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NFLX Beats But Guidance Stuns Stock -19% From Friday's Close, Margins Implode

Tyler Durden's picture


Netflix headlines may appear rosy as top and bottom lines were a beat but guidance on revenues and subrscriber adds perhaps rings the death knell on this mythical beast...

  • *NETFLIX SEES 2Q REV. ABOUT $873M-$895M; EST. $893.4M :NFLX US

We can only hope that AAPL does not miss in any way on any metric ever...

Here is what not to put in your letter to investors when you are a zero barrier to entry streaming company whose business model is being assaulted by everyone, not least of all Apple.

We think our 2012 domestic streaming net adds will be about the same as in 2010, and that gross adds will approximately follow the 2010 seasonal pattern.




Due to the increased net adds quarterly seasonality, Q2 net adds will be below those of 2010, despite Q2 net adds following the traditional seasonal pattern, and despite us expecting to match 2010 in annual net additions.

and the funniest line ever in an official company filing:

We see nothing new or particularly concering this quarter to date in our member viewing, acquisition and retention. All are healthy.

Except your stock price...

Finally, this is how you destroy your company. What can one say but sweet streaming jesus: this must be what an exponentially accelerating dead cut has to look like.

And another hilarious chart: total "profit" per foreign international paying sub. We only hope they can make up for it in volume...

Full letter:



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Mon, 04/23/2012 - 16:22 | 2368242 mrdenis
mrdenis's picture

OH the inhumanity ...........

Mon, 04/23/2012 - 16:41 | 2368327 maxmad
maxmad's picture

Collapse Bitchez!

Mon, 04/23/2012 - 20:01 | 2368759 Animal Cracker
Animal Cracker's picture

Nah.  They just need a solid Groupon deal.

Mon, 04/23/2012 - 22:05 | 2368928 JW n FL
JW n FL's picture



Owned and Operated!

My Life and Your Life on FILM!

Mon, 04/23/2012 - 16:48 | 2368357 ACP
ACP's picture

But CNBC said earnings were better than expected!

Where's Steve LIESman to tell everyone how margin compression is a good thing?!?


Mon, 04/23/2012 - 18:24 | 2368587 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I was told BTFD. What could possibly go wrong?

Mon, 04/23/2012 - 21:42 | 2368909 Trimmed Hedge
Trimmed Hedge's picture

I believe what Taylor is trying to tell us in his own quirky little way, is... "BTFNFLXD"


; )

Tue, 04/24/2012 - 08:29 | 2369387 dannyboy
dannyboy's picture

Is Tilson still long this? If so.. so, so painful.

Mon, 04/23/2012 - 18:22 | 2368580 stocktivity
stocktivity's picture

About a month ago, I got an offer for a free one month trial. I wonder if I would have counted as a new subsciber if I had accepted?

Mon, 04/23/2012 - 19:30 | 2368716 CPL
CPL's picture

Yup.  It how bell dresses up quarterly numbers with their ISP sympatico and sat tv.  Once they have the CC number you are "subscribed" because you'll more than likely miss the cancel date then you'll justify how cheap it is.

Mon, 04/23/2012 - 18:52 | 2368641 jus_lite_reading
jus_lite_reading's picture

WARNING: The biggest ponzi stock out there right now is LNKD... the same person who warned about NFLX, GRPN, and a whole handful of ponzi banks is saying LNKD is the next one to say adios!!

Thu, 07/12/2012 - 12:59 | 2610310 Nagelstudio
Mon, 04/23/2012 - 16:23 | 2368250 Stochdoc
Stochdoc's picture

They need to start including porn on streaming.  That'll squeeze the shorts.

Mon, 04/23/2012 - 16:25 | 2368258 NewThor
NewThor's picture

The IPO on NETDICKS is going to be huge.

Mon, 04/23/2012 - 16:26 | 2368267 The Axe
The Axe's picture

THE SEC would use all the bandwidth

Mon, 04/23/2012 - 16:38 | 2368315 GMadScientist
GMadScientist's picture

1 colo machine at their ISP and we're all good.


Mon, 04/23/2012 - 16:50 | 2368366 ACP
ACP's picture

That would be a huge government contract.

Tue, 04/24/2012 - 00:34 | 2369088 Oh regional Indian
Oh regional Indian's picture

Now that is Funny New Thor. 

But it also sounds creepy when you've just watched Idiocracy. 


