Netflix Crushed After Q2 Results -- Key Facts

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Netflix's Revenue Surges, But Outlook Disappoints

• Summary: Netflix Inc.'s stock (NFLX) fell over 20% in late trading after the company reported Q2 results as follows: Revenue up 46% to $239.4 million. Net profit of $16.8 million. EPS of $0.24. Subscribers at end-June were 5.17 million, up 303,000 from end Q1. Guidance: Subscribers at end-quarter of 5.5-5.7 million. Net income of $5-10 mlillion on revenue of $249-254 million, versus current consensus of $258.3 million.
• Comment on related stocks/ETFs: Netflix missed the consensus revenue estimates for Q2, reporting revenue of $239 million versus the consensus of $242 million, though it beat the consensus EPS estimate of $0.18 comfortably. Net new subscribers, at 303,000, were significantly lower than Q1's 687,000. Importantly, churn rose to 4.3% from 4.1% in Q1, though still lower than 4.7% a year earlier. And subscriber acquisition costs, known as SAC, rose to $43.95 per gross subscriber (ie. excluding loss of current subscribers) versus $38.47 in Q1 and $38.13 a year ago. Finally, projected revenue for 2006 was $980 million, below the consensus estimate of $1 billion. Of all these numbers, the most critical are the churn rate and customer acquisition costs, because Netflix will find it hard to grow profitably if it's expensive to attract new customers and a high proportion of its current customers cancel their subscriptions. CEO Reed Hastings discussed this in the conference call; see the full transcript, the specific discussion about churn and SAC, and his comments about competition from Blockbuster and the transition to Blu-Ray and HD-DVD. Netflix fan Davis Freeberg also provides his perspective on the results.

Comments

[jolly singh:]

www.cinemanow.com/burn...;device=7&cpt=...
huge competition

2006 Jul 25 08:57 AM