Netflix: Negativity May Be Airing, But Don't Change The Channel - An Algorithmic Perspective
- Netflix has dropped a dramatic 21%-25%, following its "disappointing" Q3 earnings and Q4 guidance, both of which indicated low subscriber growth.
- Some analysts believe this spells trouble, citing not-so-speedy margin and revenue growth, compelling new competition, rising content costs, slow domestic growth, and unimpressive international results as further problems.
- While critical appraisals are understandable, Netflix continues to demonstrate positives: i.e., historically unexpected milestones and rebounds, global market leadership, strong channel identity, and dedicated production of new, original, niche-specific content.
- Further, Netflix's competitive resilience, diverse projects, net growth, expansion potential, and user-experience commitment, in tandem with present-day U.S. streaming- and cable-market climates, signal noteworthy future prospects, analysts and investors believe.
- I Know First's algorithm predicts a bullish forecast for Netflix in the 1-month and 3-month time frames.
Netflix Looking To 'Bloodlines' To Be Its Next 'House Of Cards'
- Netflix has seen great success with original content such as ‘House of Cards’ and ‘Orange Is The New Black,’ but has yet to find its next big hit.
- 'Bloodlines' could be the streaming service's next game-changer because of its strong cast and respected showrunners.
- While the company has many big time names attached to future programming, ‘Bloodlines’ gives it yet another award season contender.
- Netflix is pumping billions of dollars of new content into its pipeline for 2015 and beyond but it will take some time for those investments to pay dividends for investors.
- We wrote that Netflix has long-term potential just days before earnings, making it a buying opportunity.
- Netflix reported earnings the next week and the stock was hit 20%.
- Like Mark Cuban, we think it was a good time to buy.
Netflix: Subscriber Retention Issues Flagging The Trouble Ahead
- Subpar subscriber growth in the domestic market masked the deterioration underway in subscriber retention in international markets.
- If the trend persists for the next two quarters, investors will begin to re-price the international growth opportunity for Netflix.
- Investors pinning their hopes on profitability of the international segment should brace for a wild ride in the future.
Netflix: Mark Cuban Misses The Boat And Why Shares Are Still Unattractive, Expensive And Overrated
- Mark Cuban buys 50K shares of Netflix.
- Reasons why Netflix most likely won't be acquired.
- Netflix's latest earnings report shows investors why it cannot support its current sky-high valuation.
- Even after the earnings sell-off, shares of Netflix are still expensive and unattractive.
Netflix, Streaming Video On Demand Will Change TV Forever
- Netflix is well positioned as the streaming video on demand model works extremely well in the internet of things.
- However, competition, and the improving scale of competitors may challenge Netflix's ability to raise pricing. As a result, the industry will consolidate around a few applications that can replicate MCVPs.
- Standard multichannel video providers like Comcast, DirecTV and Verizon may focus more on content production and take on a role in which they distribute packages of SVOD applications.
- Given the high rate of penetration of SVOD, and the superior functionality, the business model should change quite considerably over the next five years.
If Content Is King, What Kind Of Emperors Are Netflix And Amazon?
- Content is king but not all kings are equal.
- This part of the series looks at Amazon's and Netflix's content to determine just exactly what kind of kings they are and how their reign will turn out.
- The recent increase in streaming competition will put an even greater premium on content.
- Both are still very expensive.
Is Netflix's Downplaying Of HBO Competition Real Or From Fear?
- Netflix's streaming model now under siege.
- Slowing subscription sign-ups could be a harbinger of things ahead.
- The company will have to spend more for original content to maintain growth.
Netflix Sinks On Subscriber Growth Decline: Is The Market Saturating?
- Even though company revenues were more or less in-line with expectations, domestic streaming subscriber additions fell significantly short of guidance.
- Despite strong international growth potential, the U.S. still accounts for roughly 65% of Netflix's value.
- We find some evidence of subscriber growth moderating and we believe that incremental customer additions will become difficult for Netflix.
Netflix Popular In New Zealand, But Real Test Remains
Ignore The 25% Crash, Netflix's Results Aren't Nearly As Bad As They Look
- Netflix crashed 25% immediately after reporting quarterly earnings as the company missed subscriber estimates and handed in a weak profit forecast for the fourth quarter.
- The company's profits will suffer because it is aggressively investing in overseas growth. This is painful in the near-term, but is critical to ensuring long-term growth.
- In addition, fears of HBO's stand-alone streaming service are overblown. Netflix and HBO are not competitors, but rather complementary services.
- Netflix's price hike negatively impacted subscriber growth in the most recent quarter.
- Streaming content obligations continue to balloon as well.
