Despite investors lapping up shares of Netflix, Inc.
Learnings from Quarter
- U.S. subscriber growth is slowing less than expected, despite un-grandfathering driving churn higher.
- U.S. average revenue per user for the fourth quarter is trending above Deutsche Bank's estimate.
- International subscriber growth exceeded estimates in the third quarter and is expected to grow in line in the fourth quarter.
- The company believes first-quarter consensus estimate for international subscriber growth is too optimistic, given tough comparisons related to the rest-of-the-world launch in the quarter.
- Noting that the management is wanting to invest in content aggressively, Deutsche Bank is of the view that the investment should lead to a gradual build of operating leverage as opposed to a more rapid acceleration expected in a bull case scenario.
- The company is expecting to increase the number of hours of original content markedly in 2017; revenue from licensing content in China should see modest upside, as the company alters its plan to a licensing model rather than market entry.
Raising Estimates, Price Target
Citing the 20 percent rally in the shares of the company in after hours in reaction to the results, the firm reiterated its Sell rating. The firm premised the rally on the lowered bar, which the company scaled in the third quarter.
As such, the firm raised its price target to $92 on higher estimates.
In pre-market trading, shares of Netflix are surging up 17.99 percent to 117.75, and at last check, Netflix was up 18.12 percent at $117.81.
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|Oct 2016||SunTrust Robinson Humphrey||Maintains||Hold|
|Oct 2016||Credit Suisse||Maintains||Neutral|
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