Finance NFLX

How Netflix Fortunes changed in 3 months:  ( from 300 to 100 to 65 )


Understanding Why Netflix Changed Pricing - good one.
  -- You will pay us a $/user/month for anyone that has the ‘right’ to connect to our content – regardless of whether they view it or not.” This was the term that changed Netflix pricing.
 -- at age fourteen, the digital world is forcing Netflix to execute a pivot. And the world they are entering is radically different from the world they are leaving. There is no longer a first-sale doctrine to keep things neat and tidy
asr: If somebody see this one Coming  few months before would have known NFLX would crash 250 to 100 soon  ( this kind of Clarity needed 3 months ahead in  Investment Analysis , we try this kind analysis with CL ...  )..

asr 1: 
1/ NetFlix bought $39.6 million of repurchases in the third quarter of 2011 at average cost basis of $218  [ Netflix bought at $218 ]).
2/ Lost 1 million customers due to price increase
3/  now analysts realized content costs  of future are increased ( thay why netflix issued $400 mill  stock/bonds )


asr 2: NFLX has 50 Mil total shares, so brokarage earlier thought  NFLX will make $4 x 50 mil = $200 million profit in 2012 . Now  Contents costs are increased from 1.9 to 2.0 Billion , $100 million profit goes there b) subscribers losses add to that then  2012 estimate turned to LOss

The brokerage lowered its 2012 per  estimate

 -  2012 EPS :  to a loss of $0.66 from a profit of $3.95. 

 - 2012  revenue  : reduced to $3.709 billion from $3.919 billion

"Given stalling domestic net subscribers growth and lowered expectations for the whole of fiscal 2012, 

  - we are lowering 2012 net additions to 5.7 million from 6.1 million, 

 -  increasing content costs to $2.0 billion from $1.9 billion,

 -  and increasing marketing to 14.8 percent of revenue from 11.6 percent," said Squali.

The brokerage lowered its price target on shares of Netflix to $75 from $90, while maintaining its "hold" rating.

November 28, 2011

Netflix Estimates Revised at Jefferies  

"We are lowering our 2012 estimates and price target in the wake of Netflix' announcement to sell $200 million of zero coupon convertible notes and $200 million of common stock. 


Concurrent with the company's S-3 filing, management updated guidance, now expecting consolidated net losses for 2012, versus 'unprofitable for a few quarters' previously," said Youssef Squali, an analyst at Jefferies.


Squali said his revised estimates reflect a combination of
 -  lower net subscribers additions, 
-   higher selling/marketing spend, 
 - and higher content costs.

Previously, management said it would be unprofitable for a few quarters starting the first quarter of 2012, but shied away from full 2012 guidance. Domestic streaming net adds have been consistent with prior expectations, flat for November and expected to be strongly positive in December.

Netflix entered into an agreement to sell $200 million of zero coupon convertible bonds to Technology Crossover Ventures and about $200 million of common stock, bringing the total capital raise to $400 million. The zero coupon convertible bonds do not bear interest and are scheduled to mature on Dec. 1, 2018.

The initial conversion rate for the zero coupon convertible bonds is 11.6553 shares of common stock per $1,000 principal amount ($85.80 per share conversion price).


Squali said the convert deal was contingent on the sale of $200 million of common stock at about $70 per share (this follows $39.6 million of repurchases in the third quarter of 2011 at average cost basis of $218  [ Netflix bought at $218 ]).