No slowing down: Q1 beats and Q2 guide ahead
Q1 results showed that demand for internet TV remains extremely strong with domestic adds up almost 40% YoY, even given relatively high penetration in that market, and international adds up 55%. Total Q1 adds of 7.4m were well ahead of the consensus of 6.5m as consumers continue to be drawn to the breadth, ease of use and low price of the service. Q2 add guidance of 6.2m was well ahead of the consensus of 5.2m, down on Q1 as Q2 is seasonally slower, but still up 19% YoY. Marketing spend was higher than expected but operating margins still beat by ~6pp and the company lifted full year margin guidance from 10% to 10-11%. Netflix is executing extremely well and we remain strongly Overweight. We are lifting our estimates and our PT rises from $385 to $413.Netflix is engaged in subscription streaming entertainment service including TV series, documentaries and feature films across a variety of genres and languages. Members can watch as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause and resume watching, without commercials. Additionally, several members in the United States subscribe to the company's DVD-by-mail service. The company improves its streaming content with a focus on a programming mix of content. The company's members can download a selection of titles for offline viewing. The company operates its business as a global operating segment.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
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