Netflix's Interconnection Agreements To Reduce Profitability
Netflix's European Expansion To Drive Stock Higher
- NFLX entered Europe on Monday with France and Germany being its two biggest markets.
- Support from incumbent cable and telcos is a positive while competition may heat up.
- Leveraging content and recommendation engine may attract additional subs, thereby driving the stock higher.
- The company has been on a tear over the last couple years, but could still offer value.
- The shift away from the high-margin DVD business is being offset by international expansion.
- It's now competing with HBO very effectively.
- I contend that Netflix customers are highly price inelastic in their demand for the company's streaming service.
- Therefore, Netflix could increase its pricing without losing a significant number of customers.
- I run through five hypothetical scenarios to determine the impact pricing increases could theoretically have on the company's EPS.
Spinning Netflix Out Of The Growth Portfolio For TRI Pointe Homes
- I wanted exposure in the housing industry, so I doubled up by adding TRI Pointe to the growth portfolio which already had Toll Brothers.
- Netflix is a great company, but I've been using it as a trading vehicle as it can be volatile.
- TRI Pointe is undervalued based on 2015 earnings estimates and earnings growth expectations.
Netflix And Time Warner: What This Year's Emmy Awards Tell Us About Big Media
- Winning a Emmy gives executives a tangible form of validation they can use to justify their choices to both boards of directors and stockholders.
- Streaming networks are slowly gaining ground against their broadcast and cable rivals but haven’t quite broken down the door just yet.
- The incoming threats from streaming networks have made other networks paranoid and as a result made a number of risky decisions.
- Netflix bears miss a number of key points.
- The DVD segment is not that important anymore.
- Contribution margins are much healthier than we are led to believe.
- The balance sheet is getting a lot better.
- Current valuation may be too low.
Buying Back Into Netflix Using Under Armour Profits
- Fundamentally, Netflix is the better buy when compared on an earnings growth basis.
- You can't argue locking up profits on a 66% gain in Under Armour.
- I will definitely be buying Under Armour again if I see it pull back a bit.
- Netflix is highly over valued.
- Free Cash Flow generation is lower than investors may expect and as a result EV/EBITDA or P/E multiples are not useful in valuing the company.
- P/DCF analysis indicates that Netflix trades at almost 2x its intrinsic value, implying a potential downside of 50% from the current price.
- Netflix's current business strategy is extremely risky.
- A new service with the potential to diminish Netflix's subscriber base already exists.
- Netflix's competitors are much more suited to survive in the long-run.
- Until the company finds a way to mitigate the risk of its operations, its stock is not a sound investment.
Netflix: Why The Streaming Service Is A Must-Watch In More Ways Than One
- Netflix has taken the cable industry by storm due to top tier programming like ‘House of Cards’ and ‘Orange Is The New Black'.
- Netflix has 31 total nominations going into next week’s Emmy awards including a pair of wins it collected over the weekend.
- In addition to ‘Cards’ and ‘Orange,’ the network has a solid slate of shows in development, including a deal with Marvel.
- By not having to release ratings Netflix has a huge competitive advantage over its rivals.
- Netflix has successfully been able to increase revenues, profits, and subscribers, along with subscription prices, all of which contribute toward its competitive strength.
- International growth will take its toll out of margins; however, it will also significantly increase the company’s addressable market.
- Net neutrality remains an issue the US Federal Communications Commission will be deciding in the upcoming months.
- While the self-learning algorithm accurately predicted NFLX's gain of over 25% since January, the most contemporary forecast indicates that shares will flounder in the short- and mid-term, before rising again.
Netflix's Headwinds Are Greater Than It Would Have Us Believe
- Netflix's investment in content will cost more and take longer than anticipated.
- The net neutrality rulings do not appear to be leaning in Netflix's favor.
- Buying TWC or CBS just for their subscription based channels offers greater value then Netflix.
- Netflix surpassed HBO's subscription revenue.
- Netflix may become more profitable than HBO as it increases the pricing of its subscription and scales the service internationally.
- Surpassing HBO is just a minor pit stop to "world domination."
Netflix, Inc. Reaches 3 Million Subscribers In U.K.
- Trading long in a down market isn't the best way to trade, but is Netflix too good to pass up?
- I go over a potential trade you can make on Netflix and give you a look at how to approach an investment.
- Netflix's headwinds going forward could be a little overblown.
AMC Networks And Netflix: How The Resurrection Of 'The Killing' Impacts The Media Industry
- AMC's launch of 'The Killing' generated positive buzz which all but went away following its first season fake-out finale.
- AMC and Netflix teamed up to bring back 'The Killing' following its initial cancellation. AMC then cancelled the series again leading to Netflix picking it up for a final run.
- While AMC has struggled to launch new shows since 'The Killing,' Netflix hasn't had a problem.
- Overall the cable industry is losing ground to streaming services.
