Netflix Plunges On Revenue Miss, Ugly Guidance, Deteriorating Fundamentals
At last check Netflix' stock was down about 10% following an earnings report that was about as ugly as they get. While the company beat Q2EPS consensus of $1.12, coming with a number of $1.26, it missed revenue estimates of $790.5 MM at $789 MM. What's worse, it forecasted Q3 EPS of $0.72-$1.07, far below the $1.23 consensus, while it sees revenues of $780-$805 MM on consensus of $842 MM. And digging deeper, the rot was pervasive in virtually every line item. But don't worry: according to NFLX, it is now bearing the Pirate Bay scourge. Not. But at least Jim Cramer loves it.
Other ugliness:
- The company anticipates its current Qtr end subscribers of 24.6 million (up from 22.8 million) to barely grow to a range of 24.6 to 25.4 million
- Gross profit declined to 37.9% from 39.0% sequentially, and from 39.4% Q/Q
- The domestic subscriber acquisition cost jumped from $14.38 to $15.09
- Average monthly revenue per subscriber dropped to $11.49 - the lowest in the past 3 years, and certainly the lowest under the current business model
- The company had 1.3 million free domestic subscribers, and 110K foreign subs
- Of the company's $86 million in cash from operations, $40 million came from working capital: a traditional "source" of cash for the company
- Take away this traditional, but non-recurring working capital fudge and instead of adding $25 million in cash, the company would have burned through $15 million in cash in Q2.
And much more in the linked excel file. The company's full presentation can be found here, which has one notable item: the company is actually boasting that it is beating Bit Torrent piracy:
Netflix beating Bit Torrent piracy
In May, analysts at Sandvine published a report on global broadband trends suggesting that people are watching and downloading more video over the Internet than ever before. Given the popularity of our streaming service and the growth we’ve experienced in streaming subscribers and hours viewed, we were not surprised by this finding. What did pleasantly surprise us was how we compared to other providers of Internet video. Our low cost, high quality, on demand streaming service has become so good that the largest percentage of the Internet’s traffic is for paid content instead of illegal free peer-to-peer sites like Bit Torrent. Over coming quarters we’ll see if we can recreate this “beat piracy” feat outside of North America.
Translation: Pirate Bay is starting to eat Netflix' lunch. Yet another translation: time to IPO Piratebay and pair trade by hedging with NFLX.
As for those expecting an immediate boost to earning courtesy of the recent price spike in services, dont hold your breath:
We didn’t change the pricing for our streaming only subscribers, and those members will get to enjoy more and better streaming content going forward. Subscribers who only want DVDs from us are happy with the introduction of DVD only plans, because they can pay $7.99 instead of $9.99, a 20% savings. It is expected and unfortunate that our DVD subscribers who also use streaming don’t like our price change, which can be as much as a 60% increase for them from $9.99 to $15.98, when it goes into effect for each subscriber upon their renewal date in September.
Some subscribers will cancel Netflix or downgrade their Netflix plans. We expect most to stay with us because each of our $7.99 plans is an incredible value. We hate making our subscribers upset with us, but we feel like we provide a fantastic service and we’re working hard to further improve the quality and range of our streaming content in Q4 and beyond.
In Q3 we will see only the negative impact of the pricing change, given that the announcement was early in the quarter and that the increases won’t take effect until late in the quarter (September 15th on average). We expect domestic net additions in Q3 to be lower than the previous year Q3, and because of the timing of the price change, revenues will only grow slightly on a sequential basis.
Net result: the chart below.
And updated:
At least Reed Hasting's weekly automated 5,000 shares dump plan is helping restore much needed confidence in the long-term prospects. Oh wait...
And another way to see it:
(3 votes)
»
- Login or register to post comments
- 9720 reads
- Printer-friendly version
- Send to friend
Similar Articles You Might Enjoy:
- Netflix: Hell Has No Fury Like Subscribers Scorned
- NetFlix CEO Sends Mea Culpa Letter To Clients: "I Messed Up. I Owe You An Explanation"
- Netflix: Will This Movie Ever End?
