Tuesday, April 17, 2018

Blind Item #4 - Show Me The Cash - Mr. Hedge

A couple months ago, a certain streaming service told its investors not to worry about the mountains of cash it was blowing through.  A couple billion last year was going even higher this year - but they could always make that change in the future.  Just trust them.  At the time, I told you this was a lie.

Sure enough, the streaming service changed their tune last night, and said they planned to burn through cash for several years to come.   But don't worry, all is good - just lend them more money. 

So if a business charged a price for something its customers loved - but really needed to charge 25% more just to cover its cash costs, and 40% more just to earn a decent cash profit - what kind of "business" would that be?  Would that "business" have anywhere near the number of customers they currently enjoy?  


59 comments:

  1. Netflix gave me Altered Carbon and (nearly) naked Joel Kinnamon. I will forever be in their debt.

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    1. Plagiarized Ghost in the Shell with plagiarized Blade Runner making up the difference.
      God is dead, turn yourself into a robot and live "forever."
      Death to nihilistic sci-fi.
      That being said new Lost in Space is surprising good.
      CAPTAIN FLINT HAS SOME STERN WORDS...ABOUT SPACE.

      Delete
  2. Netflix, since HedgeHoff loves to hate them.

    With Twitter down I can't do any research....

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    1. GABRIEL THE HEDGEHOFF
      HAVE NETFLIX ORDER A CARTOON FOR THREE SEASONS
      IT WORKED FOR BOJACK HORSEMAN
      CALL ME

      Delete
  3. Netflix is still growing

    https://www.hollywoodreporter.com/news/as-netflix-goes-global-can-it-avoid-regional-politics-1102121

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  4. Netflix has cancelled a couple of shows recently like Everything Sucks and The Get Down.

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  5. This comment has been removed by the author.

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  6. https://www.marketwatch.com/story/analysts-applaud-netflix-for-another-home-run-quarter-2018-04-17

    "Stifel analysts said they expect “significant” cash burn in 2019 and expect expanding margins and slowing original content spend to push the company to positive cash flow by 2021. Analysts led by Scott Devitt said they are modeling about $3 billion of cash burn in 2019, the high end of Netflix’s FCF target for 2018."

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  7. @TLT -- Same. Naked Joel is what keeps me a customer.

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  8. You can almost hear his blood pressure spike when NFLX goes up.

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  9. "Wait until it does go wrong," Schlossberg advised. "You'll miss the initial drop, but you'll be safer and much, much better off by following on after the negative news hits."

    https://www.cnbc.com/2015/05/22/shorting-netflix-taught-me-a-serious-lesson-trader.html

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  10. @JT0130 it's the only show I've ever used a sick day to stay home and binge. His bum certainly helped aid in making that decision.

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  11. The Stock Price doesn’t seem to notice

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  12. So, if it's Netflix, the price would go from 10.99 to 13.75 (25%) or 15.38 (40%) a month, is that really going to stop people from buying the streaming service? Even at $15/month, it's still a LOT less than I was spending when I had cable.

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  13. Exactly, Thia. And their original content is getting really, really good. Not to mention being able to rewatch sitcoms like Friends, The Office, ect. If I'd pay $15 for HBO, I'd pay $15 for Netflix.

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  14. this model worked for amazon, so if they basically tie up a world monopoly, they will eventually come out ahead.

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  15. Latest financials Netflix added 2 million subscribers and average selling price was up 14%. So if Mr Hedge wants to see a 25% increase Netflix is already halfway there.

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  16. Netflix will always be cheaper than a cable tv subscription.

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  17. Yes, a stock that's going up indicates a healthy company with a bright future. That's totally how it works. The dot-com bubble and other historical bubbles never happened.

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  18. Hedge don't get potential. That's why he shorts. Dr.Doom lite

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  19. It's the same game and it can work but it's a risky game and doesn't work for everyone. Keep running, Netflix. Maybe you will win, maybe not. Investors keep ponying up cash not because they believe but because they want their money back.