Yesterday, 11:49 AM
- Netflix (NFLX -1.4%) has given an "eye-popping" two-year commitment to comedy series Love from Judd Apatow, reports Variety. CCO Ted Saranos says the new series will bring a whole new level of "agony and ecstasy" to the modern day comedy of manners.
- The company cleared a hurdled in France after telecom Bouygues announced it would integrate the streaming service into its set-top boxes this fall. Orange may follow suit.
- The third season of House of Cards is currently being filmed. The 13-episode original series is expected to debut in February of 2015.
- Shares of Netflix dipped below $450 for the first time since mid-August before recovering a bit.
Yesterday, 8:20 AM| 3 Comments
Mon, Sep. 15, 3:39 AM
- Netflix (NASDAQ:NFLX) is continuing its international expansion this week, launching service in in France, Germany, Austria, Switzerland, Belgium and Luxembourg.
- "This is the biggest international launch we’ve ever done,” says CEO Reed Hastings. "It represents nearly 80M broadband households and about 200M people."
- International expansion is critical to Netflix's growth prospects. The company's current international investments, such as Latin America and the U.K., are on track to be profitable by the fourth quarter.
Wed, Sep. 10, 9:25 AM
- A number of Internet companies are staging an organized protest against the FCC's net neutrality proposal today.
- Though Twitter (NYSE:TWTR), Netflix (NASDAQ:NFLX), Mozilla, and Reddit aren't actually slowing down their websites, they are drawing attention to the current and suggested policies of broadband providers (CHTR, CVC, TWC, CMCSA, VZ) with loading icons dedicated to the cause of an open Internet.
- The proposed "fast-lane" premium pipeline for content providers would mark the end of Internet freedom, according to the group.
Tue, Sep. 9, 10:18 AM
- Netflix (NFLX +1%) is on the rise after RBC Capital boosts its price target on the Outperform-rated stock to a cool $600.
- The investment firm sees a significant growth opportunity for the streamer in Europe and forecasts a 10%-20% penetration rate in key markets.
- Netflix has very strong brand reputation with consumers in the U.S., according to new tracking. Churn rates should dip, predicts RBC.
Mon, Sep. 8, 2:39 PM
- A new report from Nielsen puts some numbers to the escalating transition of TV viewing toward digital channels.
- In the key 18-34 year old demographic, digital video consumption rose 53% to 35 minutes a day.
- The digital growth rate was even higher for the 35-49 year old group with a 80% rise to 26 minutes a day.
- 50-64 year olds increased digital viewing by 60%.
- Live TV viewing dropped 1%-2% across age groups.
- Related stocks: CHTR, CVC, TWC, NFLX, DISH, DTV, VZ,
- Nielsen Cross-Platform Report
Wed, Sep. 3, 8:38 AM
- Netflix (NASDAQ:NFLX) lands streaming rights to upcoming Fox TV series Gotham under the terms of a new deal with Warner Bros. Worldwide Television Distribution.
- It appears to be the first time that Netflix has bet on a network show which hasn't yet debuted.
- Chief Content Officer Ted Sarandos points to the global appeal of the Batman franchise in describing the content grab.
- Terms of the deal weren't disclosed, although the $2M-per-episode cost that Netflix reportedly paid out for rights to The Blacklist could give investors a ballpark figure.
Thu, Aug. 28, 1:23 PM
- Deadline reports Netflix (NFLX +0.4%) has landed the rights for popular NBC crime drama The Blacklist from Sony for the steep price of $2M/episode.
- The site notes the deal is believed to be the most lucrative subscription VOD agreement ever for a TV series. Season 1 will reportedly be available next weekend.
- Netflix had $7.7B in streaming content obligations at the end of Q2, up $600M Q/Q. The company has admitted seeing a competitive bidding environment for content deals, as Hulu and (especially) Amazon show a willingness to pay high prices for popular material.
- Amazon inked a multi-year deal with HBO in April. It reportedly involved a $300M+ price tag.
Tue, Aug. 26, 9:11 AM
- Netflix (NASDAQ:NFLX) went home empty-handed last night from the Emmy Awards in L.A.
- The streaming company had more than doubled the number the nominations this year to 31 to help it flex its content muscles, but couldn't get over the hump in major categories with hit shows House of Cards and Orange is the New Black.
- Netflix did win 7 awards at the Creative Arts session which isn't part of the broadcast show.
- NFLX -0.8% premarket
Thu, Aug. 14, 3:38 PM
- Tiger Global Management was active in buying and exiting positions in consumers stocks over the last quarter, according to th hedge fund's most recent filing.
- New positions: Netflix (NASDAQ:NFLX), Vera Bradley (OTC:VERA), Coca-Cola (NYSE:KO).
- Increased: 21st Century Fox (NASDAQ:FOXA) to 19.26M shares; Restoration Hardware (NYSE:RH) to 3.193M shares.
- Maintained: Burger King (NYSE:BKW) at 7.2M shares, MasterCard (NYSE:MC) at 3.44M shares, Dollar General (NYSE:DG) at 7.893M shares.