- RIPflix
- Whitney Tilson Explains Why He Went Long Netflix, Says He "Hasn't Lost His Mind", Cites Business Insider To "Defend" Thesis
Oh Robo, where art thou Robo?
.....crickets.....
Tyler, you forgot about competition from Amazon's VOD for Prime subscribers
....wind....
....dried bush rolling by in the wind...
while the standoff song of "the good, the bad and the ugly" plays...
That would be tumble weed my friend if you want your statement to have the impact you were hoping for. There fixed it for ya. ;)
"Easy as cake!" Darn bloody fureigners, don't know englich very well!
Pirate Bay IPO - bitchez!
The price increases they imposed are going to kill their growth and retention numbers. They just signed their own death warrant.
That's what I think. I cancelled the online svc entirely after receiving the price increase notice.
Greedy f-ers.
Ah yes, commoners must express their revulsion through any and all means. Cinema is mostly shit now, anyway.
+1
99% of movies are total shit. The only thing interesting is next summer's Promethus or Ridley Scott's Alien preequel (roughly).
He wanted a budget big enough to bail out Greece or at least most of Ireland.
And reduce the bandwith and infrastucture cost. In a weird way this is how they slow the rate of growth till the networks in the world improve.
This is a RoboFader "convict(ion) buy", so BTFD, bitchez!
Tomorrow is RATE HIKE DAY ......just took a look at BANK NIFTY index...and the VIX...::
http://markettechnicals-jonak.blogspot.com/
Covered my shorts at 257. Easy money.
Who needs Netflix anyway? You can get any movie or TV show you want for free these days, commercial free. We don't even need Sirius radio anymore.
We don't even need Sirius radio anymore
That's a BS statement. Try telling a truck driver he doesn’t need his XM/Sirius radio anymore.
Just like taking a trucker's meth away.
I kinda like the streaming service. $8 a month is much cheaper than cable. I've watched a bunch of foreign films I never would have known existed, e.g. Ip Man, The Man From Nowhere. Some older movies are good too. Less hassle than pirating, IMO.
+1
If I actually paid for my Time Warner cable subscription I would have cancelled it a long time ago in favor of Netflix, which is still an outstanding value. People need to calm down and stop ranting about 'greedy f-ckers'. Eight bucks for unlimited streaming is pretty sweet even if their catalog is not quite all-encompassing.
It is not exactly watch on demand , have you ever done a serch for a movie title and you can NEVER watch it you have to add to list, you have to put a same type film in and hope it pulls up the film you were really looking for so you can watch it instantly. Why does spell check never work I am dislecsic.
GET SHORTY
Since when do fundamentals matter ???
This is why they have been shouting about moving into LatAm, Caribbean and Europe. For the first two, internet speeds are so slow, it will take a week to download a movie and in most parts of Europe, on demand film is available through numerous sources already. US equity idiots who buy the likes of Netflix won't understand that data speeds are higher in Europe, and this is a well established market.
As for US, it looks like they've hit peak subscribers, so there's only one way to go from here..
People don't like paying 60% increases... Who'd a thought?
Safe to say another momo done?
My rates are dropping by 20%. If you do not do streaming (which stinks anyways due to internet lag), your rates drop. Go Netflix! As for stock price, it's a dud though.
Netflix IMHO has already peaked. CONtrary to what they say they will lose tens of thousands if not more than 100,000 subscribers from the cost increase alone.
Also eventually service providers are going to jack up bandwitdh usage rates which will cause the streaming business to suffer. Currently Netflix is making money on the backs of the providers. This will change.
Should be a sub $100 stock by Q2 2012
Netflix aint all that, Ive had it for 6 months, havent watched a thing on it in the last 3.
Holders'll be screwed?
'Bout time! He's the laziest A.G. the US has ever had!
btfd
RoboTrader muttering to himself in the corner, 'My Momo....my Momo!!'
One Momo to rule them all,
One Momo to find them,
One Momo to bring them all
and in the darkness bind them.
NFLX Streaming service fucking sucks anyways.
No worries, BIDU up 7%, new world record highs.
BRCM up 8%.
That will be enough to sell the phony story about the oft-mentioned "V-Shaped 2nd Half Recovery".....
LOL....
