NEW YORK - Tulipmania was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed. 400 years later, Netflix Mania came saw and went. The stock is down over 27% in after hours trade but should it be down more? The company just announced it won't be profitable starting next year. 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.
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At the rate it is getting colder, by July of 2012 we will have all frozen to death.
ReplyDeleteStraight line projections are as meaningless in the market as well... you had me until you talked about bankruptcy. I think it's rediculous to suggest as much.
I don't own NFLX, but I can tell you they have a better product than their scant competitors. And of course a company can protect themselves by cutting some of the costs rather than simply driving off a cliff.
Why is Bankruptcy such a bad hypothesis have you seen their balance sheet its horrendous. I have been predicting this for months.
ReplyDeleteAnyways a $90 price may seem safe, but this soon becomes 80,70,60,50,40,30,20,10 and then suddenly we can talk about bankruptcy.
Obviously I don't think they will go bankrupt tomorrow. I am saying a risk exists in the future IE in 1-2 years. Especially with them being unprofitable next year
Check your spelling. So sad that people to see people like you post financial comments. "Annalist" lol
ReplyDeleteWho cares about spelling or symbols , its the intent, or content that matters. Symbols constantly evolve and are subject to change. Case in point, who wrote Harry Potter, a literature professor, an English teacher? No, an out of work single mother.
ReplyDeletelol. think we figured out who anonymous is. single mother.
ReplyDeleteI have to agree with the single mother. The author probably has a short on this company, especially if he has been thinking that for months.
ReplyDeleteI don't short but you guys have no idea what you ae talking about.
ReplyDeleteThere number of cash items to liabilities is -400 million with losing cash next year and expenses going up. You guys are talking about this like its a AAA company its financial strength is actually extremely poor. And now its unprofitable.
Normally i delete comments like yours. You guys are uneducated investors. The Jim Cramers of the world. All you think is how Netflix was great because people spoon fed you and told you it was. Now people say it isn't but you're so lost in the past you still think well it will be in business just its stock was overvalued. Prove to me from their balance sheet that its strong. I doubt you can.
Bankruptcy is a real possibility for Netflix they are very over leveraged. They have content costs of magnificent amounts coming due in the next year and they hoped revenue would fund it. Content costs grew 30% sequentially to revenue growth of 4%.
The 'scant competitors' such as hulu are killing Netflix. By July 2012, netflix will be frozen to death.
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