Can I Get 40% (NASDAQ: NFLX)

NEW YORK - Netflix may have just reported the worst quarter ever as the company announced Q3 profit which shrunk by $6 million compared to Q2 from $68 million. Worse was subscribers dropped for the first time in a long time and revenue as a whole only grew 4.1% sequentially to $821 million. The company also guided way down for their next quarter as they expect net income only between $19 and $37 million. They expect to lose domestic streaming and dvd subcriptions in Q4.

Worse yet amortization of streaming content will rise by at least $100 million in the next year it grew 30% sequentially, this means profits will drop dramatically going forward since revenue is no longer increasing. If content costs continue their skyrocketing rate then Netflix may report shaply lower profits or a loss in the next year. We calculate content costs could rise to over $200 million a quarter.

Even worse yet the company's financial position is treacherous. Its current ratio which was never that impressive has gone from 6/4 to almost 1/1. Current assets excluding content shows a current ratio of 1/2. Netflix appears to be on the net track towards bankruptcy protection.

Click here to read our Netflix Report