Netflix (NFLX) International Sub Guidance Key to Earnings Tonight - UBS
UBS analyst, Doug Mitchelson, believes that the most important question for Netflix (NASDAQ: NFLX) 4Q15 earnings tonight is management guidance for 1Q16 int'l net subscriber additions. The US appears to be tracking weak but the analyst believes this is in the share price and international is more important for the stock. No change to Buy rating or $147 PT
The vast majority of new markets are "skim" launches, with limited content and often not in local languages. Managemnt guidance for these launches could be conservative considering the first time "skim" launches and only 13 days of results. However, the analyst reviewed a number of the new markets and was encouraged by how many markets have healthy levels of English-speaking homes, broadband speeds >4Mbps and healthy credit card penetration levels. The analyst is well above 1Q consensus at 3.80m net int'l adds, Streetaccount is at 2.87m.
Spotty U.S.tracking has been much of the focus recently, we continue to believe int'l trends are significantly more important for the ultimate success of Netflix (if NFLX wins int'l, we believe it will win globally, including in the U.S.)
Other things to look for:
-guidance to global breakeven
-content expense ~$5b,
-cadence of price increases normalizing
-tracking towards 40% U.S. margins in 2020
-int'l eventually reaching U.S. margins)
-will originals offset pullbacks by vertically-integrated studios
-nature and timing of China launch
-is the 2H U.S. net adds slowdown seasonal, competition or maturation,
-ability to sustain growth in already-launched int'l markets.
For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.
Shares of Netflix closed at $104.04 yesterday.