Netflix, Inc. NFLX is scheduled to report its Q4 2016 results on January 18. The company would like announce robust figures, reflecting “the impressive and ongoing ramp-up in original content, continued momentum in international markets, and attenuation in the negative impact from un-grandfathering,” Cantor Fitzgerald’s Youssef Squali said in a report.
Squali maintains an Overweight rating on Netflix, with a price target of $135. He expressed optimism regarding the company’s long-term outlook and growth opportunity. The estimates for revenue, EBITDA, NEPS and GAAP EPS are at $2,468.8 million, $177.8 million, $0.21 and $0.14, versus consensus expectations of $2,467.3 million, $185.8 million, $0.20 and $0.13, respectively.
4 Factors To Watch For
Squali mentioned four factors to watch for in the company’s earnings:
- Solid subscriber additions: 3.734 million international net adds and 1.479 million domestic net adds.
- Originals slate: This is likely to have “strengthened materially” in Q4, with ~46 titles debuting in the quarter, up from ~36 titles in the prior quarter and ~24 titles in Q2. “Impressively, this slate is only expected to pick up from here on with 1,000+ hours of original content in 2017 vs. 600+ hours in 2016,” the analyst stated.
- Un-grandfathering to not remain an issue: Management cited un-grandfathering as the reason for lower reported net adds in Q2 2016 and below-consensus guidance for 3Q 2016. By the end of Q3, Netflix had un-grandfathered 75 percent of members. “Our tracking of "Netflix price increase" on Google Trends shows this trend normalizing,” Squali wrote.
- U.S. and international sub growth: Netflix is expected to achieve single-digit U.S. subscriber growth going forward, while international growth would be substantial, with subscriber CAGR of ~20 percent through 2020 to ~90 million.
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