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  20. Already hoping for the sequel to Altered Carbon. I think the next book he keeps the same body and it is 20 years later

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  21. Same kind of business as the cable and telly monopolies. Netflix is becoming a societal must-have, and maybe it's fair play to them. They seem to be positioning themselves as a player in a cord cutting market with the original programming and talk shows. TBH, give me a robust sports package, MSNBC and TCM that would be all I needed from cable aside from the broadband connection. Maybe Cartoon Network

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  22. @tetsujin, i would not agree that it is a societal must have. some people enjoy it, some don't. just as many people watch HBO and other networks online. it's a first mover, at best. but wouldn't say people can't live without netflix at this stage. as for cable, guess who owns the internet. not netflix.

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  23. How many pedos worked on "Everything Sucks?"
    Turned it off after that "artistic" Tori Amos teen lesbian masturbation scene, about 15 minutes into the first episode. The girl looks like a child.
    Hang 'em high.

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  24. I would pay 14.99 for netflix. There original content is getting better. Their movies are getting critic praises. Their gamble is paying off I think.

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  25. Not sure how anybody can look at Netflix programming and not have suspicions there's a lot of sick people involved.

    "Everything sucks" got good reviews and I hear a lot of people who said they watched it. Why'd they cancel it? Sure had a lot of teens and tweens in it.

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  26. "Their movies are getting critic praises."

    This is so wrong it's flabbergasting. "Bright" and "The Cloverfield Paradox," their two most highly promoted original films of the year, were universally castigated as unwatchable excrement, tossed into the toilet and flushed to Netflix.

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  27. @DDonna - Cloverfield Paradox was so bad. I watched it on my fire tv and lasted 20 minutes. And that was because I honestly couldn't find the remote for the last five of those 20 minutes. LOL.

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  28. When I saw that their stocks surged this morning I knew we'd have a Mr. Hedge blind on them. Lol.

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  29. @Freckles, I hope so. Kinnaman was incredible.

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  30. I pay £6 a month for Netflix and have done since we first joined several years ago. I would happily pay a bit more for the quality of it and the amount of usage it gets in my house. Have they never even considered raising the prices?

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  31. Netflix's strategy is attrition.
    Like Amazon.
    Helps when you have spooky money faucets behind you.
    Wal-Mart did this too in their heyday.

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  32. Deficit financing only works for the Federal Government.

    Everything else is cash and carry.

    Smells like a bankruptcy brewing in the very near future!

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  33. @DDonna Tarttty - what studio hasn't had a bomb. I don't think there is a major studio in hollywood that has not experienced a box office bomb. I don't know why everyone shits on Netflix for having features that didn't work out.

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    1. A series of unusually expensive bombs to send the message to the consumer, "we can bomb like the big boys!"

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  34. Zerohedge have a good article on netflix today which attempts to show true debt levels. Harks back to the time when they were just a doom and gloom financial website without partisan politics cluttering up the pages.
    Agreed it's the same sort of policy as amazon i.e. wait until your competitors are toast, but considering their rival is errr Amazon then good luck with that one.

    I agree netflix is a good product but their cash burn rate, combined with Enty's previous posts that their true debt is far higher thanks to creative accounting which has bankrupted people before, does seem to show that it's borrowed time. The question is when if anyone is thinking of shorting the stock-timing is the hardest thing.

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  35. You got burned shorting Tesla and are getting burned shorting Netflix aren't you asshole? Too fucking bad😂!

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    1. @sandybrook

      Perhaps Preparation H is in order?

      Delete
  36. I would pay a bit more for Netflix as well. I enjoy their content, and to watch Timothy Olyphant in Santa clarita diet.. well. ;)
    I also have Hulu, its free for me, and i even still have expanded cable and amazon Prime, and somehow my husband STILL complains at times there is NOTHInG to watch. lol.

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  37. Netflix could raise it's subscriptions by 40% and still people will gladly pay to have no commercials interfere with their TV viewing, as well as not be forced into cable packages.