Tue, 04/24/2012 - 06:05 | 2369237 ebworthen
ebworthen's picture


Mon, 04/23/2012 - 16:32 | 2368283 Conman
Conman's picture

Ya stream porn on the net, no ones doign that .. they'll corner the market... ooh wait..

Tue, 04/24/2012 - 06:07 | 2369238 ebworthen
ebworthen's picture

That's why they'll call it "Cumcast".

And...did you say corner?

Mon, 04/23/2012 - 16:24 | 2368252 navy62802
navy62802's picture


Mon, 04/23/2012 - 16:24 | 2368254 mayhem_korner
mayhem_korner's picture



Today is a cue Tom Petty day...

I'm free fallin'

Mon, 04/23/2012 - 16:25 | 2368257 Temporalist
Temporalist's picture

Robo I'm sure you bought at the lows and sold at the highs.

Mon, 04/23/2012 - 16:27 | 2368268 nyse
nyse's picture

Pretty sure those are the only kinds of trades he makes.

Mon, 04/23/2012 - 16:25 | 2368262 The Axe
The Axe's picture

At least I am not Whitney....

Mon, 04/23/2012 - 16:25 | 2368263 azzhatter
azzhatter's picture

but......but....Cramer said

Mon, 04/23/2012 - 16:28 | 2368271 Conman
Conman's picture

But bad news is good news, so buy? Also does this mean that all the free subs they added wont stick around for next Q?

Mon, 04/23/2012 - 16:34 | 2368297 t0mmyBerg
t0mmyBerg's picture

I was actually just grateful that the CNBS coverage today reminded me to cancel my wifes subscription.  The morons over there still will not acknowledge the historically epic f*ckup they made last summer.  I want streaming AND dvd all on one login and all for less than the cost of doing both separately.   in other words, the way it was when the price had a 2 handle in the major slot and the price was triple digits.  but they just will not do it.  could they be that stupid?  apparently yes, yes they can.

Mon, 04/23/2012 - 16:41 | 2368325 Conman
Conman's picture

Can't blame Netflix, they did what they had to do. They obviously could not survive with the old model since shipping physical dvds costs too much vs all the streaming content rights they already aquired and paid for. They have good penetration but as a growth stock this thing is done, put a fork in it.

Mon, 04/23/2012 - 17:02 | 2368411 adr
adr's picture

Uh, yes you can. Sure the stock may not have gone full retard on its way to the heights reached last summer without the streaming business model. But the streaming model killed the company. The movie selection is terrible and most people still lack the bandwidth to enjoy it.

You see that margin compression, that's all streaming. The DVD by mail business was doing fine and gave Netflix great margins.

Netflix brass decided to concentrate on what would be best to pump its stock with hype vs what would really be good for business. Of course the executives pocketed millions through insider stock sales and the 100% bounce from the bottom gave them another great grant and cash opportunity.

Netflix isn't about movies anymore. The company produced and sold stock certificates, DVDs by mail was just an advertising campaign.

Mon, 04/23/2012 - 17:10 | 2368433 Conman
Conman's picture

Hey im not arguing that streamign killed the business - just reiterating the streaming costs forced them to segreagate teh businesses. I do disagree that dvd gives them better margins, that business was probably killing them with increaed usps costs every year.

Also im sure they saw the kiosk dvd renters were getting some penetration as well coinstar, redbox, blockbuster. logical place to go was streaming. but now thats even crowded. Lets face it this business model offers no barriers to entry. which means growth is dead for this crap stock.

Mon, 04/23/2012 - 19:19 | 2368694 Cathartes Aura
Cathartes Aura's picture

I was with them in the beginning, DVD's by mail was a good model, and I was able to get independent / foreign (ie less "popular" content) without having to live in a city with "alternative" shop providers. . .

but no, that wasn't good enough for NetFlix - they had to GROW AND GROW, until they were mainlining shitty TeeVee and acting like BlockBuster in their DVD selections - and upping the prices again and again. . . AND an obnoxious CEO. . . they pushed out their first-in folks, mocking us as we un-subscribed.

fk 'em.

Tue, 04/24/2012 - 09:46 | 2369639 fx
fx's picture

Having good penetration is a nice starting advantage - for streaming porn right to the SEC, that is.

Mon, 04/23/2012 - 18:29 | 2368596 stocktivity
stocktivity's picture

I actually flipped over to fox Business channel today. Was like watching CNBC from the past ....Liz Claman, Melissa Francis, Dennis Kneale...still cheerleaders but different faces.

