Netflix: Still Early in a Big Story

07/31/2017 2:52 am EST

Focus: TECHNOLOGY

Todd Shaver

Founder and Editor-in-Chief, BullMarket.com

Netflix (NFLX) just does what it always does: crushes expectations and the naysayers, asserts growth stock expert Todd Shaver, editor of BullMarket.com.


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The company delivered EPS of $0.15 just missing the consensus by a penny. But revenue of $2.8 billion was on the mark. The big story was the strength of subscriber growth and that was enough to send the stock soaring.

Netflix added 5.2 million net new subscribers in the June quarter vs. Wall Street’s consensus estimate of 3.2 million.

It also guided higher for the current quarter, with a forecast of 4.4 million net new subscribers, topping the consensus view for 4.0 million. This is huge subscriber growth.

The company ended Q2 with 104 million subscribers worldwide, including 52 million in the U.S. and 52 million in foreign markets. Netflix’s international streaming subscribers topped those in the U.S. for the first time.

Domestic net additions of 1.1 million represented the highest level of Q2 net adds since the second quarter of 2011.

Better yet, Q3 guidance assumed much of this momentum will continue with the caveat that management is cognizant of the lessons of prior quarters when its over-forecasted.
The underlining fundamental story remains rock solid. With its content strategy paying off in strong member, revenue and profit growth. Management continues to believe that it is wise to continue to invest.

In continued success, Netflix will deploy increased capital in content, particularly in owned originals, and, as management has said before, the business is likely to remain free cash flow negative for many years. That’s what it takes to build greatness!

The entertainment market is so broad that Netflix has now grown from zero to over 50 million streaming households in the US over the last 10 years. Netflix is growing with an expanding market, being co-pioneers of internet TV. The future is quite exciting.

Netflix is a premier growth story. The long term potential opportunity is quite big and we are still early in this trend. This is one stock you just have to figure out how to own and hold onto.

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