    Hulu and Netflix satisfies us around here, as well as our yearly donation to PBS which gets us all kinds of things.

    Watch, Netflix will take a dip in 2019 and HedgeHoff will say "I told you so!"

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  38. Tidal may be a better guess, though I thought they'd been in trouble all along. LOL at Netflix going bankrupt. The stockholders will cash out to Comcast long before that happens.

    unknown: We don't really know if "as many" people watch HBO, but we do know subscriber numbers. Netflix is certain to pass HBO pretty soon, maybe in the next two years. HBO has a lot of legacy customers. Will they be able to keep the millenials after GoT is gone? They couldn't keep me after The Wire.

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  39. I'm not a millenial, but after GoT is gone (assuming they don't do the sequel they keep talking about, I'm done with HBO.

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  40. This business is not a going concern.

    Sounds like someone is willingly taking a loss for tax purposes. The money coming in is probably being laundered.

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  41. Oooh, yeah- how does that short feel? Right back through ATH... As far as your snide "lend them more money" comment... They're a $150bb corp with $9.2bb of corp issuance (source:Bloomberg). You think 6.2% is a problem? Enjoy your stock loan.

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  42. "Maybe it's time to consider Netflix the eighth big media conglomerate, as shares of the streaming company soared 9 percent on Tuesday causing its market cap to swell to $146 billion, just $8 billion shy of both Disney and Comcast."

    https://www.hollywoodreporter.com/news/is-netflix-now-eighth-big-media-conglomerate-1103485

    Wow these blinds are like opposite advice, are they coming from the mirror universe?

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  43. Am I the only person who wishes Mr Hedge would take his rage-wanking somewhere else?

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  44. @Hedge- you gonna get your clock cleaned if you're shorting NTFLX this year- at least. the market will break overall, but not til at least late fall or next winter.

    Tesla, sure. That's truly unsustainable.

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  45. New conspiracy theory: Netflix is kept running its pyramid scheme because (((the investors))) have sensed the progressive detachment of the public from Hollywood and the media. TV doesn't work, Internet is hard to control, people don't go to the movies, the propaganda has less and less faithful audience. Something has to be run, at any cost, to keep the addiction of the masses going. Hoping for the great times to come back, when people willingly paid mire attention and money to submit themselves to propaganda.

    Also why buying those 4K TV screens If there is nothing to watch. The (((investors))) have their reasons.

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  46. No one has yet to explain how Netflix is run like a pyramid scheme.

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    1. 1. Internet bandwidth to host and stream video content is Massive and still entirely cost prohibitive. Until electricity/server/hosting cost goes down. Netflix, YouTube, and every other streaming service is a money hole.

      2. Netflix is able to exaggerate claimed profits based on old models (ie: new Netflix produced shoes are still quantified asked on old profit metrics like syndication/reruns)

      3. Netflix (like amazon) is able to continually push off paying investors by not being profitable but claiming profitability is coming "next quarter" or "next year"

      4. Keep taking investors money.

      Sooooooooo....If Netflix is kept afloat by dumb investors, who have yet to realize a profit, for over a decade

      Maybe not a pyramid scheme. But definitely scammy

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  47. I hope Hedge is paying Enty to run these ads for his shorts.

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  48. @schneider is next.
    Yeah all your points are excellent, and your second point is the most important. Valuations and profits are (according to enty) based on old accounting models which shouldn't be applied to this new form of business. That's the scam. And if Enty is right, when the costs are accounted for correctly then it is an entirely different balance sheet.

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  49. @Bootsy- it's not enty saying this stock stuff- it's the hedge guy. some financial type... who's on the wrong side of the market and probably hurting pretty bad with these positions. I'm not disagreeing entirely with his points.

    But there is always a big difference between economic and business reality and financial market valuations. Always has been, always will be. Hint: Markets way over and undershoot actual values.

    What did Buffet say- in the short run the markets are a voting machine. In the long run a weighing machine.

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