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Netflix, Inc. (NFLX) Message Board

  • sun_cruise sun_cruise Jan 31, 2013 10:32 AM Flag

    Netflix Probably Should Be Bankrupt, Stock Closer To Zero (The Street) READ

    http://www.thestreet.com/story/11827930/1/netflix-probably-should-be-bankrupt-stock-closer-to-zero.html?puc=yahoo&cm_ven=YAHOO

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    • hang em high in a Public squares in USA is now direly in Need by 99% vs 1%

      Sentiment: Strong Sell

      • 1 Reply to singhlion2001
      • FFLX borrowed money to pay high debt. Ones usually borrows to invest in and grow the business, not to pay debt coming due and taking a higher rate loan. It's a point of no return. It's like you building a house, would you give money to a failing builder, and risk losing your money?
        NFLX is broke, no future long term partners, burning cash. Just a matter of short time, they will file.
        PE 600+, no divvy. hmmmm

    • CARL ICAHN #$%$ LOOT $600M+ IN 8 WEEKS with MF criminal Thug Reed Hastings scam $ss insolvent poop wipes and How much did MF criminal thug Reed Hastings Inner Circle scam gang looted since 2010/2011/2012 and now in 2013????

      And Reed Hastings nexus scam gang raped company Balance sheet with buy Back scam bubble creation using $200M Debt in 2010 and balance sheet became insolvent in OCT 2011 and new quick Fraud $400M funding fraud with Barry McCarthy Zero Coupon 2018 fraud scam and $200M from TROWE PRICE new partner in crime gang member. DO you folks know that how Much Barry McCArthy/Reed Hastings/Jay Hoag(TCV) loot with this new fraud funding?

      AND BALANCE SHEET is again Insolvent Jan 24, 2013.

      THIS CRIMINAL MF NEXUS SCAM GANG IS PROTECTED BY PRESIDENT OBAMA AND ALL WATCH DOG AGENCIES IN USA

      ALL SCAMS PUT TO SHAME IN HISTORY OF USA WALL(NOW FRAUD) STREET CASINO HISTORY
      Ouch! The Netflix Price-Change Hangover [View article]
      Reed Hasting's is a carnival barker, a mountebank, a flim-flam man, a charlatan and a confidence man. The CFO left the company in January, because he was aware of the fake accounting at NFLX, the lies and the false hype. The Head of investor relations left 3 months ago, because she could no longer lie, about the companies activities and accounting. Both left before any investigation into accounting, or investigation into the manipulation of the stock by hedge funds begins. Goldman Sachs, Morgan Stanley. JP Morgan, Piper Jaffray and many other financial institutions have been colluding to manipulate this stock thru proprietary trading in their hedge funds. Goldman Sachs picked NFLX as their latest Ponzi Scheme, because Reed Hastings is just the perfect Machiavellian con-man. Lloyd Blankfein And Reed Hastings are as thick as thieves. It was Goldman Sachs that forced Facebook executives to add Reed Hasting to their Board of directors, to manipulate the stock price. Reed Hasting is a false Messiah, in league with Goldman Sachs, deceiving Americans, and The indolent regulators who have been paid off by Goldman Sachs. The SEC directors are bribed by Goldman not to do their job, with promises of $4 million a year jobs after they leave the SEC, at banks, the very banks they are supposed to regulate. The SEC is corrupted and compromised by Goldman Sachs, "the Great Deceiver"