OH theres another momo to jump on the bandwagon and hype! Yipee! You really are something as a rear-view mirror trader Momo.
junk bitches
You should apply for a job at CNBC...
Oh, come on, Sheepdog, Robo is just messing with you.
suck it reed hastings
Fundamentals? Stop making words up Tyler, we all know there is no such thing.
Green Light, Red Light. That's all you need to know about investing nowadays.
The darlings of the Old Bull (bear Mkt rally of 09-11) dropping like flies.
People still pay for entertainment?
The kids like it.
When I was young, all we needed was 5 gallons of fuel, a lighter and we could entertain ourself for the entire day.
Kids... they lost the sense of fun...
Dude, 5 gallons of fuel these days costs more than a case of beer.
These days, a few bottles of robitussin or glade seems a better deal.
I've seen people buy 10 cans of Glade type air freshener at a time. I figured they were either cleaning a kennel, going to a bean eating contest, or huffing it. For those interested, the local 99 cents only stores usually have a great deal of it. People can wash away the bad taste with quarts of 40 proof mouthwash for $1, or for the die hards, 8 ounce bottles of hand sanitzer (95% ethanol) for a buck.
5 gallons of gasoline only cost's 5 junk (90%) Silver dimes.
You meant liters right?
Talk about old times and warm fellings.
We used to burn shit all day left and right, vegitable, animal and mineral. Actually to be more precise, the animal part was a kid dwon the street who we all hated. But we didn't hurt him. Well, physically. Might have scarred his soul for the day. A little traumatized, but he made it. Kinda.
Or cans of lighter fluid squirt the shit like a flame thrower.
SD, you're a bloody genius. Now I have something to relate to my small nephews and neices over dinner tonight.
Y'all come on back now, ya' hear!
Sunpower......Leo? Leo??
Bueller?
Last weekend a sales rep who sold solar panels rang my door.
150 euro per panel, buy and install 10 and you could get the inverter for free.
The man must have been blind because I've already have 14 panels on my roof.
But that's what the solar business has become. Cold prospecting and crazy discount prices. I paid 4 times as much 3 years ago.
And the type of salesman... I though it was a gardner looking for a job...
In 2 years, they'll be giving solar panels for free with every box of crispy's you buy.
Hey ,SD you must live in a funny country...
Sounds like Callieepornia but it is Belgium. What kind on solar power can you get in Beligium? Spain is an ideal country and solar required heavy govt subsidies in Espania.
He lives in a country that has no working government, and where half the people hate the other half. I know at least a dozen people whom all left there in the previous year. No wonder they are practically giving stuff away. Pretty soon they will be giving a solar panel away for any French Speaking Belgian to move to France!
No wonder they made a global expansion announcement 2 weeks ago. So the indiders could sell a rally and get out before deplorable earnings. Great strategy. So much for Sarbanes Oxley. Bastards!
No wonder they made a global expansion announcement 2 weeks ago. So the indiders could sell a rally and get out before deplorable earnings. Great strategy. So much for Sarbanes Oxley. Bastards!
I see Obummer is speaking at 9:00pm.
And BIDU now has a $55 billion market cap with only $2 billion in revenues. Man, the world simply loves these tech stocks, NFLX notwithstanding.
If we get past sept with no damage we could see 1400-1450 this year. Shorts have been raped worse than any time in history the last 2.5 yrs.
Jim Cramer said this could never happen and go long netflix. That's when I sold all of it.
i thought you were all pms?
I guess I should have said I convinced my wife to sell her netflix, which she did.
It's that old what is mine is her's and what's her's is her's thing.
Not true, this morning he said the shorts would slam the bid on every uptick afterhours.
I'm BTFD, squeeze will come just like it did last qtr. after down $20. The support is $254 and then $245 and $240 - pick one and then up we go...can't stay short these low float stocks or you will get your head handed to you. I did and learned my lesson.
Even with this poor guidance, NFLX is only makign a 1-month low. The covering rally tomorrow will be something to see, and, yes, NFLX is a BTFD if the analysts do not lower their price targets overnight.
sorry, this time is different... NFLX playing games with write-off curves of content deals (that's why CFO bailed) ... sell any rally above 260-265 tmrw
but...but...I thought they were expanding into bumblefuck-astan
This is a year too late for my poor NFLX naked puts. :(
NotFlix.
