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.

All Eyes on Netflix (NFLX) Stock Ahead of Q1’19 Earnings


Netflix (NFLX) continues to pull ahead into earnings with a number of positive analyst reports to drive the stock heading into earnings today. The stock continues to hover in the $350 to $365 range this month after exhibiting a strong recovery rally following the market pullback in Q4 of 2018. The stock could break its 1-month range, but it’s heavily dependent on whether or not earnings results surprise.

The biggest catalyst to the stock near-term is today’s earnings where management will disclose both financial outlook, and also the company’s subscriber figures. Profitability is anticipated to improve over the next two-years, as they scale their revenue base and slow spending growth. However, Netflix will plow revenue back into content spending/investments and ongoing expansion into foreign market where there’s a high level of broadband penetration.

Content is going to be key over the next 12-months with a number of content licenses anticipated to expire. Wedbush analyst Michael Pachter remains more bearish on the content narrative than other investment banks:

Over the next 12 months, we expect a large quantity of existing Netflix content to migrate away from the service. Disney and Fox will launch Disney Plus later this year, and presumably, content from each studio will find an exclusive home on the new network. Warner Bros. also plans a proprietary service later this year, and Comcast’s NBC Universal unit will launch a proprietary service in 2020. We estimate that these four studios provide around 20% of Netflix’s overall content measured by available hours and closer to 40% of hours viewed on the service. By the end of 2020, we expect all of this programming to disappear from Netflix, and we think that the company will find replacing the content with originals a daunting task.

The loss of Disney, Fox, NBC Universal and Warner Bros. could play out negatively for the streaming service when looking out over a two-year timeframe, but that’s only assuming that none of these studios look to negotiate an on-going licensing deal with Netflix. Warner Bros. and Walt-Disney more likely at risk, as Disney is anticipated to launch a streaming service whereas Warner Bros. might consolidate more of their titles by moving onto HBO Now or launch a separate service independent of HBO.

Source: UBS

On the other hand, Netflix remains the leader with content spending, as they’re anticipated to spend $15 Billion over the course of 2020, which dwarfs the spending that’s anticipated from the other streaming services alternatives, i.e. Hulu and Amazon. Hulu’s spending on content originals matches Amazon. Hulu also has a number of TV shows they license from established TV networks that also gets subsidized with advertising revenue as well. Whereas Amazon is a little more diversified with its Prime Subscription, as it’s not a stand-alone streaming service.

The $1 price increase for the base plan, and $2 increase for standard and premium Netflix plans will drive the revenue narrative over the next 12-month. This may offset some of the concerns tied to the loss of content licenses (because they’re bound to make more money when they charge higher prices) thus providing Netflix with more resources to film more content originals (which has continued to trend upwards in the past couple years).

Pricing increases probably won’t affect Netflix’s subscriber growth by much in the upcoming quarter or over the next 12-months.

Source: Piper Jaffray

Piper Jaffray’s Michael Olson anticipates some subscriber upside tied to their Search Index weighting methodology. It suggests that Netflix’s subscriber growth could beat expectations or outlook in the impending quarter. What would drive expectations higher and cause the stock price to rally is a surprise on subscriber growth, and the current data points suggest that Netflix could surprise on domestic subscriber growth by 4 percentage points (most optimistic scenario) and could surprise by 13 percentage points in international subscriber growth.

Keep in mind, this laps into a period where Netflix will also experience the benefit of a price increase starting from the month of May onwards, which will also boost expectations tied to revenue growth. Piper Jaffray estimates that Netflix will finish the year with 177M paying subscribers for both domestic and international streaming, and if that base of subscriber is also paying a heightened subscription rate, the near-term growth narrative still makes sense, especially because the subscriber plus pricing growth narrative seems to work near-term for investors.

Read more: Top Analyst Sets Expectations on Netflix Ahead of Earnings Show

 

Stay Ahead of Everyone Else

Get The Latest Stock News Alerts