      ‘Netflix' CEO Receives Wells Notice, SEC Alleges "Reg FD" Violation
      netflix-ceo-receives-wells-notice-sec-alleges-reg-fd-violationThe antics of the world's most cartoonish CEO, that would be NFLX' Reed Hastings of course, who once upon a time posted on Seeking Alpha telling naysayers not to short him bro, (only to continue selling his company's stock even as NFLX proceeded to use corporate money to buyback NFLX stock in the $200+ area in effect funding Hasting's own personal bank account), before promptly collapsing to multi-year lows, has finally been called to task by none other than that other most cartoonish of organizations: the SEC, which is now desperate to clean up its image as the bulk of the most coopted personnel are jumping ship, and will likely end up in various Wall Street companies.
      • NETFLIX, CEO RECEIVED WELLS NOTICE FROM SEC STAFF
      • NETFLIX CEO SAYS SEC STAFF QUESTIONED FACEBOOK POST
      • NETFLIX CEO SAYS SEC STAFF RECOMMENDS CIVIL ACTION
      • NETFLIX CEO SAYS SEC STAFF CITES 'REG FD' VIOLATION
      • NFLX SAYS DOESN'T USE FB TO GET MATERIAL INFO TO INVESTORS
      A cartoon investigating a cartoon: what can one say- truly a match made in heaven. We wonder what would happen if the SEC were to actually inquire about the accounting of billions in off balance sheet liabilities. Actually, nevermind.

      Sentiment: Strong Sell

    • Read the article in the first post of this thread and understand why Netflix probably should be bankrupt. There is no profit in this space. And Netflix has billions of dollars of obligations coming due that are not shown in the balance sheet. This is a struggling company trying to stay alive, not a growth company at all. If it fails, it will go bankrupt.

      Sentiment: Strong Sell

    • NETFLIX BANKRUPT TWICE AND STILL MASSIVE FRAUD LOOT ALLOWED BY S.E.C. CRIMINAL WATCH PARASITES IN USA
      Netflix Narrowly Avoided Doom In 2013
      Netflix (NFLX) CEO Reed Hastings is a spin-master, second only to Jeff Bezos. No matter what results Netflix reports, things are always sunny. Those who mock the old price increases and Quikster debacle forget that the stock rose on the day of the announcements. The latest slight of hand is the move to explore taking advantage of the current low interest rate environment, while stating that Netflix has sufficient cash on hand to fund expenses. This is not true. In fact, if Netflix had not issued additional debt, there is a strong likelihood of financial disaster in 2013.

      This same argument was used last time Netflix sought financing in late 2011, but this time around, people seem to fully believe the argument. Ironically, Hastings' spin is more misleading than in 2011. I will provide a look at the massive content obligations due in 2012 (minimum of $2.45 billion). For those looking for a good story about Netflix, I suggest Rocco Pendola's piece from early January. Rocco is a story investor, not a numbers guy, but I believe few people in the world have a better grasp of the business model situation.
      ------------------------
      My Background

      This might seem like fluff, but I believe it's important to understand an analyst's history and potential bias.

      I shorted Netflix from 2010-11, and I played a series of out-of-the-money earnings puts during 2012. The first time, I entered around $170, rode to $300, and back down to around $90. My thesis has always been overvaluation on a bad business model -- last January I predicted that Netflix would need major financing to avoid bankruptcy by 2013.

      In hindsight, my subscriber growth estimates were way off. I predicted averages of 19.5 million domestic and 2.5 million international; instead we saw 23.5 million and 3.5 million, for a yearly run revenue difference of $480 million. For Q1 2012, I suggested a massive out-of-the-money (1w) "lottery ticket" put play on earnings. This turned into a massive profit. I then lost interest in Netflix for the next few quarters.

      The Debt Deal

      Netflix announced yesterday the pricing of $500 million in eight-year notes at 5.375%. The current commercial yield index is at 3.38% and high-yield index is at 5.89%, placing NFLX just shy of junk territory. The debt deal by itself makes sense. The bond markets are starved for yield and Netflix needs the cash. I'm not decrying the offering; my point is that this isn't a Microsoft (MSFT) or Intel (INTC) type of advantage play -- this cash was needed to ensure operations, and Netflix is extremely lucky to receive it.

