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Netflix Quarter 1 Follow Up

|Includes: Netflix, Inc. (NFLX)

It looks like Q1 profits beat by great margins.

  • Revenue 100m above estimate, 2.6b.
  • Operating Income 100m above estimate, 270m.
  • Net income 3x estimate, 178m.
  • EPS Beat 0.37, at 0.40.

The problem with Netflix's Q1 report was the miss on membership additions.

  • Net Additions estimated at 5.2m, at 4.95m.
  • Total memberships expected to be 99m, at 98.75m.

Also we saw International Profit beat by 3x 16m estimate, at 43m.

I believed the international profit would an inflection point and would now incur positive profits the following quarter, however that is not true because Q2 estimates to have negative 28m international profit.

Netflix beat their earnings through having higher revenue at the same 'cost of revenue' (3m discrepency since previous quarter). They net additions however has a larger affect on both the company and share price. I am looking to see better membership additions the following quarter to compensate for the amount of debt they are taking on.

Supporting Documents

  1. Q117ShareholderLetterV2FINAL.pdf

Disclosure: I am/we are long NFLX.