Mon, 04/23/2012 - 16:28 | 2368274 RacerX
Mon, 04/23/2012 - 16:28 | 2368277 mayhem_korner
mayhem_korner's picture



Notice when the stock price drops, the fire at the bottom gets higher...

Mon, 04/23/2012 - 16:32 | 2368286 monopoly
monopoly's picture


Mon, 04/23/2012 - 17:19 | 2368363 LouisDega
LouisDega's picture


Mon, 04/23/2012 - 16:34 | 2368296 Temporalist
Temporalist's picture

Oh and Facebook had a 12% loss in the last quarter

Mon, 04/23/2012 - 17:08 | 2368428 NewThor
NewThor's picture

Facebook has a top secret Space Exploration team that is currently extracting Valarian diamonds from Mars.

Once the IPO is done, they will announce it to the world and become the

greatest. corporation. of. all. time. (not counting the catholic church)

Mon, 04/23/2012 - 19:05 | 2368670 Problem Is
Problem Is's picture

Smoke weed... not meth, there Thor...

Mon, 04/23/2012 - 16:34 | 2368298 YesWeKahn
YesWeKahn's picture

People will be scaried tomorrow. If AAPL does this, the darn market will be halted a few times.

Mon, 04/23/2012 - 16:37 | 2368309 John Law Lives
John Law Lives's picture

"We can only hope that AAPL does not miss in any way on any metric ever..."

AAPL sandbags when they project future EPS estimates.  Nonetheless, when APPL does eventually lay an egg with a major product release, the market response should be swift and brutal.


Mon, 04/23/2012 - 16:41 | 2368324 GMadScientist
GMadScientist's picture

T-shirt recently seen on a friend:

"I was a Mac developer when Apple was doomed."


Mon, 04/23/2012 - 16:43 | 2368335 SheepDog-One
SheepDog-One's picture

AAPL is about as good as its ever going to get right now, that mid $600 range was tops. 

Mon, 04/23/2012 - 18:37 | 2368609 stocktivity
stocktivity's picture

Appl can't even think a negative word tomorrow.

Mon, 04/23/2012 - 16:39 | 2368320 buzzsaw99
buzzsaw99's picture

a weaker usd and the BRIC will help them get a bonus.

Mon, 04/23/2012 - 16:41 | 2368329 SheepDog-One
SheepDog-One's picture

Last time I used Netflix was at a party a couple months ago, I just played a bunch of Trailer Park Boys episodes....other than that, Netflix is pretty much worthless. Cancelled it.

Mon, 04/23/2012 - 17:12 | 2368436 NewThor
NewThor's picture

+1 cat food mountain

Mon, 04/23/2012 - 19:04 | 2368665 Problem Is
Problem Is's picture

And you watched it like a shit hawk... Like a shit hawk...

Mon, 04/23/2012 - 16:41 | 2368332 carbonmutant
carbonmutant's picture

CSTR is an egg snatcher...

Mon, 04/23/2012 - 16:44 | 2368341 El Oregonian
El Oregonian's picture

NETNIX. Or one big NEIN!

Mon, 04/23/2012 - 16:45 | 2368344 I am a Man I am...
I am a Man I am Forty's picture

Reality alert!!!  Apple has missed earnings before geniuses.  It happened way way way way back in October of 2011.  This is bad blogging.  Remember, they missed because people waited on the new iPhone to come out.  Sound familiar??  The stock was trading at $398 all the way back then.

Mon, 04/23/2012 - 16:50 | 2368368 Conman
Conman's picture

I dont see anywhere where its posted that apple never msised earnings.. Just tyler(s) aking what happens to the nasapple if any appl metrix misses tomorrow.

Mon, 04/23/2012 - 16:48 | 2368345 junkyardjack
junkyardjack's picture

Its still above zero so this has to be bullish

Mon, 04/23/2012 - 16:47 | 2368355 resurger
resurger's picture

if AAPL miss tomorrow ...... i think you know

Mon, 04/23/2012 - 16:52 | 2368378 junkyardjack
junkyardjack's picture

if AAPL misses, keep both arms in the vehicle at all times

Mon, 04/23/2012 - 21:19 | 2368874 devo
devo's picture

They won't miss, but they'll disappoint

Mon, 04/23/2012 - 16:48 | 2368359 Jason T
Jason T's picture

margins.. it'll be all margins that drive stocks lower in the coming years.  demand destruction has already been present, which will even get worse.

Mon, 04/23/2012 - 16:50 | 2368367 suckerfishzilla
suckerfishzilla's picture

I would rather BTFD in Silver prices right now thank you.

