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NFLX Plunges After Missing Sales, Subs And Earnings; Cuts Forecast; Burns Quarter Billion Dollars

Following more than a year in which Netflix pulled an Amazon quite successfully, burning through tens then hundreds of millions in cash but promising ever loftier growth, moments ago the magic finally ended, when Reed Hastings' company reported Q3 revenue of of $1.581 billion, wildly missing not only consensus expectations of $1.75 billion, but its own Q2 forecast of $1.593 billion, while also missing the bottom line estimate of $0.08, generating just 7 cents in Earnings.

Far worse, the "growth" company also missed the Q3 domestic subs forecast even more, generating just 0.88 million new US subs, down from 0.98 million a year ago, and both its own forecast of 1.15 million, and Wall Street's of 1.25 million. The explanation was rather laughable:

We added 0.88 million new US members in the quarter compared to 0.98 million prior year and a forecast of 1.15 million. Our over-forecast in the US for Q3 was due to slightly higher-than-expected involuntary churn (inability to collect), which we believe was driven in part by the ongoing transition to chip-based credit and debit cards.

"Inability to collect" $7.99?

Of course, the other far more likely explanation, that the company "could not collect" simply because US consumers are broke and can't even afford a paltry $7.99 for commoditized TV streams, is far less palatable.

Finally, not only did the company miss Q3 results, but it also guided far lower than expected, and is now expecting 1.65 million domestic streaming subs, below the 1.81 million estimate.

And while the company added a solid 2.7 million international subs, NFLX continues to burn a ton of cash here, with the contribution margin on international streaming now at -13.1%. And there will be much more losses:

As we have indicated previously, international contribution losses will grow sequentially in Q4 as we launch Spain, Italy and Portugal. We have announced our expansion to South Korea, Hong Kong, Taiwan and Singapore in early 2016. Our plan remains to run around break-even through 2016 and to deliver material profits thereafter.

Good luck with that plan.

The summary financials breakdown and projections were as follows:

If and when fundamentals matters once again, the following chart will be very interesting to all: in Q3, NFLX burner a record $252 million in cash, bringing its total cash burn in the past 12 months to a gargantuan $722 million.

Good luck generating even one dollar of free cash flow with this "growth" company. And since the company has a generous $2.6 billion in cash and investments, it will continue burning cash for a long time before its investors finally riot and demand some cash return on their investment.

And finally, moving away from the cash flow statement to the balance sheet, NFLX also revealed that its off-balance sheet total "streaming content obligations" have now risen to a gargantuan $10.4 billion, up $1.5 billion from a year ago. This is greater than the company's entire balance sheet.

The stock, which crashed 14% immediately after the results, has recovered some of the losses. Will the BTFDers reemerge and take NFLX into the green after what is a terrible quarter, or will gravity finally prevail?