- Despite its 20% drop, NFLX remains significantly overvalued.
- Netflix reported earnings in-line with consensus expectations.
- The company's guidance for subscriber growth reflects maturation of its market.
- At a P/E of 93, the company's stock still prices in highly optimistic growth expectations.
- NFLX down 26% after hours thanks to dismal earnings report.
- Hits came from low subscriber growth, huge negative cash flow, poor 4Q guidance.
- Soon it may have to compete with HBO, CBS streaming options in marketplace.
- Netflix reported weak Q3 2014 results.
- These results confirm my original opinion that investors should short the stock.
- As outlined in my earlier article, I expect Netflix to continue to fall towards its intrinsic value of ~$240/share or lower.
Wed, Oct. 29, 1:22 PM
- A bid by Aereo to be defined as a cable provider gained support from the FCC with a new proposal out this week which was described in a blog post written by Chairman Tom Wheeler.
- The agency supports "open access" for consumers to high-speed broadband delivery and the right of over-the-top firms to offer programming owned by pay-TV providers and broadcasters.
- In essence, the FCC thinks the bundled pay-TV model should be broken so that consumers will not be forced to pay for channels they never watch.
- What to watch: Though Aero isn't likely to be the ultimate pay-TV disrupter without the deep pockets to license content, the position of the FCC opens the door for other Internet video players to emerge and chips away at the bundled channels model.
- Related stocks: DISH, DTV, CMCSA, CHTR, CVC, TWC, VZ, T, NFLX.
Mon, Oct. 27, 11:53 AM
- BTIG Research is out with a new research note in which it reports that Verizon is offering FiOS customers a free year of Netflix (NFLX -1.7%) service and a $150 gift card if they sign up for the company's triple play service.
- Further review of the deal by DSLReports.com indicates the offer is limited to New York City customers for only a limited sign-up period.
- What to watch: Though the promotion isn't widespread or lasting, it indicates some capitulation from the pay-TV side on Netflix as a staple.
Fri, Oct. 24, 1:48 PM
- RBC is out with a forecast on which studios will make the most money in 2015 from selling off-network series to SVOD concerns such as Netflix (NASDAQ:NFLX), Amazon Prime (NASDAQ:AMZN), and Hulu.
- CBS Studios (NYSE:CBS) leads the pack at $179M, while Warner Bros. (NYSE:TWX) is expected to bring in $106M and Lion's Gate (NYSE:LGF) about $61M.
- Sony Pictures TV (NYSE:SNE), Fox (NASDAQ:FOXA), and ABC Studios (NYSE:DIS) are pegged to bring in $40M-$43M.
- The overall spend of the top three streamers on older series is expected to rise 31% to $6.8B next year.
Mon, Oct. 20, 7:51 AM| 3 Comments
Fri, Oct. 17, 2:26 PM
- Moody's calls the decision by CBS (CBS +2.3%) to move forward with a streaming service another step forward in the "transformation" of content delivery.
- The ratings agency thinks the product will be attractive to millennials and cord nevers, but is undermined a bit by not including NFL broadcasts.
- In an interesting pullout, Moody's predicts the service won't have a material impact on subscriber demand for SVOD concerns such as Netflix (NFLX -2.2%), Hulu, and Amazon Prime (NASDAQ:AMZN).
- Moody's also point out that content providers will have the ability to set restrictions on content delivery in order to maximize revenue streams. Disney's (DIS +2.6%) ESPN comes to mind.
Fri, Oct. 17, 11:49 AM
- Mark Cuban on Twitter: "I'm buying NFLX stock. At half of YHOO, 10B<Twitter and small pct of major media companies, Someone will try to buy them."
- Netflix (NFLX -3.8%), which has a current market cap of $20.9B, ticked slightly higher on Cuban's remarks, but continues to sell off for the second day in a row after reporting soft Q3 subscriber adds.
- The outspoken Dallas Mavericks owner has plenty of industry experience: He once sold Broadcast.com to Yahoo for $5.7B, and now controls multiple studios and TV network AXS TV. He was less positive on Netflix back in 2010, predicting (not too accurately) the company would struggle to land deals for high-profile Hollywood content.
Thu, Oct. 16, 12:45 PM
Thu, Oct. 16, 9:13 AM
Thu, Oct. 16, 7:43 AM
- There's a widespread reset of expectations on Netflix (NASDAQ:NFLX) after the company delivers subscriber growth below guidance in Q3 and gets a reality check with HBO stepping into the streaming fray.
- Wedbush: Bearish-leaning analyst Michael Pachter take a victory lap over the sell-off, but also stays focused on the disparity between Netflix's net income and free cash flow. There's $448M over 9 quarters that needs to be sorted out, says Pachter.
