Cowen Trims PT on Netflix (NFLX) to $110 Following Q2 Results, Outlook; Affirms at 'Outperform'
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Cowen and Company trims its price target on Outperform-rated Netflix (NASDAQ: NFLX) from $130 down to $110 following Q2 results on Monday night.
Analyst John Blackledge commented today, NFLX's 2Q16 US and Int'l sub adds were below guide and our/consensus estimates due to higher churn from pricing increases, while gross sub add growth was in line with mgmt. expectations. The 3Q16 US and Int'l sub guide was below our est. and well under consensus est. due to churn from the cont'd price increase rollout and Olympics impact.
NFLX mgmt. called out US contribution margins could surpass the 40% '20 target earlier and that for Int'l markets launched in '10-'13, aggregate contribution profit is on track for $500 million in '16 (vs. total est. loss of ~$400million), hence as the business scales outside of the US, positive margin contribution occurs.
For comparative purposes, we estimate the '10-'13 Int'l markets will generate revenue of $2.2BN in '16, at $500 million contribution profit, implies a 22% contribution margin, which looks similar to the US streaming biz in '13, when it generated $590 million in contribution profits (22% margin) and ~$340 million in EBITDA. Fast forward to '16, we estimate the US biz generates ~$1.8BN contribution profit (35% margin) and $1.2BN in EBITDA. If the '10-'13 Int'l markets, which we estimate have ~140 million broadband HHs vs. ~100 million in the US can follow a similar growth trajectory (or even close) to the US, it signals significant consolidated earnings potential, particularly with an ARPU tailwind over the next year or so,
the analyst noted.
For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.
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