In a research note released Tuesday, Aegis analyst Victor Anthony reiterated a Hold rating on shares of Netflix (NASDAQ:NFLX) with a price target of $200, after the streaming giant delivered a largely in-line quarter for domestic subscriber additions and some meaningful upside to its international subscriber guidance. (To watch Anthony’s track record, click here)
Anthony wrote, “Netflix’s reported Domestic net additions missed our estimate while Int’l net additions was nicely above our estimate. Revenue, Adj. EBITDA and GAAP EPS missed our estimates. The quarter/call was uneventful. Int’l pricing in 4Q17 will be much higher than we had modeled due to more price increases in Europe. That leads to higher ’18 revenues but imposes more risks to our thinking that churn will be minimal in 4Q17, although we believe that the content-slate could serve as an offset. Netflix guided for P&L content spend of $7B-$8B, implying cash content spend of ~$11B-$12.5B. As a result, we increased our 2018 cash burn by 40% to $2.4B from $1.7B.”
“We see very few catalysts that could drive the shares higher and we remain cognizant of the risks that Netflix continues to face, including: loss of licensing content, content costs inflation, cash burn, and longer-term competitive pressures,” Anthony concluded.
Helfstein wrote, “4Q sub guide suggests future pricing cycles will be less painful than 2016. Strong International contribution margin guide was driven by broader than anticipated ASP increases. As a result, we’re raising ‘18E International contribution profit by $391M, partially offset by 5% lower US profit on marketing/ content costs. Stepping back torrid top-line/sub growth only outpaced by profits (3Q Global Streaming Subs/Revenue +26%/+33% y/y vs. Contribution Profit +52% y/y). Everything moving in right direction now, but investor anxiety over 2018 cash burn and content competition looms if sub growth slows. Target assumes 5x/16x ‘19E US sales/EBITDA and 9x International sales discounted 10%.”
The rest of Wall Street largely buys into what Netflix has to offer, as TipRanks analytics reveal NFLX as a Buy. Out of 35 analysts polled in the last 3 months, 22 are bullish on Netflix stock, while 12 are neutral and 1 is bearish. With a return potential of 7%, the stock’s consensus target price stands at $213.73.