Netflix, Inc. (NASDAQ:NFLX) reported boomer Q3 results with what appears to be real increases in profitability. When companies grow so quickly investors need extra doses of caveat emptor.
Look at what they are reporting about their own acquisition costs:
Subscriber acquisition cost for the third quarter of 2006 was $45.32 per gross subscriber addition, compared to $36.33 for the same period of 2005 and $43.95 for the second quarter of 2006.
Acquisition costs are growing rapidly in percentage terms. A 25% increase in comparable quarters is huge. There is a good chance that they will be buried in acquisition and retention costs as they try to attract and keep clients. Could become a mug’s game.
Read Netflix's most recent earnings conference call.
NFLX 1-yr chart:
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