Netflix may operate a great service, but as it turns out, it fails rather profusely at the one thing most businesses are designed ot do: make money.
Accounting gimmicks allow them to report a "profit" year after year, while actually racking up massive debt from losing huge sums of cash to operating expenditures.
The simple truth is Netflix, despite reporting a "profit" after all sorts of ridiculous accounting adjustments, has never really made any substantial cash. In recent years, its specialty has actually been losing money, and its rapidly becoming a market leader in this area with growth that would "impress" (depress) any "investor" (long-term bag-holder.)
Perfect chart for Halloween; it is horrifying.
The total positive cash flow, going back to March 2011, is only +249.7 million. The loss is a staggering -2767.3.
In the last 7 years, Netflix has really accomplished only only one thing that matters to the bottom line - losing over 2.5 billion dollars.
"But Lexiconical," you cry, as you clutch statements from your passively-managed 401K, "everyone is watching Stranger Things now! These are just "capital investments". Plus, I'm sure things look better now - your chart stops in 2016!"
Yes, well, that's a good try. 2017 was a record-breaking year for Netflix...unfortunately, the record they broke was, yet again, how much money they lost.
Very tough to find a bullish case here.
As for that "capital expenditures" bit? Sure, sometimes that pans out. Most companies, however, fail, and Netflix is simply ramping up their spending more and more to try and compete in the "original content" segment against the likes of practically every company out there today. (Apple. Facebook. Amazon. CBS. Disney. Google. Sony. Time Warner. Hulu. )
Netflix plans to burn $8 billion next year, or almost 7 times what they lost last year (in a record breaking-cash-loss year), on "original content".
It definitely won't be all that "strange" a "thing" if Netflix sets another record-breaking loss in 2018. Do you want to fund these losses as an investor, or take advantage of them as a customer?
Any rational market would heavily discount this stock, but we are well into the "financial twilight" zone.
Except, not actually in the coyote's butt...you get the picture.
If you have any additions or errata for this post, please let me know! I will see that they are voted to the top of the comments, and will make the appropriate edits (if possible).
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