Netflix Bulls Win The Day As Subs Data Outweigh Competition Concerns

Netflix, Inc. NFLX shares set a new 52-week high of $143.46 as investors put the free cash flow and competition concerns on the backburner and rather focused on better-than-expected subscriber additions.

Print Highlights

Here are some highlights of Netflix’s Q4 earnings:

  • Netflix reported Q4 EPS $0.15, beats by $0.01.
  • Revenues at $2.48 billion, beat by $10 million.
  • Netflix added 1.93 million domestic subscriptions, 5.12 million internationally.
  • Netflix sees Q1 2017 EPS at $0.37 versus $0.18 estimate, streaming revenue of $2.516 billion.
  • Netflix expects to reach ~7 percent operating margin this year.

Looking Forward: Globalization, Original Content

For the first quarter, Netflix expects to add 1.50 million domestic streaming customers and 3.70 million International streaming customers. Total streaming revenue guidance as a result calls for $2.516 billion.

“Bears may point to weak FCF in the quarter, but the Bulls win the day with very strong sub trends, helped by ‘re-joins’ in the US and continuing traction and more localization in international markets,” BMO analyst Daniel Salmon wrote in a note.

Netflix is benefiting from its deep slate of original content that is helping to reduce churn, bring back old customers, while focus on local content is driving growth on the International side.

The U.S. sub growth should continue amid upcoming stronger content slate with new seasons of "Orange is the New Black," "House of Cards," "Bloodline," "Stranger Things" and "The Crown."

Analyst Rating, Commentary

But, Salmon kept his Market Perform on Netflix shares unchanged in part due to the global launch of Amazon Prime Video at a 20 percent lower cost.

That said, the analyst is quick to point out that Netflix's results are a “good reminder that IP-delivered TV is still in its infancy, there is room for multiple winners, and global rollouts like Prime's help bring attention to all OTT services.”

At last check, shares of Netflix had risen 5.23 percent on the day to $140.23, while Salmon raised his target price to $150 from $115.

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Posted In: Analyst ColorEarningsNewsGuidancePrice TargetReiterationAnalyst RatingsMoversTechMediaBMODaniel Salmon
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