After Jim Cramer listened to the conference call for Netflix, he was left dazed and confused.
"If you weren't dazed and confused, too, then you obviously weren't on the Netflix conference call," the "Mad Money" host said.
Cramer has always said that it is essential for investors to listen to a company's conference call after earnings are released. Often it can provide clarity from management on how the company is really doing.
Unfortunately, the Netflix conference call was not fruitful for Cramer. The streaming company's shares fell more than 13 percent on Tuesday after it announced that it had missed subscriber numbers for the second quarter.
The first concern for Cramer was the frequent use of the word "un-grandfathered" on the call. He is always suspicious when a company creates a word that spellcheck doesn't recognize. Yet, somehow this nonexistent word dominated everything on the call, namely that subscribers who were grandfathered into Netflix did not renew their subscriptions ahead of a price increase.
For the first time ever price mattered for Netflix. It seemed as if the mere fear of the pending price increase is what weakened U.S. numbers, Cramer said.
"I found myself thinking, at least they didn't lose any," he said.
Before the second-quarter results, price had not mattered for Netflix. Cramer regarded it as part of a holy trinity of memberships that consumers were willing to pay for that also includes Costco and Amazon Prime.
No one knows why the un-grandfathered subscribers decided not to renew the service. Cramer noted that Netflix didn't get it, either. He read over the comments from the team multiple times, and he still couldn't figure it out. It did not make sense that subscribers would leave because of a few dollars, especially when compared to the price of a cable bill.
Cramer didn't get the last miss from Netflix when it pinned most of the blame on Australia, either. He didn't get it when Netflix also blamed the previous quarter miss on an issue with credit card migrations. But he was willing to overlook each one because he knew that the audience loved Netflix.
"Now, I am not so sure. You just shouldn't be getting this level of Netflix cutting. And the lack of domestic growth isn't being made up overseas, like it used to be," Cramer said.
This simply became one of those bad quarters that prompted Cramer to think the stock just can't be bought because management didn't give investors a reason to do so. It kept guidance for next year, but that was not enough.
With three straight quarters of misses, he doesn't think the company will be able to get ahead of it until the "un-grandfathering" is finished at the end of the year.
"Perhaps you were listening to an old call, when the idea that someone wouldn't pay up for Netflix was inconceivable. Not anymore," Cramer said.