NEW YORK - Netflix recently released their third quarter results which led to a large stock decline. The company also gave a disappointing outlook. They said earnings would be way down in Q4 and $19 to $37 million and next year they would be unprofitable.
The company's financial position is bordering on 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. The company is also increasing content costs going forward. Their accounts payable are going to have to wait for Netflix to make payment.
This problem could have been rectified had Netflix not aggressively repurchased its shares in the last four years which obliterated its balance sheet. The company has repurchased $1 billion of common stock in the last four years and in their latest quarter they even accumulated more. With such a poor financial condition what is the CFO thinking?
Companies like Apple which have $70 billion in the bank, don't pay a dividend and did not well after they were very profitable. Microsoft took a while to pay one it is very puzzling that Netflix has a payout ratio of over 100% annualized and it wants to grow at 50%. All of this will likely lead to disaster for Netflix.
Its no wonder that BLOAQ, Blockbuster's bankrupt stock has outperformed Netflix over the last year despite being in bankruptcy. Is bankruptcy the next flick for Netflix?
No comments:
Post a Comment