      Netflix redeemed the $200 million 8.5% senior notes due in 2017 (issued November 2009), for an estimated expenditure of $225 million. This move changes annual interest expense from $17 million to $29.45 million. Essentially, Netflix is only paying $12.45 million, or 4.53%, on the new $275 million -- a huge win for it.

      The Need and Spin

      I've tracked relevant quarterly Netflix stats since Q1 2009 and highlighted the best (three) results in green and the worst (three) results in red. Pay close attention to the Rev/AP and Quick/AP.

      Click to enlarge image.

      Coverage by Quick Ratio

      The dark red marks the quick/AP ratio Netflix faced prior to the November 2011 financing. As you can see, Q4 2012 is the second worst level in history. My definition of Quick/AP ratio is (cash+sti)/(current content liabilities+ap). If you include the total liabilities from a quick perspective Netflix had a ratio of 0.30 prior and 0.42 post debt issuance. Comparatively to Netflix's 2011 "disaster phase" Netflix had ratios of 0.39 prior and 0.82 post.

      Coverage by Revenue

      Assuming annual run-rate revenues, NFLX had revenue coverage of 3.51x in November 2011. In January 2012, NFLX has revenue coverage of 1.54x. Netflix needs to keep other expenses (non-content gross costs, marketing, tech and development, G&A, legal, and interest) below 35% of revenues just to break even in 2013.

      Netflix is clearly in a worse liquidity position than during the horrendous fall 2011 phase.

      Managing the Enormous Liabilities

      As I stated earlier, all other expenses must stay below 35% of revenues for Netflix to break even in 2013. This assumes three things: 1) sub growth will be flat across the board, 2) Netflix will not incur any additional liabilities, and 3) Netflix will not pursue any large expansion plans. I believe sub growth will continue slowly, with a spike this quarter due to the new content, but I also believe content liabilities will increase at a similar pace. As an additional precaution to already referenced content costs, Netflix states: "For agreements with variable terms, we do not estimate what the total obligation may be beyond any minimum quantities and/or pricing as of the reporting date." In other words, the $900 million-plus that is due in 2013 might actually be much larger -- it's very likely that these variable contracts are tied to subscriber counts.

      In 2012, Netflix spent $485 million on marketing, $329 on tech and dev., $120 million on G&A, and $923 million on non-content gross ($2.625 billion gross exp-$1.591 billion streaming-$65.4 million dvd-$45.5 million depreciation). This equates to 51.4% of revenues -- this year Netflix needs to hit 35% to break even.

      My Model

      As I admitted above, last January I missed poorly -- very poorly -- on sub counts. Please take my revenue estimates with a grain of salt.

      Revenue

      DVD: Avg. 6.5 million at $11, Streaming-dom 27.5 million at $8, Streaming-intl 6.5 million at $8 -- total revenues of $4.12 billion.

      Expenses

      $500 million marketing, $320 million tech and dev., $125 million G&A, $30 million interest -- $975 million.

      Gross non-content expenses of $1 billion.

      Liabilities of $2.695 billion (assuming 10% growth above the current level).

      Cash Position Update

      Drop of $550 million vs. Netflix Quick of $498 million -- Netflix needed more cash to avoid bankruptcy or restructuring in 2013.

      Caveats

      I'm assuming massive blowback on my model/projections, especially considering my miss on subs last year. I encourage challenges on my numbers, primarily on the "gross non-content" since this is really a huge black box. It is possible that the GNC could drop a tad and equally possible that the liabilities will remain flat, or be renegotiated back a few months.

      It's also possible that we could see 30%-plus annual growth in subs. To be clear, my model predicts 27% average year growth, a number that I consider to be already very high.

      Sentiment: Strong Sell

    • This is an extremely risky stock to own!

      Sentiment: Strong Sell

    • If NFLX cannot get more money, it will be bankrupt! And it should be bankrupt!

      Sentiment: Strong Sell

    • Even if NFLX does not go bankrupt this year, its stock price definitely should not be at this bubble level.

      Sentiment: Strong Sell

 
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