Major Catalysts for the NETFLIX Weekly
The Earnings Report.....
reported Q4 revenue of $7.71 billion, up 16% year-over-year, and added 8.28
million global paid net subscribers during the quarter, both exceeding the
consensus estimates. Netflix also stated that it will be free cash flow
positive in 2022, which is another positive that might be getting overlooked.
The stock is getting hammered following the report because of its
forecasted guidance for subscriber growth in Q1 2022, which could be hinting at
the fact that streaming video competitors are eating into the company’s market
With that said, Netflix recently increased its prices, has an internal
recommendation software that will be tough for competitors to replicate, and
has great opportunities in international markets to gain more users going
investors that his hedge fund, Pershing Square Capital Management, started
buying on Friday and now owns more than 3.1 million shares in Netflix, making
Pershing Square a top 20 shareholder.
In a letter
to his clients, Ackman praised the company's "best-in-class management team" and on Twitter the
manager said he has long admired Netflix CEO Reed Hastings and the "remarkable company he and his team
shares climbed as much as 5% in after-hours trading. They had tumbled more than
30% in the last five days, a much steeper swoom than the broader market. After
the market closed last Thursday, Netflix forecast weak subscriber growth.
whose firm invests $22.5 billion, wrote that he had been analyzing Netflix at
the same time he was investing in Universal Music Group and was ready to buy
when Netflix' "stock price declined
sharply last Friday."
"Now with both UMG and Netflix,
we are all-in on streaming as we love the business models, the industry contexts,
and the management teams leading these remarkable organizations."
Netflix benefits from highly recurring revenues, adding the company has pricing
power and delivers industry-leading content.
brutal two weeks for the market this month, Goldman Sachs is saying it's about
time for investors to dip their toes in the volatile waters.
whole-hog on adding risk assets to the portfolio, but a nibble.
"To the extent that zero
interest rate policies, negative real interest rates and quantitative easing
have been supportive for risk assets, it is understandable that a perceived
move away from these supports should cause a correction, particularly given high
valuations. But this adjustment has now been reflected in the markets and the
downside risks from here are much lower so long as economies can grow. Our Risk
Appetite Indicator (GSRAII) has fallen back, suggesting we are getting closer
to levels that have typically been a good entry point for longer-term
investors," said Goldman
Sachs strategist Peter Oppenheimer on Wednesday.
Wall Street analysts, the company's revenues could hit $38 billion by 2023, an
increase of nearly 400% from 2016.
pandemic didn't necessarily create new demand. Rather, it accelerated trends
that were already in progress in the global streaming market. This doesn't just
apply to subscriber growth. Companies like Disney (NYSE:DIS) accelerated their
streaming rollout plans as well, making more content available for subscribers.
Money is also flooding into production. It seems as if every single content
producer now has a unique offering that consumers need to pay a monthly
generated positive cash flow in 2021 and expects to remain cash generative for
the foreseeable future. As such, for the first time in its history, it is no
longer reliant on investor financing to keep the lights on and fund content
development and licensing spending.
This is a
huge step forward for the business.
subscription service has become a non-negotiable spend for some consumers,
which gives the enterprise an air of defensiveness. Its cash flows are
relatively stable and predictable, and it can increase its subscription prices.
Consumers are unlikely to notice a 5% per annum increase in prices. Even if
they do, it's such a small expense that they are unlikely to cancel the
subscription, especially when one considers the amount of entertainment value a
Netflix account provides.
nature of the client base is the primary reason the stock now offers an
interesting opportunity. Based on Wall Street growth projections for 2023, the
stock is trading at a forward price-earnings ratio of just 25. This seems
incredibly cheap for a business with a sticky customer base and the potential
for substantial revenue and profit growth in the years ahead.
if the company's subscriber growth falls to zero, it still has the potential to
grow earnings through price increases.
monster success of shows like Squid Game and Money Heist,
as well as recent movies like Red Notice and Don't
Look Up, it appears as though the business still excels at entertaining
viewers. And in 2021, Netflix had the most Emmy and Oscar nominations and
wins of any studio out there.
As a result,
it would be the last streaming subscription consumers would cancel if they
had to. In fact, according to Nielsen data, Netflix has a 7% share of
total TV viewing time in the U.S., the most of any streaming service.
From the customer's perspective, Netflix is still the top dog, with an
exceptional value proposition that is increasing with the introduction of
mobile games. And management just raised prices in the U.S. and Canada.
outlook for the first quarter seems to have taken Wall Street by surprise.
However, despite several analysts cutting their NFLX price targets and
downgrading the stock, the general consensus remains bullish. The median price
target is $521, indicating more than 30% growth potential in 2022.
Despite lowering his NFLX price
target from $700 to $650, BMO Capital analyst Daniel Salmon remains bullish,
predicting an upside of nearly 70%. The analyst believes Netflix management
will engage in a buyback later this quarter. He also notes that Netflix has
little regulatory risk, compared to other FAANG stocks.
Another bull is Cowen analyst John
Blackledge, who lowered his firm's price target on Netflix from $750 to $600.
But he maintained his Outperform rating on NFLX, implying an upside of more
than 50%. The analyst reported that foreign exchange headwinds had compressed
margin expectations in Netflix's guidance.
Still on the bull side, UBS analyst
John Hodulik lowered his firm's price target on Netflix from $690 to $575. But
that's still nearly a 50% upside. He also reiterated his "buy"
recommendation on NFLX shares. The analyst acknowledges the soft first-quarter
subscriber outlook and attributes it to macro pressure in Latin America.
Hodulik remains bullish on the company's operating leverage due to Netflix
management holding its outlook at 300bps of average annual margin expansion.