- Exits: SodaStream (NASDAQ:SODA), Kate Spade (NYSE:KATE), Carter (NYSE:CRI).
- SEC Form 13F
Thu, Aug. 14, 10:42 AM
Fri, Aug. 8, 1:47 PM
- Netflix (NFLX -0.4%) CEO Reed Hastings took to Facebook to call attention to what he calls the milestone achievement of the company passing HBO in subscriber revenue.
- "HBO rocks, and we are honored to be in the same league," wrote the exec.
- During Time Warner's (TWX +1.7%) earnings call earlier this week, CEO Jeff Bewkes was spared any direct questions about the Netflix factor. Perhaps just as well after Bewkes in 2010 famously likened the metamorphosis of Netflix into a streaming giant to the Albanian army trying to take over the world.
- TWX earnings call transcript
Wed, Aug. 6, 8:49 AM
- Execs with Disney (NYSE:DIS) used the music from Frozen to set the stage for their comments on the company's FQ3 performance.
- Theme park attendance growth has been in the single-digits, but guest spending has been boosted by the MyMagic+ program. CFO Jay Rasulo says the program has more revenue impact to come.
- CEO Bob Iger seemed unconcerned about any revenue slowdown at ESPN. He noted advertisers are buying spots closer to the run dates and ESPN had an "extremely good" upfront.
- The company says it's very bullish on the SEC Network. There is an expectation that 60M U.S. subscribers will watch the SEC programming beginning this month.
- A question about Disney's relationship with Netflix (NASDAQ:NFLX) drew an enthusiastic response from Iger. No concrete numbers were thrown out, but it appears Disney will continue to benefit as Netflix grows globally. The Disney brands can be "well monetized" on the Netflix platform, notes Iger.
- Earnings call transcript
- DIS -0.5% premarket
Mon, Jul. 28, 9:57 AM
- Netflix (NFLX -0.3%) is in talks to purchase the streaming rights for Seinfeld, confirms show co-creator Jerry Seinfeld.
- The current syndication deal for the show which has generated $3B of revenue for Time Warner expires in September.
- What to watch: Media analysts think the Seinfeld SVOD rights could be quite valuable and a potential Netflix differentiator with it one of the few properties that easily generates repeat viewings. The wildcard is if bidding competition from other streamers pushes the price tag into record territory.
Tue, Jul. 22, 11:24 AM
- "The launch into the six new European markets appears costlier than anticipated," writes Janney after taking in Netflix's (NFLX -4.5%) light Q3 EPS outlook. Though the company expects its U.S. streaming contribution profit to rise $18M Q/Q to $245M, its international contribution loss is expected to grow $27M to $42M.
- RBC expects Netflix's international ops to stay in "early-stage margin mode" for several years. Nonetheless, it sees the unit's margins matching U.S. levels long-term, and is reiterating an Outperform.
- Over a dozen firms have still hiked their Netflix targets in response to the company's better-than-expected subscriber adds and healthy Q3 sub forecast. Pac Crest (PT hiked by $10 to $530) notes total Q2 adds of 1.7M beat its forecast by 300K, and that lower marketing spend is offsetting higher content costs (thus driving margin expansion as revenue grows).
- Mentioned on the CC (transcript): 1) CFO David Wells suggests Netflix open to stepping up its content spend once margins hit 30%. U.S. streaming margin was at 27.1% in Q2. 2) Reed Hastings declares the impact of Netflix's price hike on sub adds to be minimal. 3) Expenses related to paid peering deals are dwarfed by content costs. 4) 10%-20% of international content tends to be local fare. 5) Netflix sees its superior TV show library as a differentiator relative to Amazon's European service (formerly called Lovefilm).
- Prior Netflix earnings coverage
Mon, Jul. 21, 4:16 PM
- Netflix (NASDAQ:NFLX) expects Q3 EPS of $0.89, below a $1.06 consensus.
- 570K U.S. streaming subs were added in Q2, above guidance of 520K. 1.12M international subs were added, above guidance of 940K. The U.S. and international bases respectively stood at 36.2M and 13.8M at quarter's end. The DVD base fell by 391K to 6.3M.
- Netflix expects to add 1.33M U.S. subs in Q3, and 2.36M international subs.
- Q2 free cash flow was $16M vs. $8M in Q1 and $13M a year ago. Domestic streaming contribution profit rose to $227M from $151M a year ago (margin of 27.1%), and international streaming contribution loss fell to $15M from $66M (margin of -5%).
- Streaming content obligations total $7.7B, up from $7.1B at the end of Q1 and $6.4B a year ago.
- ARPU is expected to "rise slowly" thanks to price hikes for new members. Netflix will launch in Germany, France, Austria, Switzerland, Belgium, and Luxembourg in September.
- NFLX +1.6% AH. Q2 results, shareholder letter (.pdf)
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