Alarming Subscription Growth Miss at $NFLX Rocks Stock

Shares of NFLX are getting face punched in after-hours trading tonight, post earnings disappointment. The growth was fine; on paper the company is fantastic. However, in light of the headlong assault provided by the money burning Bezos at Amazon, expanding into original content, coupled with the poor reviews of this past season of House of Cards, one could make a strong argument that Netflix is heading into tumultuous waters.

They were expected to produce 2.23 million subs in the U.S. and 4.51 million internationally. Instead, they clown-car’d in with 1.77 and 4.36, respectively. Moreover, look ahead, the company is forecasting 500k domestic subs in Q2 and 2 million overseas. These are outrageous numbers, indicative of a great business. However, expectations were for 586k and 3.5 mill, respectively. That’s a stark drop off in guidance. They attribute the slow-down to maturing markets. Once they enter a market, like Latin America, people go fucking apeshit for the service. But, as human caprices ebb and flow, people become bored with the ancient movies populating the NFLX ecosystem and cancel.

“We were incredibly excited to grow to over 81 million subscribers, it’s an enormous quarter for us that way,” Netflix co-founder and CEO Reed Hastings said during a Monday afternoon webcast. “Some of it was from our expansion around the world: It’s 130 countries so there’s quite a bit of variety.

Some people, like this imbecile from ‘TechnoBuffalo’ think NFLX has something to worry about: “Netflix has had an incredible rise, but they need to be looking over their shoulder because there is an onslaught coming led by Amazon,” Jonathan Rettinger, president of TechnoBuffalo, told CNBC after the earnings announcement. “Netflix has a lot to worry about over the next few months.”

CEO, Reed Hastings, sums up the risks and rewards nicely.

“If you think about your last 30 days, and analyze the evenings you did not watch Netflix, you can understand how broad our competition really is. Whether you played video games, surfed the web, watched a DVD, TVOD, or linear TV, wandered through YouTube, read a book, streamed Hulu or Amazon, or pirated content (hopefully not), you can see the market for relaxation time and disposable income is huge, and we are but a little boat in a vast sea. For example, while we’ve grown from zero to 47 million members in the USA, HBO has also grown, which shows how large the entertainment market is. We earn a tiny fraction of consumers’ time and money, and have lots of opportunity ahead to win more of your evenings away from all those other activities if we can keep improving.”

My guess, people want to be a part of the Netflix ascendancy and this small miscue will not keep growth buyers out of the stock. But, should this miss become a trend, look for valuation to become an issue. The companies PE is out of this world high. The p/s ratio is near all time high levels, above 7x, a 275% premium to the rest of the market. The stock has been trading at this high premium since the stock bottomed in 2013. Before that, the companies p/s ranged from 1.4-5. Clearly, there is downside to the name.

The reward lies in whether or not the company can continue to grow revenues 20-25% year over year. Look at that revenue growth chart.

This is what dreams are made of. Never ending spiraling higher stock markets, spearheaded by calamitous news. If markets can go up on this news flow, imagine what it’ll do when the economy is pistol whipping hot under President H. Clinton.

In what can only be described as miraculous, America inherited an Asian oil rout and flipped it to a rally. Brent crude is essentially unchanged for the day and the Dow broke 18,000 to the upside.

As for me, my positions remain intact: short XLE, long TLT. It was a bad day for Senor Tropicana, as I am feeling the brunt of being fully exposed to the short side of big oil. Nevertheless, I am a patient man and I have time to kill before I cover my shorts. Plus anyway, a bad day used to mean -6% for the day, with my old style. Being down 1% or so is like having to deal with the emotional turmoil of tossing one of my readers into shark infested waters and then presiding over their expeditious and gruesome extermination. It’s not really that big a deal.

This is good because it means that their central bank, the Federal Reserve, will hold off on hiking rates.

Junk debt in China is acting junky as of late, with spreads widening  and yields rising in 9 of the last 10 trading days. Credit agencies are slashing the ratings of these nefarious firms and issuers are canceling bond sales at a frantic pace. More than $9 billion in bond sales have been canceled in April alone.

The numbers suggest more pain ahead: Listed firms’ ability to service their debt has dropped to the lowest since at least 1992, while analysts are cutting profit forecasts for Shanghai Composite Index companies by the most since the global financial crisis.

“The spreading of credit risks is only at its early stage in China,” said Qiu Xinhong, a Shenzhen-based money manager at First State Cinda Fund Management Co. “Many people have turned bearish.”

“To Chinese investors at the moment, default risks are high almost everywhere,” said Shi Lei, the head of fixed-income research at Ping An Securities Co. The yield premium on corporate bonds will probably rise by 30 to 50 basis points over the next several months, Shi said.

Sixty two companies have canceled bond payments this month. To put that into perspective, that’s six times the normal average.

“As more and more issuers default, lenders and investors will reassess their portfolio and lending, and that will cause yields to rise,” said Christopher Lee, chief ratings officer for Greater China at Standard & Poor’s in Hong Kong. “If the onshore market has any dislocation, that will have a spillover effect in the offshore market.”

Corporate debt to GDP in China stands at a record 165% of GDP. Again, this is good news for markets because…

Yeah, my friends and I want to bid for YHOO too. I realize the current market cap is a tad more than what I have saved in my JP Morgan account. Nevertheless,  I’m hoping Goldman Sachs will help finance this dream of mine, to be at the helm of one of the world’s dumbest internet companies alive.

