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8 Netflix Investor Concerns Heading Into Q2 Earnings Report

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8 Netflix Investor Concerns Heading Into Q2 Earnings Report
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Ahead of the 2Q16 earnings report by Netflix, Inc. (NASDAQ: NFLX), BTIG’s Richard Greenfield highlighted eight investor concerns regarding the company.

Greenfield maintains a Buy rating on the company, with a price target of $150.

Key Investor Concerns

The analyst listed the eight biggest investor fears that management needs to address.

  • 1. Hulu: Greenfield questioned whether the success of Hulu vMVPD could threaten Netflix’s position in the U.S. “The concept being, if you start your evening with a far better TV experience on Hulu vs. legacy MVPDs antiquated product offerings, will consumers end up leaving less often for third-party SVOD offerings such as Netflix?” the analyst explained.
  • 2. Disney: Earlier in the week, Walt Disney Co (NYSE: DIS) launched ad-supported library content via a new “Throwback” section on its WatchABC app. This has raised concerns whether it would create problems for Netflix if Disney were to launch its own SVOD service. Although such a situation might be several years away, it would mean that Disney might shift content from Netflix to its owned or co-owned properties.
  • Related Link: Cantor Says Netflix Is Still A Buy, Despite 'Un-Grandfathering' And Tempered 2Q Expectations

  • 3. Inflation: Greenfield also questioned whether content cost inflation would make it harder for Netflix to achieve the profit margin and free cash flow it has been targeting in the past, “particularly as there are more buyers of content emerging not just in the US, but in all the major international markets” that the company operates in.
  • 4. Addressing Failures: The analyst also pointed out that investors have been concerned that Netflix is not admitting to content failures and continues to overspend on poor performing projects.
  • 5. Under-Amortization: Concerns regarding the company under-amortizing has persisted for some time, and Netflix needs to raise investor confidence that it is adequately amortizing content.
  • 6. Future Price Increases: “How hard will it be to raise price above the $10 level, especially if premium-priced services such as HBO begin to reduce its sticker price over the next one to two years?,” the analyst questioned.
  • 7. Abroad: Investors have also been concerned regarding Netflix’s success in Japan and other Asian markets.
  • 8. Bandwidth Usage: There have also been concerns regarding whether bandwidth usage has declined with increasing competition.
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    Latest Ratings for NFLX

    DateFirmActionFromTo
    Mar 2017Deutsche BankMaintainsHold
    Mar 2017BernsteinInitiates Coverage OnOutperform
    Mar 2017JefferiesUpgradesUnderperformHold

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