Netflix, Inc. (NFLX) Beats Q4 EPS On Tax Gain, Misses Revenues, Guides Lower, Cash Burn Soars

netflixTyler Durden: All algos that were short Netflix, Inc. (NASDAQ:NFLX) into earnings were just brutalized and stampeded into an epic short-covering squeeze when the company announced Q4 EPS of $1.35, nearly double the $0.72 expected.

However, as usual, there is more here than meets the eye, especially when considering that NFLX Q4 revenue actually missed expectations of $1.49Bn, printing $1.48Bn.

So how did NFLX smash EPS? Because as anyone who actually read the release before trading the stock would find, NFLX “Q4’14 Net Income/EPS includes a $39m / $0.63 benefit from a tax accrual release related to resolution of tax audit.”

Subtract that from the reported EPS and one gets $0.72. Right on top of expectations.

And then there is Q1 guidance, which NFLX said would be $0.60, not only lower than a year ago, but also substantially below expectations of $0.78.

So net-net: a quarter that was in line on the bottom line, a miss on the top line, and a business which may well be slowing down.

Finally, here what investors will soon be paying very close attention to: Free Cash Flow.

At ($78) million, this was the worst quarter for the company in years.

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