SunTrust Robinson: Large customer base and strong brand drives earnings that exceeded expectations

On Thursday SunTrust Robinson Humphrey issued an earnings recap of Netflix Inc.

. Currently SunTrust Robinson Humphrey rates Netflix as Neutral and raised their price target from $480 to $550. Robert Peck and Rodney Hull, analysts at SunTrust Robinson Humphrey, wrote, "We believe NFLX to be the dominant internet streaming video service, offering consumers a robust yet highly curated selection of premium television and movie content. The company is at the forefront of the secular shift to premium streaming video and boasts a large installed customer base, strong brand, focused strategy, superior monetization model, and growing portfolio of differentiating original content...While we are comfortable with near-to intermediate-term top-line expectations, we do not see upside to margins/bottom-line as we suspect international profitability may be slower to turn up as the company invests in content and brand. The continued launch of new markets and original content should also continue to weigh on cash flow." Netflix is continuing to expand internationally as their growth in subscribers from 2.4 to 2.5 million can be partly attributed to new market opportunities in Australia and New Zealand. Domestically Netflix outperformed consensus estimates of 2.1 million subscribers by reporting 2.6 million paid subscribers. Netflix reported EPS of $0.77 vs consensus estimates of $0.63, exceeding expectations. However SunTrust sees an increased competition for subscribers as other companies try to take market share from Netflix. This may increase the cost of content and decrease profits for Netflix in the future. In the short term Netflix can use its size to increase their leverage and possibly conduct share buybacks. Netflix is currently up 11.58 percent premarket. Shares of Netflix previously closed at $475.46.