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Moral of the story is that even billionaries have paper hands!

by nodemaker 4y ago

anothernewdude 4y ago
I don't think they see a possible recovery for Netflix here.
- francisofascii 4y ago
  It is that? Or maybe they discovered whatever model they had setup for Netflix was flawed, and they just decided to dump it and move on.
  - formerkrogemp 4y ago
    Most valuations these days are predicated upon market sentiment, low interest rates, rapid growth, and forecasts into future cash flow growth. Should any of these crash into reality, the proverbial faeces hit the fan, and the valuations disappears like the smoke and mirrors they are. Nothing grows 20% YoY forever. It's all unicorn farts and VC pixie dust powering these high flying valuations.
    - francisofascii 4y ago
      Sure, many companies have this problem. But does Netflix? They have been making a profit for quite some time. They PE ratio is 20, which is not high compared to other companies. Do they need to grow to be profitable? If they can cut costs a bit and stabilize subscription levels, they should be fine. What am I missing?
      - formerkrogemp 4y ago
        The growth is baked into the valuation. I don't disagree with your ideas, but so much is built on perception. Share prices fall. Capital becomes more expensive. Options aren't worth as much. Employee morale drops. Profit isn't the only or main measure of success these days, which is unfortunate. As a long term shareholder, I'd be somewhat concerned about their ability to compete and deliver, but I'd be fine with their current profit levels. Not at current valuations however.
Melting_Harps 4y ago
> Moral of the story is that even billionaries have paper hands! To be perfectly fair, this level of volatility is not even seen in BTC anymore, wow! You have to go to the super leveraged exit scam alts to see a 62% drop. For all this talk about stability being critical to the health of the established markets, this really is egg on the face when a FAANG has taken such losses on a service which they have this much market-share on in comparison to the rest of the Industry. Netflix's share price peaked in November 2021 and is about 62% lower year-to-date.
- thoughtstheseus 4y ago
  False. Many not scammy businesses decline 62% in YTD figures. The decline potential is obvious… Netflix has enormous operating leverage, which Bill mentions in his official note. Operating leverage magnifies the impact of marginal subscribers.
  - bavell 4y ago
    Lol how many $100B+ market cap businesses decline 60%+ in 6 months? Parent's point is that this is unheard of for an established player and makes stability of FAANG look really bad.
    - thoughtstheseus 4y ago
      Not many because they have not been around very long. I’d guess few of them would be old enough to drink alcohol in the US. It wasn’t until ~2000 companies started to cross the $100 billion market cap threshold.
      - bavell 4y ago
        Sure, but don't get hung up on the $100B number. The overall point being made is that FAANG is seen as a rock of stability compared to crypto and yet has experienced massive price change over a relatively short amount of time. The point of mentioning the market cap is that you'd expect volatility to be very low. Just shows you that the stability is not quite as stable as previously assumed.
moralestapia 4y ago
Yup, its clear that NFLX is on a rough patch but I'm sure they'll recover. This feels like a rookie mistake.

Moral of the story is that even billionaries have paper hands!

anothernewdude 4y ago

I don't think they see a possible recovery for Netflix here.

francisofascii 4y ago
It is that? Or maybe they discovered whatever model they had setup for Netflix was flawed, and they just decided to dump it and move on.
- formerkrogemp 4y ago
  Most valuations these days are predicated upon market sentiment, low interest rates, rapid growth, and forecasts into future cash flow growth. Should any of these crash into reality, the proverbial faeces hit the fan, and the valuations disappears like the smoke and mirrors they are. Nothing grows 20% YoY forever. It's all unicorn farts and VC pixie dust powering these high flying valuations.
  - francisofascii 4y ago
    Sure, many companies have this problem. But does Netflix? They have been making a profit for quite some time. They PE ratio is 20, which is not high compared to other companies. Do they need to grow to be profitable? If they can cut costs a bit and stabilize subscription levels, they should be fine. What am I missing?
    - formerkrogemp 4y ago
      The growth is baked into the valuation. I don't disagree with your ideas, but so much is built on perception. Share prices fall. Capital becomes more expensive. Options aren't worth as much. Employee morale drops. Profit isn't the only or main measure of success these days, which is unfortunate. As a long term shareholder, I'd be somewhat concerned about their ability to compete and deliver, but I'd be fine with their current profit levels. Not at current valuations however.

Melting_Harps 4y ago

> Moral of the story is that even billionaries have paper hands! To be perfectly fair, this level of volatility is not even seen in BTC anymore, wow! You have to go to the super leveraged exit scam alts to see a 62% drop. For all this talk about stability being critical to the health of the established markets, this really is egg on the face when a FAANG has taken such losses on a service which they have this much market-share on in comparison to the rest of the Industry. Netflix's share price peaked in November 2021 and is about 62% lower year-to-date.

thoughtstheseus 4y ago
False. Many not scammy businesses decline 62% in YTD figures. The decline potential is obvious… Netflix has enormous operating leverage, which Bill mentions in his official note. Operating leverage magnifies the impact of marginal subscribers.
- bavell 4y ago
  Lol how many $100B+ market cap businesses decline 60%+ in 6 months? Parent's point is that this is unheard of for an established player and makes stability of FAANG look really bad.
  - thoughtstheseus 4y ago
    Not many because they have not been around very long. I’d guess few of them would be old enough to drink alcohol in the US. It wasn’t until ~2000 companies started to cross the $100 billion market cap threshold.
    - bavell 4y ago
      Sure, but don't get hung up on the $100B number. The overall point being made is that FAANG is seen as a rock of stability compared to crypto and yet has experienced massive price change over a relatively short amount of time. The point of mentioning the market cap is that you'd expect volatility to be very low. Just shows you that the stability is not quite as stable as previously assumed.

moralestapia 4y ago

Yup, its clear that NFLX is on a rough patch but I'm sure they'll recover. This feels like a rookie mistake.