Netflix Earnings Focus on Subscriber Growth and Disney+ Commentary

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  • #20473
    ThePitBoss
    Participant

    Streaming giant Netflix report  first quarter earnings after…

    [article]1470[/article]

    #20477
    ThePitBoss
    Participant

    Ahead of earnings Netflix Inc (NASDAQ:NFLX) upgraded by Deutsche Bank to Buy from Hold.

    Analyst Bryan Kraft wrote that the company is “looking more and more like a platform every day, rather than just an application,” and believes it could beat subscriber expectations.

    #20478
    ThePitBoss
    Participant

    Bank of America- Buy rating ahead of $NFLX Earning

    “We see limited scope for a negative surprise on domestic subs in 1Q or 2Q guidance, despite concerns about price hikes and competition. Given strong recent growth trends we believe most investor concerns over Netflix’s long term potential have been alleviated. Some near-term competitive noise from the Disney launch and potential for weak 2Q domestic sub guidance as NFLX rolls out its price increase to existing US subs could shake investor confidence briefly.

    We would see any dip on either issue as a particularly attractive buying opportunity because we do not view Disney as the competition and we expect, as has happened before, that any price hike based increase in churn would be short-lived as consumers quickly come back for the content they crave.

    #20479
    ThePitBoss
    Participant

    PiperJaffray- Overweight rating ahead of NFLX Earning

    “Our analysis of Netflix search trends points to a strong Q1, with potential upside for both int’l and domestic subs. Specifically, guidance points to 9.1% y/y domestic sub growth in Q1 (150bps decline in y/y growth vs. Q4) and our search index points to 12.6% growth (110bps acceleration in y/y growth vs. Q4).

    For int’l, Q1 guidance implies 38% y/y sub growth (190bps decline in y/y growth vs. Q4) and our index points to 50.8% (480bps acceleration in y/y growth vs. Q4). We would not directly apply these implied growth rates and it is important to take note of the error in our model vs. reality, but the index is directionally positive, showing a high likelihood of a strong Q1 for Netflix sub adds.”

    #20486
    ClemSnide
    Participant

    Much bigger cash burn – if they can hold that in and their content stops a drift to competitors could be a smart move, But needs to stop the burn!

    #20493
    Super Harley
    Participant

    UBS on NFX – buy rating

    “Chill about Netflix churn fears. Pricing Moves On Full Display & Remains Key Positive Driver. Both for the Q1 EPS report and mgmt Q2 guide, the impact of recent pricing moves in a handful of countries was on full display. In particular, better revenue forecast and weaker sub guide (though we view this as a conservative framing by mgmt) will likely dominate the ST debate.

    Moving beyond that, we would focus investor attention on NFLX’s key attributes:
    a) pricing power in developed mkts; b) potential for pricing tiers in developing economies to open up greater scale; c) compound revs at a 20%+ CAGR; d) expand OI margins; e) lessen its dependence on capital market fundraising; & f) has low/no regulatory headwinds. As a result, over the LT, we see NFLX as a top pick as it capitalizes on the oppty to be the global leader in streaming media & the competitive moat around its business widens (via a mix of content spend, marketing, & scale).”

    #20494
    Super Harley
    Participant

    Oppenheimer NFLX outperform rating, lowered price target to $410 from $425

    “Lowering target to $410 from $425 on modestly weaker FY19/20 subscriber outlook, partially offset by higher APRU, but maintaining Outperform rating. 1Q global paid subs +25% y/y, modesty slower than +26% in 4Q, with streaming revenue +29% ex. FX, vs. 35% in 1Q, as global ARPU increased 3% ex. FX vs. +7% in 4Q. Higher US price causing modest churn. Margins exceeded guidance, but company maintained prior FY19E margin outlook. Despite new competitive entrants (AAPL and DIS), NFLX cites potential for further upside with only 2% of global downstream mobile internet traffic vs. 10% peak viewing share in US. Product bundles have helped mobile adoption and shown solid traction thus far. Testing various plan prices in India.”

    #20495
    Super Harley
    Participant

    [color=green][b]Raymond James – strong buy on NFLX
    [/b][/color]
    “Netflix’s quarterly results read largely as expected, with upside to 1Q U.S. and Int’l Paid Net adds, and a soft 2Q guide for U.S. (~300k, roughly in line with us but below Street’s 650k). While bears may nitpick that Int’l Paid Net add guidance was below at 4.7M, it misses the bigger picture. 1H19 Int’l Paid Net dds are projected to increase +19% y/y and tracking ~435k (4%) ahead of Street expectations. 2019E continues to shape up to be a record Paid Net dd year for Netflix. Reiterate Outperform.”

