NFLX sure knows how to spark a short squeeze with well crafted "BS" !

 CRAZY-SHIT valuations and fuzzy math crap! 

After hours on 01-19-2021; we saw an earnings report from Netflix was a mixed bag: despite mediocre and lackluster earnings and revenues at best, the firm has been riding a wave of extreme optimism, its stock soaring in early 2020, putting it in the top 20 for SPX-500 firms, similar to the gains seen by other shutdown beneficiaries. Still, after surging to a record high in early July, the stock has traded in a waffling range-bound pattern (from $460 to $545), unable to break out to a new high. And while there is no doubt that viewership has surged during the nasty Covid-19 lockdowns in the U.S. and much of the world, there are serious complications that the cheerleaders on CNBC have ignored almost completely as the Covid-19 virus brought TV and film production to a halt, a situation that may only get worse for Netflix as the months wear on. But the biggest $64,000 question remains how many future subs has Covid-19 sucked into the present day with significant enticements?

So, was 2020/Q4 the quarter that would finally unleash another nosebleed repricing higher for Netflix stock, or has the triple top telegraphed some serious pain?  Well, the bulls may have finally lucked out, despite a bit of a heart attack initially, because after Bloomberg first reported a miss in EPS sending the stock sharply lower first, it then reported a huge beat in 2020/Q4 subs (many on a free trial) here are the details:

Ø  Netflix 2020/Q4 pro forma EPS $1.19 “missed big” vs. estimates of $1.38!

Ø  Netflix 2020/Q4 Revenue. $6.64 billion, vs. estimates of $6.63 billion a tiny beat!

This was the data that hit first and sent the stock lower (as I went SHORT...then I became trapped in a SHORT losing $4.75 in a blink of an eye) as the headlines were quickly followed by what I saw as a very stupid catalyst behind the sharp reversal higher, namely a 2.5 million beat in 2020Q4 paying subs; how could this be; likely due to the Covid-19 home-bound...Netflix 2020/Q4 streaming paid net change 8.51 million vs. estimates for 6.06 million...but these numbers were still weak when compared to 219/Q4, 2020/Q1, 2020Q2

They stated, “We’re becoming an increasingly global service” with 83% of paid net subscriber additions in 2020 coming from outside the U.S. and Canada". The number of new subs was enough to allow lame investors to quickly ignore the disappointing 2021/Q1 outlook of just 6.0 million subs (again significantly below the just-released 8.51 million sub number) and worse yet well below the expected 7.45-million **another WTF are the chasers of price thinking**  Interestingly Netflix Sees fiscal year 2021operating margin of 20%...they now see operating margin at a mere 14.4% vs. 20.4% quarter/quarter! Operating income is expected to come in at $954.2 million, a drop of 27% quarter/quarter...and negative free cash flow $284 million vs. positive $1.15 billion quarter / quarter...By adding 8.5 million subs, Netflix has crossed the 200 million paid memberships mark (or have they). But while the Firms subscriber outlook was disappointing it was more than offset by a surprising addition to their the released statement “combined with our $8.2 billion cash balance and our $750m undrawn credit facility, we believe we no longer have a need to raise external financing for our day-to-day operations.” This was seen as a huge milestone for a firm which until a year ago had not had a cash flow positive quarter since 2014 (although it once again begs the question how much of this is based on optimistic assumptions about continued growth). The cash flow positive “BS” forecast came at a good time: just as the firm announced that net cash generated by operating activities in 2020/Q4 was -$138 million vs. -$1.5 billion in the prior-year period, while free cash flow (FCF) for the quarter dropped to -$284 million vs. -$1.7 billion.

 This made me choke and I wanted to puke: Netflix stated that as it generates excess cash (a joke), it intends to maintain $10 billion to 15 billion in gross debt and will explore returning cash to shareholders through ongoing stock buybacks, as they did in (2007-2011).  Netflix also tried to appease investor concerns that the pandemic will slow their productions. From the investor letter: “Our productions are back up and running in most regions - we have learned that flexibility and adaptability are paramount in this fast-changing environment. With over 500 titles currently in post-production or preparing to launch on our service and plans to release at least one new original film every week in 2021 with extraordinary talent, we’re confident we’ll continue to have a great content offering for our members.” 

Between the subscriber beat and the firm's forecast that it will soon be cash flow positive going forward, NFLX stock has exploded higher (and I got trapped for a tad) and at last check was about 10% higher trading just above $565.00 to $570.00.