With that in mind, the fucking Yellow Page, or “YP” as they call themselves, wants to acquire YHOO (I bet they do). The only minor stumbling block to financing the deal is YP’s paltry $1 billion valuation. They’d have a better chance if their valuation was zero.

YP is working with Goldman Sachs Group Inc. to investigate a variety of strategic alternatives, which could include acquiring smaller firms or selling itself, said the people, who asked not to be identified because the negotiations are private.

The company, controlled by Cerberus Capital Management, is valued at $1 billion to $1.5 billion, one of the people said. Its size makes it a candidate for a Reverse Morris Trust with Yahoo: a tax-free transaction in which YP would merge with a spun-off subsidiary of Yahoo’s core business, the person said. Time Inc. also considered such a transaction with Yahoo, Bloomberg reported in February.

It’s the fucking phonebook for Christ’s sake. I think it’s fair to say, potential suitors for Yahoo are now the bottom of the barrel varietal. Cerberus should go hire some teenagers to throw 5 pound phonebooks through the windows of Yahoo execs until they agree to the deal.

I’ve learned a lot about the faces on out fiat currency over the past year. For example, Alexander Hamilton was a worthless asshole, deserving to be replaced on the $10 bill, until the super popular, liberally favored, smash hit play, Hamilton, seized audiences en masse–causing the Treasury to forgo their plans to oust the old founder of the American banking system.

President Andrew Jackson wasn’t liked when he was alive, even less so when dead. Apparently, he was a giant dick, sashaying throughout the country, committing genocide against the Native American population. Previous generations granted President Jackson a portrait on the coveted $20 bill–because they were racist, ignorant, knuckle-draggers, and not the sophisticated Chardonnay drinkers like us.

It is widely believed that Secretary Lew will announce plans to punt Jackson and keep Hamilton this week (thank heavens for Broadway plays). Replacing Jackson will be a woman who will remind us how racist and awful we all are, guilting us into donating said $20 bills to homeless men in the streets, in order to relieve us of our white privilege.

Once decided, the sloths in the government will take 15 years to implement the changes.

Why?

Because they’re astoundingly inefficient people.

The new bills will be unveiled for circulation around the year 2030.

Biotech and big Pharma are enjoying themselves today. Energy related shares have recovered and pressing higher–because no oil freeze is good news. Why? Well, let me explain.

Now that the middled east are free to ‘Mars Attack’ one another with sneaky backdoor deals, the price of oil will soon collapse under its own hubris. But wait, there’s more. Because of the specter of this eventuality, traders are bidding up oil because after it collapses, oil producers will be forced to cut production and prices will then lift. In other words, traders are merely trying to get ahead of the curve, by bidding up oil before it collapses, before it rebounds.

This is fuckery on an industrial scale.

DAX viagras into the bell. Dr. Copper is the truth, yadda, yadda, yadda.

Healthcare

Nazis

SPY

Crude

Dr. Copper

Any questions?

For about 30 seconds, the market threatened to trade down 50 points. WTI crude was off a harrowing 5% and oil stocks were lower by 3%. All of that shit has ended now. The panic of 25 minutes ago has ended and with it enters a new era of unchecked hedonism and prosperity, or whichever suits you best–determinant on your socio-economic backgrounds.

As you read this, the Dow is moving briskly into the green, dragging along the ever stubborn Spy and NASDAQIRI. It’s worth mentioning, there are a few Debby Downers who are diluting the mood. But, no worries, the stock Gods, designated by Zeus himself, will see to it that all stocks and investors be treated fairly and justly.

“Money for all” is the motto. Don’t just sit there and watch everyone become billionaires. Get out there and take what’s rightfully yours!

This is hardly what I’d call reason to worry. Futures are mildly lower, off by 9. WTI is merely giving back some of its recent gains, off by 4.5%. And, European markets are off a trifle, -0.3%.

My XLE is down where I expected it to be.  Some of the smaller capped oils are enduring some truly harrowing declines this morning. Other than that, I’d consider this open to be genteel.

Vista equity partners are buying up piece of shit software company, Cvent, for a 69% premium.

“This milestone is the next chapter in our 17-year history,” Reggie Aggarwal, founder and chief executive officer of Cvent, said in the statement. “With Vista’s financial strength to invest in Cvent now and in the future, we will be better positioned to deliver innovative solutions that transform the meetings and events industry, and to offer employees new opportunities for career growth.”

Great job CVT management for ripping off those private equity asshats. Well played!

The fuck out of here with these numbers. If you’re one of the morons buying MS in the pre-market due to their ‘earnings beat’, I hope that you soon find yourself tied to a gibbet, set to receive 1,000 lashes about the back and neck.

“The Fly” does not mess around when it comes to doling out punishment to those who heartily deserve it.

Year over year, the clowns at MS saw revenues stagger and then plunge, down 21% to $7.79 bill. Net income clown car crashed into a brick wall, off by 53% to $1.13 billion, or 55 cents per share.

The answer to these horrible times? Fire a bunch of fixed income guys of course. Morgan, like so many other investment banks, just want to get rid of those pesky traders, so that they can focus on wealth advisory. You know, offer some asshole 300% of his trailing 12, so that he can bring his asshole team over and manage his clients assets through ETF allocations, by which he’ll charge them 1% per annum for saying hi to them every 6 months.

“The first quarter was characterized by challenging market conditions and muted client activity,” Gorman said in the statement. “While we see some signs of market recovery, global uncertainties continue to weigh on investor activity.”

Wait until the market really drops and these banks are trying to dig themselves out of the quicksand filled with a bunch of incompetent advisors who are losing client assets hand over fist.