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- But I'm still buying a small batch to dollar cost average down.
- The fundamentals look very expensive but this is an earnings growth story.
- The company continues to expand globally and will soon realize returns on their investments.
Future Netflix Pricing Moves Hold Key To Investor Decisions
- Netflix erroneously blamed pricing for its lower-than-expected subscriber growth, leading to a 25% drop in share price.
- Consumer research suggests Netflix could have successfully upped its monthly price to at least $8.99 and even $9.99 for both existing and new subscribers, significantly impacting profitability.
- More aggressive pricing could double near-term profitability.
- Netflix analysts and investors should encourage company management to give added focus to the pricing function and consider broader and steeper price increases.
- On a sales multiple basis, Netflix is reasonably priced when compared to other large-scale online media names.
- International subscriber growth, along with domestic price increases, will drive the bulk of the revenue growth going forward.
- Domestic subscriber growth will likely slow to a 10% CAGR, but pricing increases will drive sales growth.
- When combining international revenue at $15 billion and domestic at $10 billion, I estimate Netflix may grow revenue to $25 billion by 2019.
Netflix Off-Balance Sheet Obligations: Concerns Are Way Overblown
- Netflix's off-balance sheet obligations are actually future costs of revenue.
- There's a legitimate reason why they're off the balance sheet to begin with.
- Netflix has plenty of financial flexibility even if it overbids on content in certain years.
- NFLX is not suitable for Defensive Investors or Enterprising Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is significantly overvalued at the present time.
- The market is implying 74.66% earnings growth over the next 7-10 years, which is extremely high compared to the rate the company has seen in recent years.
- Netflix’s programming costs could be growing faster than its revenues.
- Netflix has already agreed to pay $2 million an episode for the NBC series The Blacklist.
- Companies with deeper pockets and leverage could create a bidding war for programming that Netflix can't win.
- Just because a stock falls in price doesn't mean its shares are cheaper.
- The relationship between net income and cash flow is paramount in assessing earnings quality.
- Let's tie these two concepts together with respect to Netflix and address its valuation.
- As Netflix continues to rapidly burn through cash, it will be forced to raise more by selling stock or borrowing. Either of these events is bad for shareholders.
- The company will eventually dig itself into a debt-hole that it cannot climb out of; bankruptcy is a definite possibility within a few years if this continues.
- Increasing competition, exponentially rising content costs, and non-existent customer loyalty and stickiness will limit Netflix’s growth potential.
- The safest and most profitable way to bet against Netflix is via out-of-the-money puts, which could increase in value by over 1,000% when the financial collapse occurs.
- NFLX has fundamental concerns.
- Those will likely impact the stock in the quarters that follow.
- But the stock also is bouncing off of longer term support.
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.
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)
Mon, Jul. 21, 4:02 PM
Sun, Jul. 20, 5:35 PM
Fri, Jul. 18, 11:28 AM
- Netflix (NFLX +0.2%) added 900M subscribers in the U.S. and 1.1M abroad during Q2, forecasts BMO Capital.
- The company reports its quarterly results on Monday afternoon with some of the focus expected to move outside of straight number-crunching to dissect which new global markets Netflix plans to enter in 2H and what the costs of those launches will be.
- Earnings preview
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