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Re: nflxvery few comments on cash-flow. Street Takeaways - Netflix Q4 Earnings Friday, January 18, 2019 02:07:58 PM (GMT) Overview: The stock is trading down ~1.2% following last night's fourth quarter release that included EPS $0.30 vs FactSet $0.24 on revenue $4.19B vs FactSet $4.21B and global paid net adds of 8.837M vs consensus 7.730M. Management also provided first quarter guidance, expecting EPS $0.56 vs FactSet $0.84 on revenue $4.49B vs FactSet $4.60B and global paid net adds of 8.9M vs FactSet 8.38M. Reaction to the print has been generally upbeat despite downward pressure on shares, with analysts consistently attributing weakness to lofty expectations and the stock's +50% move since Christmas Eve. While top line performance was noted as being slightly lower than expected on F/X headwinds, firms commonly highlighted strong paid net adds, driven by international outperformance (domestic essentially in-line), with international paid net adds of 7.308M vs consensus 6.13M. Forward discussion also tended to be upbeat. Revenue guidance below consensus was largely shrugged off by analysts surveyed who noted continued F/X headwinds and a more gradual implementation of price increases than some had modeled. Positive focus was instead on International paid net adds guidance of 7.30M vs consensus 6.36M, along with reiterated guidance for a 13% operating margin for full year 2019. All in, bullish analysts remain confident in the company's position within the strong global shift to on-demand entertainment. Sentiment around the stock remains relatively constructive, as a quick look at sell-side sentiment shows 71% of firms keeping Buy-equivalent ratings compared to a 49% average for the S&P 500; average price target of $402.88 represents a 15.4% premium to current levels. Analyst Commentary: Evercore ISI analyst Anthony DiClemente - raises target In the context of NFLX shares up ~50% since Christmas coupled with news of a price increase in the US, feels Netflix posted strong 4Q sub results but mixed 1Q19 guidance against elevated expectations. Notes 1Q19 revenue guidance was light both domestically and internationally however, with a gradual price increase implementation planned in the US and FX headwinds intensifying internationally - firm reduces 1Q19 financial estimates while modestly increasing full year top line forecasts. Target to $350 from $325 Maintains an In-Line rating Guggenheim analyst Michael Morris - Firms investment thesis remains based on beliefs that 1) the Netflix consumer offering is a substantial customer value in both price and utility, and 2) the company's efficient model will continue to support the virtuous cycle of quality content delivery and monetization. Feels the company remains on course to both invest to expand global content reach and to increase revenue at a pace that will drive higher operating margins. The company guided for 9% operating margin in 1Q19 and expects to achieve a full-year margin of 13%, up 300bp compared to 2018. Target is $400 Maintains a Buy rating J.P. Morgan analyst Doug Anmuth - raises target Notes 4Q18 was even more backend-weighted than normal given the strength of content in late December, including Birdbox & Black Mirror: Bandersnatch - as a result, the gap between total net adds & paid net adds widened, w/free subs at 6.2% of total subs, the highest level since 4Q13. Believes NFLX could be assuming a potential global paid sub headwind of 1.25-1.5M from the pricing change - however, also believes NFLX's content momentum should continue in 1Q, a seasonally strong period, & the paid net add forecast could be conservative. Target to $435 from $425 Maintains an Overweight rating Loop Capital Markets analyst Alan Gould - Notes revenue jumped 27% (its slowest rate in 11 quarters) on 25% unit growth and a 3.5% ARPU growth to $10.22 - the top line slightly missed expectations due to substantial F/X headwinds, and 4Q profit beat expectations. Notes 1Q revenue and earnings guidance is below consensus forecasts, again facing F/ X headwinds, but the company reiterated its 13% operating margin estimate for 2019 - despite what firm believes was a good quarter and guide, the stock declined 4% after market giving back some of its 50% gain since Christmas Eve. Target is $395 Maintains a Hold rating Nomura/Instinet analyst Mark Kelley - raises target All in all, views the quarter was fairly clean; believes management’s language on cash burn was consistent with prior commentary, indicating that investment in content is still top of mind. Thinks shares are fairly valued, given that Netflix is trading at a premium to its peer group as well as its own historical multiple - firm is increasing estimates however, to account for the US price increase. Target to $320 from $300 Maintains a Neutral rating Piper Jaffray analyst Michael Olson - raises target Notes reported a mixed set of metrics for Q4 and provided a similarly mixed Q1 outlook - suggests the single most important metric to investors, however, is international subscriber additions and that was ahead of expectations for the quarter and the guide - Netflix has ~60% share of U.S. internet households and 15% of int'l (excl. China), thinks there's clearly room to grow for int'l. Firm's confidence in Netflix to lead the charge in capturing traditional content dollars as they transition to streaming is unchanged Target to $440 from $430 Maintains an Overweight rating |
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