Wednesday, 26 July, 2017

Netflix, Inc.'s (NFLX) Q2 Guidance Upside Helps Offset Q1 Subscriber Miss

Reed Hastings Netflix: Nope, we don't want sports
Stacy Diaz | 21 April, 2017, 16:40

Quarterly revenues of $2.637 billion just missed our consensus estimate of $2.641 billion, but this figure still represents growth of almost 35% year-over-year. This report covered the first quarter of fiscal year 2017.

As far as the first quarter is concerned, The company managed to bring 1.42 million domestic and 3.53 million worldwide subscribers to its ranks.

Netflix didn't add as many new users in the last quarter as investors had been expecting, both in the United States and internationally. In comparison the number of new subscribers in the second quarter is lower than the first quarter which was 7.05 million, according to AFP.

USA paid subscribers continued to grow at a slower pace than we previously projected, with trailing 12-month paid net adds at 3.7 million in the quarter, down 32% from 5.4 million at the end of first-quarter 2016, which was down 9% versus 2015.

Q2 subscriber growth guidance (international): 2.6 million, versus Wall Street forecasts 2.1 million.

"That is not a strategy that we think is smart for us since we believe we can earn more viewing and satisfaction from spending that money on movies and TV shows", Netflix said.

In 2017, the company plans to spend more than $US1 billion marketing its content, Netflix said in the shareholder letter.

Loop Capital Markets has a Buy rating on the shares Netflix, while it lifted its price target for the shares to $172 from $162.

The company previously said it expects to invest more than $6 billion on programming this year, up from $5 billion in 2016.

"Investors ask us about Amazon's move into NFL football".

"The company is likely to continue to experience quarter-to-quarter volatility, as both the pace of subscriber additions and the path to respectable profitability remains hard to determine", wrote Dougherty analyst Steven Frankel in a research note, maintaining his neutral rating.

The service added almost 5 million subscribers during the first three months of the year, and will end March with 98.7 million customers in roughly 190 countries.

"With a growing member base spread across the world, we seek to please diverse tastes with a wide breadth of content", Netflix said. Baird remains positive on the global growth opportunity, but views valuation as fair in light of increasing competition, rising content costs and steep free cash flow losses, which the company expects to continue. "Starting this year, we can be primarily measured by revenue growth and (global) operating margins as our primary metrics".