- RBC: The long-term thesis on the streaming concern is still intact. PT clipped to $550.
- Piper Jaffray: The "priced for perfection" stock sees its price target reduced to $345 by analyst Michael Olson. Estimates on FY14 and FY EPS are chopped lower.
- Goldman Sachs: NFLX is still a Buy as the investment firm stays focused on revenue growth - instead of the subscriber guidance miss.
- Citigroup: The price target on Netflix is lowered to $365 due to a new set of expectations on growth and competition.
- NFLX earnings coverage: top and bottom lines, earnings report highlights, comments on HBO, conference call breakdown.
- NFLX -25.3% premarket to $335.15.
Wed, Oct. 15, 7:22 PM
- "Our per-member viewing and retention in the US are as strong as ever," Netflix (NASDAQ:NFLX) declared in its Q3 shareholder letter (.pdf), rejecting the view that competition had much to do with its light Q3 subscriber adds. Rather, blame is largely placed on price hikes for new subs.
- Were U.S. penetration rates also a factor? With 37.2M U.S. subs at the end of Q3, Netflix is now used by nearly 1/3 of American households, not counting those getting free access via account-sharing.
- On the earnings Q&A (video), management defended Netflix's aggressive international spending, noting (among other things) the additional scale provided by foreign markets makes it easier to finance big content deals. The company also highlighted Adam Sandler's international appeal, and that of Netflix's original content.
- International markets that launched before 2014 are now "collectively profitable on a contribution basis." However, 2015 margins will be dinged by a higher VAT rate going into effect in January - Netflix expects a 5% European impact on average.
- Q3 U.S. streaming contribution margin was 28.6%, and international margin -8.9%. In Q4, those numbers are expected to drop to 28.4% and -24.5%.
- Other details: 1) Content obligations rose by $1.2B Q/Q to $8.9B. 2) Free cash flow is expected to continue trailing EPS in the coming years due to content spend. 3) The DVD sub base fell by 300K to 6M.
- NFLX -25.8% AH. Q3 results, details.
Wed, Oct. 15, 5:37 PM
Wed, Oct. 15, 4:26 PM
- Netflix (NASDAQ:NFLX) issues a statement on the move by Time Warner to offer HBO as a stand-alone service
- The company spins the move as inevitable and sensible, while predicting both streaming services will prosper as consumers move to Internet TV.
- CEO Reed Hastings has a long history of complimenting HBO, but he will be as eager as anyone to get a better view of how the new HBO streaming product will be marketed and priced.
- Shares of NFLX are down 23.4% in AH trading to $344.10 after Q3 results.
Wed, Oct. 15, 4:08 PM
- Netflix (NASDAQ:NFLX) reports its added 3.02M subscribers in Q3 vs. guidance of 3.69M and a recent history of 1.69M (Q2), 4.0M (Q1), 4.07M (Q4 2013), and 2.73M (Q3 2013) over the preceding 4 quarters.
- The company cites higher subscription prices as a factor in its sub guidance miss.
- Total subscribers rose to 53.06M by the end of the period.
- Total contribution margin ended up at 18.0%, down 50 bps Q/Q.
- U.S. contribution margin +500 bps to 28.6%.
- Q4 sub guidance: 4.00M net additions are expected - 1.85M domestic and 2.15M international.
- NFLX shareholder letter (.pdf)
- NFLX -18.9% AH.
Wed, Oct. 15, 4:06 PM
Wed, Oct. 15, 12:05 PM
- The latest big revelation from Time Warner (NYSE:TWX) at its engaging Investor Meeting presentation is that licensed rights to Friends will go to Netflix (NFLX -2.9%) for streaming in the U.S. and Canada.
- All 10 seasons of the hit show will be available on Netflix beginning on January 1.
- Warner Bros. Television has been raking in network licensing fees on Friends since the last episode aired in 2004.
- Previous: HBO to go stand-alone
Wed, Oct. 15, 11:32 AM
- Netflix (NFLX -2.6%) slid a little lower after Time Warner announced HBO would become a stand-alone service sometime in 2015.
- Though it isn't clear how much of HBO's programming will migrate over to the OTT product, the mention of the "international possibilities" of a streaming HBO is enough to catch the attention of Netflix watchers.
- The development also has implications for Hulu (DIS, CMCSA, FOXA) and Amazon (AMZN -1%) which could end us as delivery partners or direct streaming rivals, according to Re/code.
- Pay-TV operators (CHTR, CVC, DISH, DTV) are in a bit of a box by the plan and may choose to play hardball with HBO.
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