Cho Research

About the Author Cho Research

Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

After Netflix (NFLX) Earnings, Is It Time to Buy the Stock?

Netflix (NASDAQ:NFLX) reported a fairly solid quarter despite some negative commentary pertaining to competition. Walt-Disney officially announced their Disney+ service, and also Apple announced Apple TV+ in the past couple weeks leading up to Netflix’s quarterly result. The CEO of Netflix, Reed Hastings on the quarterly earnings call seemed unfazed by the entrance of both Apple and Walt-Disney in the streaming segment, as he mentioned that there has always been a lot of competition, and that it probably wouldn’t impact Netflix’s growth rate by much.

The quarterly results seemed relatively solid, as the company reported revenue of $4.521 billion, and dil. EPS of $0.76 for Q1’19 results. This compared to analyst expectations of $4.5 billion revenue, and dil. EPS of $0.57 for the quarter. Netflix beat expectations on both metrics, representing a $210 million revenue beat, and a $0.19 dil. EPS beat as well.

However, the financial outlook for Q2’19 was $4.928 billion revenue and Dil. EPS of $0.55. versus expectations of $4.95 billion revenue and Dil. EPS of $0.99. Netflix will likely report revenue that’s in-line with expectations next quarter, but expectations for profits next quarter fell short by $0.44 this was largely owed to a 48% tax rate, which will be a one-time discrete event with the corporate tax rate higher than usual for just Q2’19.

UBS Analyst, Eric Sheridan remained optimistic on the long-term narrative around Netflix in a report released right after Netflix announced earnings. Eric Sheridan reiterated his Buy rating and $420 price target, which implies nearly 18% upside from current levels.

“We would focus investor attention on NFLX’s key attributes: a) pricing power in developed markets; b) potential for pricing tiers in developing economies to open up greater scale; c) compound revenues at a 20%+ CAGR; d) expand operating income margins; e) lessen its dependence on capital market fundraising; & f) has low/no regulatory headwinds. As a result, over the long-term, we see NFLX as a top pick as it capitalizes on the opportunity to be the global leader in streaming media & the competitive moat around its business widens (via a mix of content spend, marketing, & scale),” Sheridan noted.

On the investor call following the report, management still remained certain that the margin narrative would improve by the second half of 2019 due to the pricing increases that will take into effect starting from May. Also within the shareholder letter, “While there will be some quarter-to-quarter lumpiness in operating margins due to the timing of spending, our full year 2019 operating margin target of 13% is unchanged, which means that we expect operating margin in the second half of the year will be higher than the first half.”

Netflix shares have been trading sideways for the past year, but the bias still remains to the upside. The subscriber growth figures for Q2’19 outlook was 5M additional subscriber versus Q1’19 additions of 9.6M. So there’s a bit of a subscriber growth drop-off, but that might be explained by the anticipated churn rate in subscribers according to Netflix’s shareholder letter, “We’re working our way through a series of price increases in the US, Brazil, Mexico and parts of Europe. The response in the US so far is as we expected and is tracking similarly to what we saw in Canada following our Q4’18 increase, where our gross additions are unaffected, and we see some modest short-term churn effect as members consent to the price change.”

Overall, investors can walk away from the quarter with the expectation that results will be back-half loaded with Q2’19 providing somewhat of a bridge until thing’s get more exciting in terms of profitability and revenue growth tied to price increases. Subscriber growth will likely normalize given enough quarters keeping the long-term growth narrative relatively appealing.

Wall Street likes the risk/reward factor at play here, as TipRanks showcases a Buy consensus rooting for Netflix’s success. Out of 32 analysts polled in the last 3 months, 25 are bullish on NFLX stock, 5 are playing it safe on the sidelines and 2 are bearish. With a return potential of nearly 15%, the stock’s consensus target price stands at $409.07. (See NFLX’s price targets and analyst ratings on TipRanks)


Read more: Netflix’s (NFLX) Success Is Already Baked Into the Stock, Analyst Says


Stay Ahead of Everyone Else

Get The Latest Stock News Alerts