still waiting for himto tell me when to sell my oil MLP's... 40% and counting
short the bounce.
ZH was WAAAAAAY out in front of this one. Is that the same as being wrong??
think they said sell at 60-100 range ... broken clocks are right 2 times a day,.. and on a long enough timeline...
$115 drop in a matter of minutes. Ouch. That must have left a mark, no? Poof!! And then it was gone.
Not if you're waiting patiently; being way out in front is another way of saying you know what's going to come next.
goo time to buy is all this is. For 8 bucks a month, I love streaming.
they should add some porn though.
XNXX.com thank me later
never heard from him again...
Unless there was only 10 shares outstanding, why would you pay $480/share for Blockbuster 2.0?
I forgot I even had Netflix, it's a piece of crap, always stopping to reload minutes into any show.... I'll have to remember to cancel it tonight.
Oh, that was a nice short. good thing I didn't know about that. I'd be in-sufferably smug by now.
shit at least they still have earnings... Wheres AMZN?...... that should get Monkey Hammered tomorrow
Blue Horseshoe loves AMZN. He'll be doing his X-Mas shopping from home this year, thank you very much.
AMZN loves Ebola.
netflix?
never used them
skinflix?
i'm in
Netflix CEO should have been removed long ago.
WS payback for founder-itice
We're gonna need that streaming shit when we're all locked up for 42 days seeing who code brown's first.
TPB ftw
Wish I'd shorted them.
I'm out of the loop on this shit. Don't have cable, have not had it in ten years. If I want to watch a movie I get it from the library.
150 plus P/E Ratio, What the hell,
LOL, can only go higher. Same con game, different time.
Totally not rigged at all
I got that sarc at the end there tyler.
Kabooooom! Earnings downgrades coming in mass. The Wall Street talking heads were pumping these guys.
Netflix sucks and has completely sucked for almost six months.
It started sucking when it ditched South Park, reached its peak of suck with Netflix originals and has pretty much plateaued there at the peak of suck.
Credit Roku for offering YouTube, so I can sleep to MST3K at night.
Incoming is Streaming HBO which will destroy Netflix.
In the not too distant future, somewhere in time and space...
And all of the headlines on Yahoo! finance this afternoon were like "Investors expect Netflix to hit it out of the park" or something to that effect.
In today's rampalooza in the equity markets, it was the NASDAQ that led the way, even getting into the green for a brief time before sliding back into the red.
Kudos to all those who bought tech stocks this afternoon. Really, great job.
Why are you extending kudos to the Fed's computers?
I'm still confused as to why all these companies so badly overestimated. There are sure many more to come. Were any insiders playing the eventual down side, propping up the stock long enough to liquidate options, trying to ensure employment for themselves for another quarter? Were any of the MSM and paid propaganda mouthpieces pumping fiction to prop up the market until the plug was ready to be pulled?
If there was ever a need for pre-crime investigations governments, corporations and their partnerships are it. Guilty until proven innocent.
All signs now appear to be pointing to the crescendo going Ebola green for collapse and chaos into the New Age of the NWO
Where is techstrategy? He was all over this.
Haha.
-Nelson
Audio:
http://nelson-haha.api-meal.eu/
Still seems kind of overpriced. Maybe I'm stating the obvious. I just have the service for when my girls stay with me. I rarely find anything decent to watch.
get your girls reading zh. why poison their mind instead of showing them the truths of the world?
This is why I don't buy things based on forward earnings. People think I'm stupid to use trailing earnings because that's like driving forward by looking out the back window. My opinion is that looking out the back window gives me a better sense of where the road is compare to looking at a crystal ball.
Yet again the almighty BlackRock holding a big bag of horse shit - shocking. Let's see how they do without the Fed driving the car on a road rigged so there can't be any crashes.
Viking Global Investors nice call lol
Their CEO was out today talking up the market. Saying never a better time to be in. Lying sack of shit. Holding said sack of shit now.
I believe it. I'm sure he's all over financial whoremedia.
Who's calling the shots at Viking, Gartman? Great timing on that initial move in.
Nice catch. Someone jumping ship!
Nutflick's wasn't a bad product when it first came out (except in Canada where it started as a disaster and then got worse), but Android/Google TV and the various knock-offs are decimating Nutflick's.
Why pay $8 a month for Nutflick's when you can pay a one-time $100 for an Android box and get twice the content?
why pay for either when you can get any scripted entertainment for free?
Live sports is what keeps cable/sat around.
Once that is able to be as easily pirated as scripted content, forget all these bs media firms.
Netflix dropped like my dick after I regain consciousness and realize I brought home the fattest stripper in the club
"The bigger the cushion, the better the pushin'!"
when netflix is at its bottom mark zuckerberg will pick it up and drop it into the stomach of facebook. imho
LOL!!!!!!!!!!!!!!!!!!!!!
I like netflix. It's worth the $8 a month I pay. But sometimes their suggestions make no sense. Like when I turn a movie off after five minutes because it sucks, and then netflix suggets other movies because I "watched" that one. But they got some good TV shows on there. And some of the horriblest movies ever conceived. And lots of horror movies with lots of boobies.
But like I said, it's only $8 a month.
I guess it's kind of hard to game their stock via buybacks when their business model is so closely tied to monthly fees and number of subscribers.
What the flix?
Amazon prime is basically the same thing with free 2 day shipping thrown in. At least for the things I watch. A no brainer for me.