Survey Says Santa May Have Delivered A Solid Q4 To Netflix

After posting solid gains in 2016, Netflix, Inc. NFLX appears well positioned to continue its streaming momentum into the company’s fourth-quarter release on January 18.

Survey Results: Original Content And Growth

A quarterly subscriber survey conducted by Baird Equity Research suggests Netflix saw solid domestic growth in Q4, largely due to the services’ original series "The Crown," "The OA" and "Luke Cage."

Fifty-one (51) percent of the Q4 U.S. subscriber survey respondents indicated they were Netflix subscribers, up from 46 percent a year ago and up 200 bps sequentially. This compares with flat sequential growth in the same survey in 2015 and 2014.

Rating And Valuation

Baird maintains a Neutral rating on the company. According to the firm, the company valuation is roughly fair, “given the combination of growing competition, negative free cash flow and potential higher network costs under likely new net neutrality rules.”

While international growth also remains solid, it is more difficult to gauge. Baird is forecasting Q4 domestic and international streaming net additions of 1.45 million and 3.75 million, respectively, in line with guidance but down slightly year-over-year.

Furthermore, Netflix is becoming much more reliant upon original content, due to an increasing number of services shifting to an original content strategy versus licensed content strategies.

In addition to the Neutral rating, Baird maintains a $120 price target on Netflix. Shares were seen up 3 percent on the first trading day of 2017.