Netflix's Q2 Subscribers Miss 'A Mere Hiccup'

Loop Capital’s David W. Miller believes the subscriber guidance miss Netflix, Inc. NFLX reported for Q2 was “merely a bump in the road.”

Miller initiated coverage of the company with a Buy rating and price target of $125.

Competitive Advantage

The analyst believes that as soon as Netflix “completes localizing its service in select countries with a more fortified content selection, Netflix should get back to meeting, and/or beating, previously-dispensed guidance bogies within its international SBU.”

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In fact, Miller believes pricing structure and the value the consumer gets from that structure is potentially the largest competitive advantage for the company as it seeks to grow subscribers.

“For a mere $7.99/month, consumers get a smorgasbord of content across film and TV dating back to the 1960s. There is no "a la carte" pricing. Consumers can watch what they want, when they want, streamed instantly to a variety of CE devices,” the analyst explained.

Value For Money

Miller elaborated that this was in complete contrast to VOD, which is priced per film and the choices are limited. In addition, there could be issues with “disc quality.” In short, no single competitor offers the variety of choice at the price point that Netflix does.

The analyst went on to say, “[P]eople just want to watch great content, no matter what the age of that content, and it is the code baked inside NFLX’s recommendation engine that allows a win-win for both subscribers and studios.”

At last check, Netflix was up 1.72 percent on Wednesday morning, trading at $104.10.

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