Stock of the day 09/10/2015 – Netflix Inc

With Netflix announcing its new subscriber fee will increase one dollar to $9.99, the company will be aiming to reveal some much larger figures with its Q3 205 earnings release next Wednesday.

Since its 7-for-one stock split in the middle of July the streaming-service has been chugging along nicely, even if the events of August took the wind out of its sails; from its new price of $107.87 (down from $703.15) per share the stock had managed to climb to $129.27 (which translates to an all-time high of $904.89) by the beginning of August.

However, the China-inspired chaos of that month (a country that Netflix is struggling to break into, incidentally) pushed the stock below the $100 mark for the first time since the split. This meant Netflix spent September dancing around that level, failing to break away from its post-split lows until the start of October, where it has managed to surge back to a current trading price of $116.40 (IT-Finance.com, 09/10/2015).


(Source: IT-Finance.com 09/10/2015)

If anything is going to get investors ready to Netflix and chill it will be another blockbuster earnings release from the company. Its fourth quarter results in January caused the stock to surge around 33% in its aftermath, whilst the first quarter figures in April prompted another 18% jump. Whilst the stock split muddies the waters on how much of a boost its second quarter data in July gave the Netflix, the company did hit its all-time high in the following fortnight, so it is arguably safe to assume investors were pleased.

In regards to that Q2 report, Netflix announced a 2.37 million increase in international subscribers to 23.3 million, far above the 1.94 million expected as it expanded into New Zealand and Australia, alongside a similarly higher than forecast 900,000 jump in domestic subscribers to 42.2 million. This left Netflix with 65.6 million subscribers (more than the entire population of the UK) and a 23% rise in revenue to $1.64 billion (a smidgen lower than the $1.65 billion analysts had predicted).

Netflix itself forecasts it will add another 3.55 million subscribers worldwide, with expansion into Japan (which has reportedly adopted the service more slowly than the company would like), Spain, Italy and Portugal boosting its customer base. Whilst the main focus, as ever, will be subscriber-growth, the company’s revenue growth should still please investors, with analysts expecting a 24% increase to $1.76 billion.

And with the growing presence of Amazon and Hulu, extra weight may be given to its original-programming slate, an increasingly important factor in differentiating the company from its rivals. Still to come in 2015 is the new sitcom from Asiz Ansari ‘Master of None’ and, following the success of ‘Daredevil’, Marvel’s latest offering ‘Jessica Jones’. There is also the fruits of its budding film development slate, including the Oscar-tipped, Idris Elba-starring ‘Beasts of No Nation’, the first of Adam Sandler’s 4-film deal with the company ‘The Ridiculous Six’ and a Billy Murray Christmas-special aptly named ‘A Very Murray Christmas’.

Netflix has a consensus rating of ‘Buy’ with an average target price of $112.52.