Sarah Roden

About the Author Sarah Roden

Sarah writes about stock market news for TipRanks. She graduated as member of Phi Beta Kappa from the University of Richmond in Richmond, Virginia.

How Did Analysts’ Estimates Stack up Against Netflix’s Q4 Report?

Analysts had many speculations about Netflix’s (NASDAQ: NFLX) fourth quarter earnings report, which were posted yesterday, January 20th, after market close. How did their ratings match up to the report?

User growth was a highlight of the report, as the company posted a record 13 million new members, resulting in a total of 57.4 million global Netflix members. Netflix estimates they will have a total of 61.4 million members by the end of the current quarter.

Netflix posted revenue of $1.48 billion, marking a substantial year-over-year increase from $1.18 billion. This figure was consistent with the Street’s estimate, though narrowly missed Zack’s estimate. The company posted earnings per share of $0.72 on a non-GAAP diluted basis, blowing the $0.45 estimate out of the water.

The Q4 report highlighted the launch of Netlix’s service in Australia and New Zealand later in the current quarter, adding to the approximately 50 countries it presently serves. Additionally, the report proudly mentioned that Netflix will be streaming The Interviewjust a month after it appeared in theaters.

CEO Reed Hastings and CFO David Wells noted in the report, “It is increasingly clear that virtually all entertainment video will be Internet video in the future. We believe there is big growth ahead in the US market for Netflix, even if we may not get there in a straight line of 6 million annual net adds. We’ll continue to improve our content, our marketing and our service, to eventually achieve “must have” status in most households.”

Before the report was released, analyst Tuna Amobi of S&P Capital reiterated a Hold rating on Netflix on January 20th. He noted, “We are cautiously mindful of a potential deceleration in subscriber growth against targeted net adds of 4 million (1.85 million U.S. and 4.15 million international), after a recent price hike weighed on Q3.” This fear proved to be unfounded, as user growth surged in the quarter. However, Amobi did note potential troubles for 2015, such as “intensifying competition in streaming video and shifting winds on broadband regulations.” Netflix voiced support for strong net neutrality in the report, echoing President Obama’s low-cost, high-speed Internet initiatives and noting that Finland went as far as to make fast Internet access a right for all citizens.

Tuna Amobi has a 70% overall success rate recommending stocks with a +18.8% average return per recommendation.

Analyst Doug Anmuth of J.P. Morgan separately rated Netflix on January 20th before the report was released, maintaining an Overweight rating on the stock with a $450 price target. Anmuth estimated that Netflix would add 1.85 million subscribers, totaling 39.1 million. The report easily beat this estimate, posting 57.4 million total subscribers. The analyst believed the report would be driven by “the continued secular shift away from linear TV and positive seasonality,” which the executives noted in the report.

Doug Anmuth has a 66% overall success rate recommending stocks and +25.0% average return per recommendation.


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