Lessons from NFLX?

[justdoit]

NFLX is a "growth/momentum" stock that's often compared to TSLA and is having (has had?) a great run. They had a pretty good run up after the govt debt issue till they announced earnings yesterday. They beat projects and were up over 10% in after hours and opened today at ATH's. But they had this crazy free fall today and ended -10%! I didn't follow their news too quickly but I believe it's because of some comments from their CEO:

"Every time I read a story about Netflix is the highest appreciating stock in the S&P 500 it worries me because that was the exact headline that we used to see in 2003,” said Hastings. "We have a sense of momentum investors driving the stock price more than we might normally. There's not a lot we can do about it but I wanted to honestly reflect upon that.”

I'm just wondering if there is anyone here following NFLX closely and if there are any lessons we can learn? Maybe such a huge run up to earnings isn't the greatest thing? Maybe Elon needs to choose his words carefully when it comes to discussing stock price?

Would love to hear what people think.

 

[Discoducky]

I follow NFLX and was wondering what was driving the price down today after good earnings and good news (surpassing HBO in subscribers). Reed has put his foot in his mouth before and should accept that the free market is determining the price of the stock.

 

[mershaw2001]

Netflix is only like tesla in its stock movement, nothing else in my opinion. I was short netflix for a brief period, and have been long tesla for years. The money doesn't add up with netflix. Revenue is too low and the cost to renew content is too high. The cost to renew content will remain the same or go higher, but not come down with economies of scale. I think the opposite is true with tesla. As production ramps up, the cost of producing cars gets smaller. Tesla is about 3 years on the curve before netflix- consider tesla about where netflix was when it had acquired the 2008 starz contract and was ramping up to the first time it hit 50 dollars in 2009- that's where tesla is now. They haven't begun to saturate the market. Netflix's upper bound is about 40M subscribers. They hit 32 million and bounced down to 28 million I think, and now they are back to 31 million. In essence they will have to do something radical to extract more money from america, and raising prices had a violent reaction last time. I don't see that as anything similar to what tesla is facing.

Netflix has huge off balance liabilities, and will start to bill their accounting more to the time when content is acquired. This will mean they will probably miss on earnings in the next cycle because of the higher costs. It used to be that they could hide the cost of the content for years by billing it linearly for the time that they had the content. However, that's not how people view shows- people binge the shows the week they are released and for the next 4 years there's less viewers, so netflix updated the way they are billing themselves for generating the content. Now most of the cost will be incurred in the quarter that the content is acquired. I think this is one of the big drivers of the fall, it's why the stock shot up, but then the big boys are now getting out.

 

[justdoit]

Netflix is only like tesla in its stock movement, nothing else in my opinion. I was short netflix for a brief period, and have been long tesla for years. The money doesn't add up with netflix. Revenue is too low and the cost to renew content is too high. The cost to renew content will remain the same or go higher, but not come down with economies of scale. I think the opposite is true with tesla. As production ramps up, the cost of producing cars gets smaller. Tesla is about 3 years on the curve before netflix- consider tesla about where netflix was when it had acquired the 2008 starz contract and was ramping up to the first time it hit 50 dollars in 2009- that's where tesla is now. They haven't begun to saturate the market. Netflix's upper bound is about 40M subscribers. They hit 32 million and bounced down to 28 million I think, and now they are back to 31 million. In essence they will have to do something radical to extract more money from america, and raising prices had a violent reaction last time. I don't see that as anything similar to what tesla is facing.

Netflix has huge off balance liabilities, and will start to bill their accounting more to the time when content is acquired. This will mean they will probably miss on earnings in the next cycle because of the higher costs. It used to be that they could hide the cost of the content for years by billing it linearly for the time that they had the content. However, that's not how people view shows- people binge the shows the week they are released and for the next 4 years there's less viewers, so netflix updated the way they are billing themselves for generating the content. Now most of the cost will be incurred in the quarter that the content is acquired. I think this is one of the big drivers of the fall, it's why the stock shot up, but then the big boys are now getting out.

Yes, I meant they're usually compared in terms of stock movement.

 

[Convert2013]

Yes, I meant they're usually compared in terms of stock movement.

What a un-refined loud mouth CEO that dude Hastings. I think Elon is much better at PR on these things. I was crying yesterday for not getting in when NFLX dipped to $288 during the govt shutdown and went to $395 after hours. But boy was I happy today that I didn't jump in. Actually what happened was good- those investors who cashed out can now dump the $$ in TSLA after ER. I think Reed has some bad memories from the NFLX crash back in the days and the statement was a knee-jerk reaction, not well thought out. That said, I think NFLX has a better shot at being the next $1000 stock, before TSLA. They have a lot of room to grow still.

 

[mershaw2001]

I disagree, but i suppose that's what makes a market. I think NFLX is facing hardship in foreign countries where licensing takes an additional fee and the content is different from the US. I think they see themselves as price limited in the US and are very hesitant to up the price, even though they could snatch 16 dollars per person per month for the netflix service without losing too many people. The reason they don't is that they don't want to lose momentum again and drop to 50 dollars per share. I don't think they have the ability to substantially increase viewership in the US, either. At best they can get to 35 or 36 million in the next few years.

 

[Norse]

hopefully all the AAPL and NFLX money will go to Tesla tmrw.

 

[Blurry_Eyed]

Looks like Carl Icahn cutting his Netflix stake was the big driver down today. He had over 9% of Netflix from his June disclosure and dropped it to 4.5%. Price action today makes it look like someone got wind of it early in the trading day and then everyone started heading for the exits even after the great earnings report. Icahn finally tweeted late today that he sold a big block today.

When Icahn moves, the markets pay attention.

 

[MikeC]

Looks like Carl Icahn cutting his Netflix stake was the big driver down today. He had over 9% of Netflix from his June disclosure and dropped it to 4.5%. Price action today makes it look like someone got wind of it early in the trading day and then everyone started heading for the exits even after the great earnings report. Icahn finally tweeted late today that he sold a big block today.

When Icahn moves, the markets pay attention.

Must be nice to have a stock go up because you bought it. Pretty much becomes a self-fulfilling prophecy. I wonder if he's secretly picking up any TSLA - and what the stock would do if he disclosed it.

 

[Norse]

Must be nice to have a stock go up because you bought it. Pretty much becomes a self-fulfilling prophecy. I wonder if he's secretly picking up any TSLA - and what the stock would do if he disclosed it.

yeah but it sucks when it tanks when you sell half of your holdings

 

[Convert2013]

Must be nice to have a stock go up because you bought it. Pretty much becomes a self-fulfilling prophecy. I wonder if he's secretly picking up any TSLA - and what the stock would do if he disclosed it.

Yeah I thought about that, but I doubt Icahn is up to speed on understanding Tesla... but if he announces he's in TSLA, TSLA will rocket with ZERO doubt.