Netflix, Inc. (NASDAQ: NFLX)
Earnings Report
After the close today, Netflix (NFLX) posted slightly weaker than expected earnings that was mostly affected by the weak US user subscription growth. The company announced earnings of $29.4 million or 7 cents per share on $1.74 billion in revenue. Analysts polled at Thomson Reuters were expecting 8 cents per share on $1.75 billion in revenue. User subscription growth was the main focus of this release and is what really impacted the share price in the post market session. Globally NFLX added 3.62 million subscribers during the third quarter, which was more than the companies forecast of 3.55 million, however, US growth was only 880,000 subscribers, which was well short of the 1.15 million mark estimated. Currently NFLX has 69.17 million users worldwide and is expecting that number to reach around 74 million by the end of the year as they expand into Spain, Italy and Portugal. CEO Reed Hastings stated in the conference call,
“When we look at the last couple years, where we’ve been — last four years, we’ve been about 6 million net adds in the US, and then an accelerating number of new members internationally. But restricting the comments to US, it’s fundamentally that internet TV is better than linear TV. The consumers can watch when they want, on what type of device they want, and the content has just gotten better and better. So the fundamental confidence about the large scale is because on demand is a better experience than linear. And the entire market is going to move from linear to on demand, internet television, over the next 10 to 20 years. In terms of the specific, when we look at the shows that we have coming out next year, that gives us a lot of confidence. We have the Disney Pay 1 deal coming in the US in the third quarter. Third, fourth quarter of next year.” TheStreet
I don’t think that this was a terrible earnings release but I think that NFLX will have to figure out ways to increase user growth in the US while still maintaining an aggressive approach overseas. Content will be a huge driver of their success so we will have to see how well they manage that part of the business. Price targets have come in mixed between analysts with prices ranging between $109 up to $137 per share. Regardless, they are all positive from where NFLX is currently trading.
NFLX Technicals
When NFLX initially released earnings shares got absolutely crushed, trading all the way down to $93.55 before rebounding and stabilizing in the $103 area. Shares opened at $103.77, down from the previous close of $110.23, a 5.8% drop, and traded down for most of the day before closing at $101.09. NFLX has been on a tear this year opening up at $49.15 and as of the close yesterday at $110.23 they are up over 120%. Even with the missed earning results they are still well above their 200-day moving average that is currently sitting at 85.47. NFLX hit highs of $129.29 back in August and have since been on a downward trend but with as much as its ran up this year, a little bit of a pullback is healthy for the stock price. NFLX is currently trading around the big $100 mark, which is a big level to keep an eye on. Support below that will come in around $96.85 and resistance will be met at $102.60 and $105.87.
About Netflix, Inc.
Netflix, Inc. operates as an Internet subscription service company, which provides subscription service streaming movies and TV episodes over the Internet and sending DVDs by mail. The company operates its business through three operating segments: Domestic streaming, International streaming and Domestic DVD. Netflix obtains content from various studios and other content providers through fixed-fee licenses, revenue sharing agreements and direct purchases. It markets its service through various channels, including online advertising, broad-based media, such as television and radio, as well as various partnerships. The company was founded by Marc Randolph and Wilmot Reed Hastings Jr., on August 29, 1997 and is headquartered in Los Gatos, CA. MarketWatch