Mon, 04/23/2012 - 16:55 | 2368391 The Count
The Count's picture

Short Apple now. Too much expectation and hopes built into this stock. 

Mon, 04/23/2012 - 16:55 | 2368394 boeing747
boeing747's picture

Balloon profits disappeared after IPO? talking about 'Fill and Pull' or 'Pump and Dump'.

Mon, 04/23/2012 - 16:56 | 2368396 Bam_Man
Bam_Man's picture

When your stock is trading at 25 times earnings and your business model is under attack from all directions, accidents can and do happen (NFLX).

Apple's valuation at roughly 14 times earnings is not even in that ballpark which means that they do not have to "beat" on every single metric to justify the stock price.

Personally, I wish that Apple would go ahead and split the stock at least 5-to-1 so that it doesn't appear so expensive and might possibly attract some retail interest. Right now with these 3%-5% intraday moves EVERY DAY, it is behaving like a Hedge Fund/HFT plaything.

Mon, 04/23/2012 - 21:26 | 2368882 Xkwisetly Paneful
Xkwisetly Paneful's picture

It's the only way the people posting $120 def tops here will ever be right.

Same as it's the only way the one's posting $600 def tops now will be right in the future.


Mon, 04/23/2012 - 16:59 | 2368402 virgilcaine
virgilcaine's picture

Dot com bubble... II  the new era I thing.

Mon, 04/23/2012 - 18:01 | 2368547 netpounder
netpounder's picture

MEGAUPLOAD, bitches!

Mon, 04/23/2012 - 18:04 | 2368557 MBOB
MBOB's picture

Brings to mind a high school era joke's punchline: "....OK, that settles it. Next week TWO trucks on the road."

Mon, 04/23/2012 - 18:20 | 2368575 devo
devo's picture

When are people going to learn with this stock...

Mon, 04/23/2012 - 19:01 | 2368662 Problem Is
Problem Is's picture

Your pension fund and 401k mutual fund managers will never learn with your money...

Mon, 04/23/2012 - 21:17 | 2368584 devo
devo's picture

CMG and AMZN are the next to fall.

Mon, 04/23/2012 - 18:24 | 2368589 Taint Boil
Taint Boil's picture



Netflix sucks – got it as a trial (streaming) and didn’t watch one thing. Very, very poor selection – almost nothing or it’s really old stuff. What a joke. Only let it go for the kids but even that is bottom of the barrel for quality and selection. It does make me feel like I’m back in the 80’s though.

Mon, 04/23/2012 - 18:58 | 2368656 devo
devo's picture

It used to be awesome, then content providers raised their prices. That was the end of Netflix. As usual, it's taking "smart money" a few years to realize...

Mon, 04/23/2012 - 18:37 | 2368611 icanhasbailout
icanhasbailout's picture

I got Netflix to screw Comcast, and then I got to screw Netflix by canceling once I found out about their copyright pushing activities.

Mon, 04/23/2012 - 18:56 | 2368651 Problem Is
Problem Is's picture

"And another hilarious chart: total "profit" per foreign international paying sub. We only hope they can make up for it in volume..."

Ah-HAH-hahahah-ha ah ha ha... +5...

Got to love "Sarcastic" Tyler....

My favorite of all the Tyler(s)...

Mon, 04/23/2012 - 19:11 | 2368679 Frank N. Beans
Frank N. Beans's picture

Facetube, Netfix, Spacebook, Crabapple, who cares.

Mon, 04/23/2012 - 19:27 | 2368706 yogibear
yogibear's picture


Tue, 04/24/2012 - 00:58 | 2369111 q99x2
q99x2's picture

Not to worry. That's FED funny money vaporizing. F'em.

Tue, 04/24/2012 - 06:10 | 2369232 ebworthen
ebworthen's picture

Streaming Netflix on the Nintendo Wii or 3DS, XBOX, or WiFi LCD is the best thing since sliced bread and well priced.

If we are not really in a recovery Netflix has a lot of room to grow as people discover they can watch movies and old T.V. shows on just about anything; a large number of undiscovered customers.

I'm surprised they aren't advertising how and with what it can work (device specific) versus the goofy branding commercials they run.

Problem is, the stock has been too much of a speculative play by the money-sloshers versus an investment, which is why it tanked almost 20% on not so bad guidance.  The superstitious high-rolling gamblers at the table left when the dice thrower switched.

Easy for an inflated stock to come back to Earth (lesson here for AAPL buyers).


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