Up to 60% since the end of last year, Netflix, Inc. (Nasdaq:NYSE: nflx) shareholders are clearly high expectations headed into the streaming giant’s first-quarter report next Monday’s close.
They are not wrong to entertain such an upward trend. Netflix shares were cancelled more than a small pullback during the next session on Monday from 6% In after-hours trading in response to the report B1. Financial results were only in accordance with the highest analysts ‘ estimates, but subscriber growth was much better than expected.
(Almost) needless to say, more robust design there is a considerable chorus of critics of the company speechless. Your concerns about balance and competitive pressure is not lost, they just don’t seem to thing to do.
Netflix Earnings Summary
For the quarter ended in March, Netflix had made $3.7 billion revenue in per-share profit was 64 cents, compared with the top line in the amount of $2.64 billion in the same quarter a year earlier when the company booked a profit of 40 cents a share. (Analysts insist that the profit amounted to 64 cents per share Netflix stock and sales of 3.69 billion).
In the last quarter not so much, but the shareholders of the company Netflix as subscriber growth as the user base now, nflx is widely expected that future revenue in perpetuity. To this end, the company Netflix brought in 5.46 million international subscribers last quarter, and nearly 2 million new domestic participants. Both compare favorably to analysts ‘ expectations, adding 1.5 million new domestic (US) subscribers, and 5 million new international members.
All told, Netflix now has 63.8 million paying international subscribers and 55.1 paid subscribers in the United States; the former has eclipsed the latter in mid-2017, and the difference has steadily expanded since then.
One dent in the report? Free cash flow was$287 million, even though it is not as bad as expected.
(More) Mixed Messages
A constant struggle between bulls and bears Netflix stock do not come to resolution after the release of the report of the company for the 1st quarter.
This argument, of course, at what price is the incredible growth of Netflix is?
There is no denying its growth in subscriber base and subsequent revenue growth is impressive. Even analysts who don’t like the stock headed into the statement of income Netflix was still technically betting on it. As MoffettNathanson said in the beginning of this month:
“Our takeaway is clear, but not much. While we expect Netflix to continue strong subscriber growth and result in above the consensus forecast in years, we still can’t justify the price of the stock in any case. Thus, we are left with constant dissatisfaction, believing that the share is overvalued, but I see no legitimate fundamental reason for investors to sell shares.”
The point is that the disappointment was a partial lack of transparency, the level of churn at Netflix, what Netflix did not disclose.
Other analysts don’t care. Deutsche Bank analyst Bryan Kraft is one of them. He upgraded the company’s shares to “buy” at the end of last week, explaining:
“Netflix has changed the industry in fully and give yourself a significant advantage that makes it very difficult for traditional media companies or even other large technology companies to catch up.”
He’s right, but…
The Debt Time Bomb?
Other analysts concerned about the company’s debt is racking up spend on home maintenance. It allocated between $7.5 billion and $8.0 billion, to make their own television shows and movies this year, and observers believe that the budget will grow by about $1 billion a year for the next several years.
Mark Mahaney, analyst with RBC capital markets, does not apply at all. He notes that if the company continues to add about 20 million new members a year, it will mean another $ 2.5 billion of revenue growth every year it happens.
That’s a big “if”, of course. With Walt Disney (Ticker NYSE:DIS) to pull much of its past and future Content from Netflix’s library, including “Star wars” and Marvel movies — consumers can be diverted from Netflix on Disney-branded streaming platform that works.
If and when Walt Disney or another player such as hulu, which is jointly owned by twenty-first century Fox Inc (Nasdaq:has closet) and the basketball Palace of Sports comcast Corporation (Nasdaq:CMCSA) and Disney decided to turn up the heat, it can quickly do Netflix at $16.1 billion of debt and maintenance obligations in connection with too great a burden to carry at the same time, cash flow continues to roll in negative numbers.
Still though, it just did not happen… and not because of the lack of opportunities for their potential competitors.
Looking forward to purchase shares of the company
None of this is new permanent owners of Netflix stock. And if the majority of shareholders should be honest with themselves they know that in current and foreseeable financial mathematics — cash flow in particular — did not make sense, if Netflix can grow its user base at such a pace in a long, long time. Maybe, maybe he can’t.
The problem may be in the cards down the road though, it’s not close enough to distract investors who like the story more than they love the Manager of the company.
To this end, the company offered guidance of $3,93 billion in sales for the quarter began, up 41% from Q2-2017 on the top line, as well as modeling a profit of 79 cents per share Netflix stock in comparison with the same period last year, a total of 15 cents a share. Netflix is also looking for more negative cash flow on an annual basis, in the amount of$3 to$4 billion.
At the moment, though, the results are still more than enough for most investors.
At the time of this writing, James Brumley does not occupy a position in any of the above securities. You can follow him on Twitter @jbrumley.