Netflix Plunges After Subscriber Guidance Cut

Tyler Durden's picture

The myths of this market continue breaking one after another. After two substantial and long overdue trading blow ups in the past 24 hours, we next turn to that other momo miracle: Netflix, which at last check had plunged 12% to about $180 following an update from the company, in which it said it subscriber growth will come in below plan. Of course, the only ones surprised by this move, are those who are actually long NFLX (and those who bought into Goldman's topticking upgrade which brought the stock to over $300 however briefly). We expect "value investor" of very high conviction, Whitney Tilson, who lately has been known best for shorting low and covering higher, to soon resume his bearish position in the name. And yes, we still expect that the company will very soon come to market with a dilutive equity offering to raise cash and stench the relentless real cash burn.

From the company:

September 15th, 2011


Dear Fellow Shareholders,


Two months ago we took a big strategic step by separating streaming and DVD-by-mail into two distinct services, and we now have more visibility into our expected Q3 2011 results. Our financial guidance for the quarter is unchanged, as is our international subscriber guidance. We are, however, lowering our domestic subscriber estimates as reflected in the graphic below.



Despite the guidance revision, we remain convinced that the splitting of our services was the right long-term strategic choice. The strategy behind the split of our services is four-fold:


(1) to create a dedicated DVD rental division that takes pride in great execution and maximizes the opportunity for disc rental over the coming decade;


(2) to enable us to improve our global streaming service even more rapidly, because it is not meshed with a domestic DVD business;


(3) to enable us, with the growth in revenue, to license more streaming content and thereby improve our streaming service even more;


(4) to remain very price aggressive, with $7.99 per month for unlimited streaming of a huge library of TV shows and movies, and $7.99 per month for unlimited DVD rentals, 1 out at-a-time.


We know our decision to split our services has upset many of our subscribers, which we don’t take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come.

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Drag Racer's picture

netflix grew because it was 'trendy' but that time has passed.

Oh regional Indian's picture


No capacitor enhancement needed. Who'll pay? To watch what? Cable is still fresh. 

+, cable has UFC. WWE. blood and gore. Bread and circus. 


Change your Life

LowProfile's picture

Streaming is the future of video.  As long as they make it simple and easy, they will have cashflow.

You guys need to check your full-retard at the door, and are a good argument for bring back the CAPTCHA for all posts.

That said, the stock is incredibly overvalued.

Hephasteus's picture

It's coralling.

People pay to build cable tv system. Cable tv system turns into interenet system. People pay for internet but dump cable tv system. Internet system takes over what cable tv used to to do.

You internet service provider is not a tech company it's a goddamn main stream media mess. Cox communications = the discovery channel. Comcast = 2/3rds of the bullshit media empire. They built it but we won't use it like they want us to. So it's simply coralling. Cable will go from 70 bucks a month to 20 bucks a month while internet goes from 40 bucks a month to 120. Then you pay someone for streaming movies.

Remember the mantra. Make them pay 2 and 3 times for everything. Make them pay for the vcr make them pay for the tapes make them pay for the content. Make them pay twice for the equipment to deliver content. Make them pay again for the content. Make them pay for internet for their tv, appletv, make them pay for internet for their phone, make them pay for internet for their computer. And if you can swing it hook their refrigerator up to the internet and make em pay again.

But most importantly hook their power meter up to the internet and make them pay for internet service for your billing department.  Also makes it easier to fudge their meter to meet your target revenue goals of the month.

UGrev's picture

That's what happens when you change your plans and fuck your loyal customers by making them pay more for less.

DirtMerchant's picture

Wow, a negative reaction to bad today bizarro day ?

SilverIsKing's picture

Day is not over. Could be up 12% in a few hours although I doubt it.

HelluvaEngineer's picture

Time for Robo to cut his losses and move his remaining capital over to additional shares of LULU.

pods's picture

No worries, Robo got out at the top, promptly shorted it, and is now in talks with Greece to buy Mykonos.


IMA5U's picture

peeps did not like the price increase

and they won't have new mean starz!

j0nx's picture

RIP Andy Whitfield.

gaoptimize's picture
Andy Whitfield - 1972 & 2011.  Rest In Peace
UGrev's picture

I didn't realize he passed.. sorry to hear that. RIP. 

Surly Bear's picture

I dropped them 8/5.

~S. Bear

j0nx's picture

Double the price and cutting 1/4 of the high end content by not renewing with Starz can tend to do that to a customer base. Wait until February when Starz content is removed and then see how well their stock is doing. Timberrrr.

drswhaley's picture

It will hit a 52 week low before then and will make the EU financial crisis look like child's play!

UGrev's picture

That's when they start streaming pRon.. 

Drag Racer's picture

so ubs was long netflix, who'da thought

drswhaley's picture

Most of the subscriber reduction is in the DVD side - this is the part that had lower margin - and the reduction is sure to bring the USPS to it's knees.  Thus, so far, this is working well for them.  However, I think they are wrong - their streaming content costs are headed up (and margins down) and their content will not be that attractive leading to a stalling of streaming growth as well.

AUD's picture

Down 12% to $180!?

That beats gold juniors hands down.

I am a Man I am Forty's picture

check out the series breaking bad on netflix streaming, great show

Theta_Burn's picture

I've been short this chode off/on for mths, only to be smoked, fried, par-boiled over and over again, and of course as per my impecable timing I'm not in when it counts.


DavosSherman's picture

BUNCH OF INEPT FUCKING MORONS the only thing they are good at is screwing up something good.

Captain Benny's picture

Here is why I'm not a NetFlix customer: NO LINUX SUPPORT

If they want to get their shiznit together and support a real operating system and not make me go through hoops just to play a streaming movie through an emulator then I'll gladly consider once again becoming a NetFlix customer.  Till that day, they're useless in my book.

If anyone is reading this from Netflix: STOP WITH THE BS EXCUSES AND IMPLEMENT A LINUX CLIENT

tmftdoyle's picture

To pick nits, the company has actually guided for their domestic subscribers to DECLINE from Q2's level. To quote Roger Mcguin "To everything churn, churn, churn". The fallacy to this company's valuation has always resided in its four-plus percent monthly customer churn. Absent subscriber growth, perhaps the momo monkeys will now stop and take the time to evaluate the punk per subscriber value inherent in the business model! $50 here we come.

Raymond K Hassel's picture

Netflix just within the past week or so has initiated a program to block dual streaming of movies on the same account, after raising prices and losing content.  Most everyone I know with Netflix splits a subscription with multiple friends/family under different roofs, as well as families sharing on different media at the same time under the same roof. Right, wrong or otherwise, they will have more cancellations coming when download error messages start cropping up.  

Ruffcut's picture

I just installed on the Wii. I did not know they made so many B and C movies. The comedy is good. Wife says she does not want it. I guess it is bye.

realitybiter's picture

They have a content problem that is impossible to solve unless they turn their model on its head.  They cannot afford to pay the content producers a fair rate for a $15 a month model.  It will never work.  It only worked before because they scammed everyone out of the gate.


They will follow blockbuster to zero.

batterycharged's picture

How are Pirate Bay shares doing?

Shocker! In a crappy economy, internet-savvy customers have figured out all those same movies are free on the internet!

A lot of people using Netflix are just trying to be good citizens, apparently that isn't holding up.