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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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Thu, 09/15/2011 - 07:48 | 1672467 Drag Racer
Drag Racer's picture

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

Thu, 09/15/2011 - 07:53 | 1672483 Oh regional Indian
Oh regional Indian's picture

Netfluxed.

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

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

ORI

Change your Life

Thu, 09/15/2011 - 11:07 | 1673397 LowProfile
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.

Thu, 09/15/2011 - 12:25 | 1673717 Hephasteus
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.

Thu, 09/15/2011 - 07:50 | 1672473 UGrev
UGrev's picture

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

Thu, 09/15/2011 - 07:52 | 1672478 HelluvaEngineer
HelluvaEngineer's picture

Step 3: profit!

Thu, 09/15/2011 - 10:23 | 1673179 bankruptcylawyer
bankruptcylawyer's picture

you forgot underpants!

Thu, 09/15/2011 - 07:50 | 1672474 DirtMerchant
DirtMerchant's picture

Wow, a negative reaction to bad news...is today bizarro day ?

Thu, 09/15/2011 - 08:23 | 1672574 SilverIsKing
SilverIsKing's picture

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

Thu, 09/15/2011 - 07:52 | 1672475 HelluvaEngineer
HelluvaEngineer's picture

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

Thu, 09/15/2011 - 08:02 | 1672503 pods
pods's picture

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

pods

Thu, 09/15/2011 - 08:16 | 1672547 NumberNone
NumberNone's picture

And CMG.

Thu, 09/15/2011 - 07:52 | 1672477 IMA5U
IMA5U's picture

peeps did not like the price increase

and they won't have new spartacus...er...i mean starz!

Thu, 09/15/2011 - 07:55 | 1672487 j0nx
j0nx's picture

RIP Andy Whitfield.

Thu, 09/15/2011 - 07:57 | 1672493 gaoptimize
gaoptimize's picture
Andy Whitfield - 1972 & 2011.  Rest In Peace
Thu, 09/15/2011 - 08:21 | 1672565 UGrev
UGrev's picture

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

Thu, 09/15/2011 - 07:53 | 1672480 Surly Bear
Surly Bear's picture

I dropped them 8/5.

~S. Bear

Thu, 09/15/2011 - 07:53 | 1672482 j0nx
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.

Thu, 09/15/2011 - 08:05 | 1672512 drswhaley
drswhaley's picture

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

Thu, 09/15/2011 - 08:22 | 1672571 UGrev
UGrev's picture

That's when they start streaming pRon.. 

Thu, 09/15/2011 - 07:56 | 1672489 Drag Racer
Drag Racer's picture

so ubs was long netflix, who'da thought

Thu, 09/15/2011 - 07:57 | 1672490 drswhaley
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.

Thu, 09/15/2011 - 07:56 | 1672491 AUD
AUD's picture

Down 12% to $180!?

That beats gold juniors hands down.

Thu, 09/15/2011 - 07:58 | 1672494 I am a Man I am...
I am a Man I am Forty's picture

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

Thu, 09/15/2011 - 07:58 | 1672496 Theta_Burn
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.

Phuck...

Thu, 09/15/2011 - 08:13 | 1672539 DavosSherman
DavosSherman's picture

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

Thu, 09/15/2011 - 08:15 | 1672542 Captain Benny
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

Thu, 09/15/2011 - 08:22 | 1672567 tmftdoyle
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.

Thu, 09/15/2011 - 08:22 | 1672569 Raymond K Hassel
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.  

Thu, 09/15/2011 - 08:41 | 1672641 somethingelse
somethingelse's picture

Hmmm BAC de-layering and Neflix layering....we shall see

Thu, 09/15/2011 - 09:27 | 1672895 Ruffcut
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.

Thu, 09/15/2011 - 09:48 | 1673021 realitybiter
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.

Thu, 09/15/2011 - 10:48 | 1673312 batterycharged
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.

 

Wed, 12/21/2011 - 02:56 | 2000225 kevin22
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