Needham & Company Reiterates Hold on Netflix (NFLX) Following 3Q
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Needham & Company maintained a Hold rating on Netflix (NASDAQ: NFLX) following the company's 3Q earnings report. NFLX is ramping up its owned content, both Series and Unscripted. In January of 2013, Ted Sarandos stated that: "The goal is to become HBO faster than HBO can become us."
Analyst Laura Martin commented, "NFLX beat revenue, subscriber guidance and estimates in 3Q16, but NFLX's programming pivot was the key story of 3Q16, in our view. Programming updates included: 1) Wholly-owned programming; 2) Unscripted (ie, reality) programming; 3) Local content; 4) 66% more content produced (from 600 hours in 2016 to 1,000 hours in 2017); and 5) Content budget of $6B (up 20% y/y, as expected) in 2017 vs total streaming content obligations of $14.4B at 9/30/16 implies a 2.5 year average contract length for licensed content. Although the pivot toward more owned programming hurts margins and FCF in the near term, we like the fact that NFLX is now building a content library. Tied to this, NFLX lowered its 2016 FCF estimate from negative $1.2B to $1.5B. We retain our HOLD rating."
Shares of Netflix closed at $99.80 yesterday.
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