There's Something Happening Here, What It Is Ain't Exactly Clear...
There's another man with a strong buy over there,
Telling me I got to beware,
I think it's time we stop, look, what's that sound,
Everybody look what's NFLX got going down...
That soon-to-be ex-DVD mailer is known as Netflix (NFLX). Not only is the share price of Netflix a ridiculous number I don't even want to quote (whispers $230+ as of 02-11-11), but the business has some red flags if you ask me. Here is the 'tale' of the tape:
EPS = 2.96
PE = 77.97
Market Cap = $12,800,000,000
Float = 51,000,000 shares
Cash = 350 mil, Debt = 236 mil
December 31, 2009 Accounts Payable = 124 mil
September 20, 2010 Accounts Payable = 207 mil
Subscribers as stated by Netflix: 20,000,000
Growth as stated by Netflix 2009-10: 30%
Ok, you see these numbers so want to know what's up. You probably heard about Leonard Brecken also question this as well as others. But let't get deeper. Netflix according to SeekingAlpha, is the 5th most shorted stock on the S&P500 at a whopping 23% of float and growing daily. This is on top of the fact they they somehow created revenue even though their account payable went up almost 100% while the bottom line went up only 30%. But let's get into some more questions.
How does a company with 20,000,000 subscribers to a service that cost $7.99/month get a market cap of over $12 billion with a B? If you can't answer, neither can I. We aren't talking about some complex business model either. They get licenses for the movies and products, they acquire the networking requirements to send these things through your gaming system or computer, and that is that. Without DVD mailing anymore, it will all be digital bits and bytes going from one place to another.
At $7.99/month x 12 months = $95.88 per customer of revenue before all the costs
At 20,000,000 subcribers that is: $1,917,600,000.
That is just the revenue. That isn't the net income!
Net income to shareholders for 2009 was: $115,860,000.
So one often wonders why NFLX is trading at $230+/share recently when it traded far less for so much longer...