Sell-Side Reaction to Netflix 3Q05 Results - Derek Brown, Pacific Growth Equities (NFLX)

| About: Netflix, Inc. (NFLX)

Pacific Growth Equities Internet analyst Derek Brown sent a note to clients evaluating Netflix' Q3 results. He has a "Buy" rating on NFLX. Extracts:

Strong Q3:05 Results And Bullish Guidance Reinforce Our Positive Thesis; Tweaking Estimates; Reiterating Buy Rating

INVESTMENT SUMMARY

• Netflix posted strong Q3:05 results yesterday post-close, including rev/PF EPS of $174M/$0.20 vs. our est of $175M/$0.17 and consensus of $175M/$0.15
• Updated guidance for Q4:05 and 2006 points to rapid subscriber growth and enhanced profit profile, reinforcing our view that Netflix’s business has reached an inflection point
• We are tweaking our ests and reiterating our Buy, given what we see as attractive risk/reward profile and the prospect of easing competitive pressures

VALUATION AND RECOMMENDATION

In recent months, Company and marketplace data have repeatedly suggested to us that: (i) Netflix’s franchise is very much intact; (ii) the online DVD rental market may be larger than previously expected; (iii) the worst of the competitive “storm

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Tagged: , Music & Video Stores, Earnings
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