The culprit for Netflix's (NASDAQ:NFLX) recent fall was the company's underwhelming domestic subscriber growth. Domestic and international subscribers were up Q/Q by 2.1% and 11.8%, respectively. The performance was consistent with that of Q2 2015 where domestic and international subscribers grew Q/Q by 2.1% and 11.4%, respectively.

Netflix Needs More People

Management's rationale for the domestic subscriber miss was "involuntary churn":

In net additions they were down year-over-year, and that we explained and attributed to our involuntary churn or payments-related churn. We think partially that was due to the transition to the chip cards, which is still ongoing. And we've reflected that trend going forward into Q4 in our guidance.

Credit card companies are shifting to chip-enabled cards. If the expiration date, security code, etc. changed on the newer cards, the cards may not have worked properly. Customers may then have been required to manually enter their new information, and not doing so may have contributed to the involuntary churn. This rationale simply does not hold water, and management needs more people to corroborate its claims.

I Found This Odd For The Following Reasons:

Even if newer chip-enabled cards did not work, customers would have found a way to manually enter their credit card information if they wanted the service that badly. I have gotten new apartments where the first thing I set up was the cable - even before the furniture was installed. I could not live without ESPN, and watched it while organizing the furniture. When I was younger and cash-strapped, I tried to stretch my payables to stem cash flow. However, I always paid the cable bill on time; I was addicted to it.

Management's argument is there may have been hiccups in the service, yet consumers didn't frantically call to reconnect it. In my opinion, either customers are not "addicted" to Netflix much as we suspected or the domestic subscriber market has become saturated.

Why Was Netflix The Only One With this Problem?

There are several other companies with customers who use chip-enabled cards, so why wasn't their subscriber base negatively impacted? Had other companies made similar claims, it would have lent more credence to Netflix's argument. In fact, some companies dismissed them:

But several firms and a retail industry association contacted by Reuters on Thursday, including Spotify, a music service with over 20 million subscribers, said they had not experienced issues with the new cards ... The National Retail Federation, an industry group, has "heard nothing at all" from its retail members about issues with the new cards, according to J. Craig Shearman, vice president of government affairs public relations.

What Really Changed

In Q3 2014, domestic describers only grew 2.7% sequentially, falling shy of the 2.8% expectation; the stock sold off 26% after-hours. NFLX has been fueled by international subscriber growth. Secondly, the domestic market was thought to be saturated in Q3 2014 when subscribers totaled 37.2 million. Why would the market expect subscribers to keep growing nearly 3% sequentially off a Q2 2015 subscriber base of 42.3 million? Either analysts were unrealistic or management needed to do a better job of managing expectations.

In addition to the renewed focus on Netflix's domestic subscribers, I believe investors are now scrutinizing crowded trades. Hedge funds have been making leveraged bets in the so-called "FANGs" - Facebook (FB), Amazon (AMZN), Netflix and Google (GOOG, GOOGL). These firms' top-line growth in addition to tailwinds from QE and zero interest rates have driven their shares higher. (See Related Article: FANG-Less: Facebook, Amazon, Netflix And Google).

However, over the past three months, things have changed. China threw the entire market for a loop when it devalued its currency in August. It was a de facto admission that the world's second largest economy was slowing. China has recently been the biggest contributor to global economic growth. A slowing China could portend a slowing global economy. Secondly, a Fed rate hike could stymie the general market. If the Fed doesn't hike, it could imply the U.S. economy is weaker than expected, which would not bode well for corporate earnings.

Over the past three months, NFLX has been the worst performer among the FANGs, having fallen about 6%. The other participants all had stellar Q3 earnings results, which probably explains their better performance. In my opinion, the market has reached an inflection point pursuant to the FANGs. Those that hit their metrics each quarter and continue to fire on all cylinders will remain market darlings. Those that do not will sell off.