Loup Ventures

About the Author Loup Ventures

At Loup Ventures, research is in our blood. The spirit of our team has always lived on the curiosity to discover new insights that yield investment opportunities. For years we did this on Wall Street, focused on public tech companies. Now we invest in private frontier tech companies, but public companies like Tesla, Nvidia, and others are also meaningful innovators in frontier tech. These public companies are shaping the emergence of AI, robotics, autonomous vehicles, and AR/VR just as much as early stage startups. As a result, we’ve always kept a watchful eye on public market participants to inform our private investment strategy. Gene Munster is a managing partner and co-founder at Loup Ventures. Prior to Loup Ventures, Gene was a managing director and senior research analyst at Piper Jaffray where he covered technology companies including Apple, Amazon, Google and Facebook. During his 21-year tenure, Gene received many acknowledgements including: Top Stock Picker from Forbes, Best on the Street from The Wall Street Journal, and was widely recognized for his work on Apple. Gene holds a bachelor’s degree in finance and entrepreneurship from University of St. Thomas.

Netflix (NFLX) Earnings: 5 Key Takeaways

By Gene Munster

Here are our five key takeaways following Netflix’s December results:

  1. Netflix reported Dec-18 revenue essentially in-line and earnings 25% above street consensus. The company guided Mar-19 revenue 2% below the street and earnings 33% below the street. The disconnect between Mar-19 revenue guidance and street consensus can likely be attributed to the street mis-modeling the rollout of Netflix’s recent price increase.
  2. Regarding the price increase, here’s the key quote from Netflix: “But you also see ASP domestically improve over the course of the year. And that’s what we think will drive an acceleration in revenue growth over the course of 2019.”
  3. The incremental revenue generated by the price increase will be reinvested in original content. Netflix’s original content spend is increasing: the company plans to create more shows and the cost per episode is rising.
  4. One unexpected comment from the earnings release was related to the impact of Fortnite as a competitor. While Netflix is the gold standard of original streaming video content, the company will face an increasing headwind from live streaming content. Netflix’s new CFO, Spence Neumann, was formerly CFO for Activision Blizzard and has familiarity with gaming, which dominates live streaming today. Read more about our thoughts on the rise of live streaming.
  5. Overall, Netflix is continuing to execute well as highlighted by the success of their original content and international subscriber growth. While the company has a meaningful growth opportunity related to continued international expansion, we think the probability of significant upside to revenue and earnings will diminish.

Read more: Analyst Targets Over 50% Downside for Netflix Stock; Here’s Why

Analyst Ratings

Most analysts on Wall Streets are out rooting for this streaming giant to be a winning stock pick, as TipRanks analytics showcase NFLX as a Buy. Based on 30 analysts polled in the last 3 months, 24 rate a Buy on Netflix stock while 4 maintain a Hold and 2 issue a Sell. The 12-month average price target stands at $396.40, marking a nearly 15% upside from where the stock is currently trading. (See NFLX’s price targets and analyst ratings on TipRanks)

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

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