Netflix Acquisition Costs Skyrocket

Oct. 24, 2006 11:22 AM ETNetflix, Inc. (NFLX)
George Gutowski profile picture
George Gutowski
58 Followers

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:

NFLX 1-yr chart

This article was written by

George Gutowski profile picture
58 Followers
George Gutowski (http://seekingalpha.com/by/author/george-gutowski/) has over twenty years of financial and investor relations experience. During this time he has developed an interest in how companies explain themselves and at times confuse the marketplace. He has written a book entitled Financial Self Defense for Investors. Published by Insomniac Press, the book is a self defense primer for investors who do not want to be cheated. Read George's blog: http://financialskeptic.blogspot.com (http://financialskeptic.blogspot.com/)

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