Very much OT...Check out the lik below. Awesome representation of US debt. Generally apropos.
http://www.wtfnoway.com/
Fiat looks so hollow... and Holywood is a propaganda machine, plain, pure and simple. I hope Netflix suffers massive server failure so people get off their asses. NWO tool company.
ORI
http://aadivaahan.wordpress.com/2011/07/24/doldrums-and-cliff-edges/
Blog pimping troll alert!
Blog pimping troll alert!
Blog pimping troll alert!
Blog pimping troll alert!
Blog pimping troll alert!
Blog pimping troll alert!
1 month ago @ Netflix Corporate HQ:
CEO: Well, maybe the economy is less feeble than we've been privately hearing about from you know who. Maybe we should raise prices and grab additional revenue.
CFO: Sounds like a plan. People will pay the higher prices.
CEO: I mean, what choice do they have? Am I right?
CFO: I concur.
CEO: We're like money, brosef.
Great model. They make up 30% of the internet traffic and pay nothing for it.
disingenuous. subscribers pay the internet provider.
Tech question....with the new ZH interface is anyone else not seeing updated/new posts unless they sign out, refresh the page, the sign back in again?
Why is technology such a pain in the bernank?
So, lets say they earn $4.00 for the year. At a PE of oh, lets be generous, 20, that brings them to about 80 bucks fair value. A little bit to go yet.
Hit, no, just have to refresh and all posts show up.
RedBox, BlockBuster and AmzonPrime say THANK YOU NETFLIX for charging your customers 60% More.
Yeah, they are complete a-holes.
I'm probably going to dump them completely. Researching alternatives now...
Netflix is down almost $30 after hours and the market futures are flat.............. what is wrong with that action?????
BTFPlunge
BitTorrent is getting crunched by ISP limits. So is NFLX. Comcrap put us on a 250 gig/mo limit with no notice.
Oh, the pain!
Frigging trading chart sucks 100 meg/dy
must be that Hitler video that did this...
What is wrong with all of you negative nancies out there? CNBC and cramer sez this is a wonderful buying opportunity. I'm sure Robo agrees, and could probably give us a truncated, outdated chart (overlaid with his new fav, BIDU) to show us how both NFLX and BIDU are GREAT BUYS RIGHT HERE....Yeah Team Oblivious!
After all, what are all of the unemployed going to do except sit around watching NFLX movies??? Oh, wait, I guess the unemployed DO have the time to go get the smae movie for only $1 at Redbox, or simply find it for free online. Hmmm, who would have thought? Well, at least AAPL touched $400 (and $400 liked it ;>0)
sarc off - what a bunch of shite on the fundos. I hope the f*ing stock crashes and burns tomorrow.
OT, but here's a guy that SERIOUSLY needs a job:
http://blogs.ajc.com/news-to-me/2011/07/11/jobless-man-offers-hunters-hu...
As Netflix goes, so goes the nation
Ahso, the turlet. Well played, grasshopper.
Netflix definitely screwed the pooch with their price increase and still tepid offerings. In a pinch, I stream Amazon. Haven't watched a physical DVD in months and even longer for the rare Blu-Ray. As someone pointed out upstream, The bandwidth caps are coming! The bandwidth caps are coming! I expect that metered bandwidth will creep into residential connections just as it has mobile data plans.
Oy.
Smells like an elaborate pump and dump. Netflix is not even worth half its value.
Yeah the insider sells are Angelo Mozilo 2.0. "He's just diversifying"
Yeah, look at who is exercising options for a $1.50 and selling them for over $280 a share....
http://www.dailyfinance.com/company/netflix-inc/nflx/nas/insider-transactions
The Bernank is preparing to back NFLX @ $290 a share.
He'll print and print to sustain the virtuous circle.
Or not.
This really is an already obsolete business model, or at minimum, obsolete pricing structure, on so many levels.
Didn't Netflix just raise prices? Some how me thinks this isn't good for getting more customers.