    #20496
    Super Harley
    Participant

    J.P. Morgan – NFLX overweight rating & raising price target to $450 from $435

    “NFLX’s 1Q19 earnings may be controversial to some—mostly because of the light 2Q sub outlook—but we think there’s much more to like here than not. Key positives that stand out to us: 1) 1Q paid net adds of 9.6M, above expectations of ~9.5M, led by Int’l upside to the guide of 560k; 2) 1Q operating margin of 10.2% was well ahead of our & consensus 8.9% on lower than expected marketing, & even w/some spend shifting later in the year NFLX’s margins should still move sequentially higher through ’19; 3) 1H19 paid net adds are guided up 7% Y/Y—even w/2Q down Y/Y on price increases during a seasonally softer quarter—and NFLX expects 2019 paid net adds to be greater than in 2018.

    Pushback will come from:

    1) a lighter 2Q sub guide, w/paid net adds of 5M below our/consensus 5.4M-5.5M, driven mostly by US, but NFLX is factoring in price increase impact related to the US, LatAm incl Brazil & Mexico, & parts of Europe; 2) Larger 2019 FCF burn at ($3.5B) on higher cash taxes, but NFLX reiterated improvements in 2020 (we think meaningful) & its push to become self-funding.”

    #20497
    Super Harley
    Participant

    Barclays – overweight rating on NFLX

    “Domestic growth concerns validated: We had highlighted (in an earlier report) the risk to Q2 sub guidance due to recent price increases over a compressed time line, in a seasonally weaker quarter. Q2 US guidance therefore came in lower at 300k vs our and consensus estimates. This guide is comparable to Q2-16 when NFLX’s price increase resulted in higher churn. However, at that point, NFLX’s US penetration rate was 46% compared to 60% today and the price increase was $1 vs $2 this year.

    Therefore, while the guidance does highlight higher churn, the implicit increase in churn is actually lower vs 2016, normalized for the degree of price increase, penetration rates and absolute price. This points to the fact that underlying US business trends continue to improve despite the headline. This impact should be further muted in 2H′19 given the new seasons of some of the most popular shows (Stranger Things, 13 Reasons Why, Crown) and movies.”

    #20498
    Super Harley
    Participant

    PiperJaffray – overweight rating on NFLX

    “Netflix reported upside for Q1′19 and provided a mixed Q2 outlook. Most importantly, int’l sub adds were ahead of expectations for the quarter and essentially in-line for the Q2 guide. Q1′19 domestic subs were also ahead of consensus, but Q2 domestic sub guidance is below the Street. Q1′19 domestic and int’l contribution profit were each ahead of the Street driving EPS upside. The revenue outlook for Q2 is in-line, while the EPS outlook is below consensus estimates, but EPS is impacted by a change in accounting that results in a higher tax rate for the quarter. Despite an onslaught of new streaming services, we expect Netflix to continue to capture a significant portion of traditional content dollars as they migrate to streaming.”

    #20499
    Super Harley
    Participant

    Evercore ISI – in line rating on NFLX

    “All said, 1Q19 results do little change our view on the trajectory of Netflix’s fundamentals. We reiterate our In Line rating /$350PT and continue to view the risk / reward balance at these levels as fair (shares trade at 30x our 2022 EPS forecast, and we project three more years before the company becomes FCF-breakeven).”

    #20500
    Super Harley
    Participant

    Credit Suisse – NLFX outperform rating, raising price target to $450 from $440

    “Overall, while not the net add beat many were hoping for, we believe outlook commentary was quite bullish, especially record 1H paid net additions in the face of record price increases, revenue growth accelerating the next few qtrs., and a very strong 2H content slate – mgmt indicated they are “not seeing anything inhibiting a long run-way of growth”. Investor consternation will now shift from price increase churn to competition, but Disney+ concerns are misplaced, in our view. Due to near-term tax structure changes, we lowered 2019 EPS $0.90y to $3.28 and 2020 $0.29 to $6.00.”

    #20501
    Super Harley
    Participant

    Bank of America – buy rating on NFLX

    “Netflix paid net add guidance missed Street estimates as price hikes both in the U.S. and in key international markets create a drag on subscriber gains. Guidance for negative free cash flow in 2019 was increased to -$3.5 billion from -$3 billion on higher cash taxes and investment in real estate and production facilities. Netflix guidance for a 13% 2019 operating margin remained constant. Average revenue per user is set to accelerate on price hikes globally, though FX remains a headwind.”

    #20502
    Super Harley
    Participant

    Citi – buy rating on NFLX

    “Netflix’s 1Q19 revenues came in-line with forecasts, while 2Q guidance was softer than expected. As expected, both domestic (1.74mn) and int’l (7.8mn) paid sub net adds were above consensus, while adj. EBITDA margin of 12.9% was also above est. of 11-12%. Also as expected, 2Q19 total revenue guidance of $4.93bn is slightly below cons. forecast of $4.96bn, partially driven by the slowdown in 2Q domestic and intl paid sub net adds guidance (0.3mn and 4.7mn respectively), likely reflecting seasonality and the timing of price increases.

    Mgmt also reiterated its commitment to operating income margin expansion to reach a 13% target in 2019. With implied global penetration of only 23%, meaningful pricing power, and content expense leverage, we forecast ~$42bn in revenue and $18 in GAAP EPS in 5 years. We believe this continues to support a 12-month target price of $420 and, as a result, we maintain our Buy rating.”

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