Netflix's Stock Is Lower Into Earnings For The First Time In 10 Quarters
- Netflix, Inc. (NASDAQ: NFLX) shares trended north in 2015, but are down 9 percent since January 4.
- UBS’ Doug Mitchelson maintained a Buy rating for the company, with a price target of $147.
- International trends are very important for Netflix’s global and US success, Mitchelson pointed out.
Netflix has launched its service to nearly 150 million broadband homes in 130 international markets. The company is expected to report its 1Q16 international net subscriber additions at 2.87 million, significantly below the 4Q15 figure of 3.51 million.
Related Link: Netflix Doesn't Understand China, New Report Says
Analyst Doug Mitchelson believes that Netflix’s US growth remains reasonable, given the company’s level of penetration and international performance. He added, “We expect international will come in slightly above expectations with particular strength in Latam and Australia/New Zealand, and the southern Europe launches appearing to go well and France still promising.”
Mitchelson noted that the vast majority of new markets are “skim” launches with limited content, which is often not in local languages.
While management is expected to guide to conservative results from these skim launches, the fact that many of these markets have healthy levels of English-speaking homes, have broadband speeds of over 6 Mbps and healthy credit card penetration levels indicates that the company can perform better in these areas, the analyst said.
International trends play an important role for Netflix’s success globally, including the US. The company’s future growth prospects are expected to be driven by the nature and timing of the launch of its services in China and other factors like “content expense ~$5b, cadence of price increases normalizing, tracking towards 40% U.S. margins in 2020, int'l eventually reaching U.S. margins),” the UBS report stated.
Latest Ratings for NFLX
|Jan 2017||Loop Capital||Maintains||Buy||Buy|
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