sharp drop coming this week.
will settle near 230 for earnings monday - then gap up or down after as usual
That was another thing that concerned me being short. I would hear 20 something's at work talk about netflix, Hulu, etc and vow never to pay a cable/sat. bill. The new $11.99 4 stream plan is also targeting them as many live with roommates. This is the move toward higher prices and margins, but slowly enough that customers can choose a higher tier, not forced.
I would've said the same thing about 140 three months ago after 4Q earnings, and we know how that worked out.
This will trade on irrational exuberance to borrow old Alan G's term.
The emphasis on exuberance as retail piles in.
This was near 90% tutes, so they will be dumping some to them.
I thought that mattered last quarter and one reason I shorted. 4Q looked like a big deterioration from 3Q with net cash flow from operations going from break even to -16m, and free cash flow going from -20m to -51m.
But 1Q numbers look better, net cash flow from ops was -12m, and fcf was -41m. Modest improvement yes, but a reversal still. More importantly the debt issue, and a short term investment gain really boosted cash/short term balance, going from 748m end of 4Q to 1.026B end of 1Q. They also issued new stock for $39m thanks to higher stock price. I expect they'll continue to do that as stock enters a new stratosphere. Modestly dilutive, but not as much since they can issue fewer shares at higher price. So I think they have plenty of cushion here.
If the sub story and cost controls stay on track, cash will start flowing in the right direction later this year, and much more so in following years.
Again, the off balance sheet obligations move on to the balance when the content becomes available for streaming. As long as they're adding 2-3m subs a quarter this will be a non-issue. Original content and international will make that happen. As far as content providers "demanding" more as Prachter says, they'll take the best deal they can for the best platform. And nflx has shown they will not over-pay or change their model, as starz drop proved. Then they turned around signed Disney, so I'm not worried about nflx ability to negotiate good deals and leverage their platform as it grows.
The $5.7B in current content obligations (not debt - they took on $500m last Q) are accounted for as the content actually becomes available to stream, then it is amortized over the life of the deal. In other words, they spread it out over many different multi-year contracts and probably have more wriggle room within those contracts. As longs as subs keep rising as they have and all the new deals and original content leads to 60m or so over the next couple years, they will be in good shape.
I think he's a stubborn contrarian, slow to acknowledge that this worm has turned.
He looked pretty shaken on Fast Money.
And he did acknowledge, for the first time I think, that he would throw in the towel if he's wrong a couple more quarters. By that time who knows where this will be in this Bernanke Bubble?
The content deals they've signed can be easily paid for if this sub growth continues, and international could be a huge upside surprise, over 1m adds last Q.
Whitney Tilson was making the same short argument as he was squeezed out from 150 to 250, so I guess I'm in good company.
Now he's an uber-bull, alas at a much better entry than me.
Wouldn't surprise me to see him pumping it on cnbc tomorrow.
Only thing for sure is the $300 price targets will come first.
The pump monkeys could start this week!
Bring on the mo-mo traders and greater fools!
Nope, I switched to long early in AH.
I couldn't hold my short much over 200.
Luckily I hedged with some May 200 calls before the close.
Those will cover most of my loss.
I had to admit that 1Q report looked a helluva lot better than 4Q, when they were still able to nearly double the stock. What will they do with an actually good report, with short interest still 15%?
So I opened a small long too.
Just gonna ride the best bubble in a bubble market!
The key thing there is that's down from -51m in 4Q, going in the right direction. From 3Q to 4Q it went from -$20m to -$51m. That looked bad as cash position also dropped sharply, but the market didn't care and stock doubled. They floated 500m debt to retire old debt and boost cash. Now they have over $1B in cash/short term. Market will care even less about it now. Cash shouldn't be a problem as long as sub growth continues. I was particularly surprised by 1m+ in international sub growth. If they just keep this pace of sub growth, later this year or next, they generate loads of cash. Then they add Disney/Star Wars, which they should be able to pay for by then.
Look at the date, Apr. 3.
Lobster boy mytek thinks he's super savvy by bumping old posts to discredit new ones.
Read my posts this evening lobster, I switched sides.
If ya can't beat em, join em.
Fact is, margins, subs, revenue, and earnings topped high end of expectations.
Cash burn was less and debt issue bolstered cash position, indicating cash will not be a problem.
In a bubble market, bubble stocks do well.
And if you believe Reed's model to 60-90m subs, content costs can be managed, and this thing will bubble on like AMZN.
Young people, new households, anyone with a game console or Internet tv will see a nflx sub as a no brainer.
So lobster, can you even post with more than one letter.
My guess is English is not your forte.
4Q earnings was weaker on most key measures, and the stock added 30% AH, then another 50% from there to 197 for near a double.
That was powered by massive short covering, and mo-mo-hype, and a stock market bubble.
I think all of those things are still in place.
I switched sides since the fundies have clearly strengthened, and standing in front of a freight train is usually dangerous.
This thing will trade completely detached from traditional fundies for the foreseeable future - like AMZN i guess.
It's not a fraud stock or company so short at your peril, as I learned!
Will make it back tho, as long as I'm not too greedy with the May 200 calls.
Whatever profit taking is overwhelmed by short covering.
If anything this report was more impressive than the last, when cash burn sharply accelerated and they had to raise debt. Look what the stock did.
Now, margins improving, cash burn less, sub growth impressive.
That's why I covered, some near the close, the rest AH.
Fortunately I bought 200 May calls when I covered some near the close.
That will be at least a 5 bagger, maybe 10 depending on the squeeze in the next couple weeks.
Also picked up a small long position at 210.
Can't fight the Fed, or Reed, I guess.
He delivered this Q, so suddenly his 60-90m sub number doesn't seem quite so silly.
The under 30 set hardly considers a cable or sat. sub these days, so that will be a driver.
Finally, congrats longs, faith in Reed and his model was clearly well worth ignoring some fundamentals.
which is usually a down day after op-ex?
Someone tried to pump it - then selling into that - accelerated by amazon pilots news.
The news and op-ex algos are in control.
Might have been dialed in at 170.
But real AMZN news makes 165 likely.
Nervous longs before earnings could drop it closer to 160.
Ha! The upper end of that range means LONGS are toast!
Look at AP story By The Numbers. Consensus estimates of 1.4 to 2.1M new domestic streaming subs plus .5 to 1.1 international. After sequester bs and payroll tax hike, and high gas prices, I think nflx as a discretionary item will take a hit.
Nflx "competitive advantage" has rapidly diminished as content owners hold the cards and can stream themselves or name their price. Business model simply doesn't work at $8 mo. Cash generating DVD side has dropped faster than expected and can no longer bridge the gap to the hoped for higher subs that will pay current content obligations of nearly $6B. That was behind the original programming move. But, oops, that turned out to be very costly too! and will new subs actually pay for it? Or just generate a lot of free subs and churn once a new series is consumed?
AMZN on the other hand has the REAL competitive advantage! How many up and coming online one-stop-shop retailers are out there?
One BIG difference!
AMZN had 11-12B cash/short term investments end of '12.
NFLX had 300M and after bleeding 50m in 4Q.
That's why they floated 500m debt and may have refinanced old 300-400m debt, or not.
They may have needed the new cash so badly they couldn't refi.
NFLX massive dilution coming.
That's the big difference from AMZN.