Q2 miss provides rare buying opportunity
Q2 net adds of 5.1m missed consensus of 6.3m while Q3 guidance of 5.0m was also short of the 6.0m cons. While negative, we strongly believe in the ongoing migration of consumers to internet TV and would note 1H adds were still up YoY. In fact, Q2 net adds would have been in line had we not lifted estimates post Q1. We are lowering 2018 net add forecasts from 29.0m to 25.9m and 2019 forecasts from 26.4m to 26.2m but our long term subscriber forecasts are essentially unchanged. Consequently, we are not changing our 12m $413 PT which offers 15% upside from the expected opening price. Looking ahead, we would have undiscounted PTs of $602 in 2021 and $714 in 2022, implying annual appreciation of ~20% over the next 3-4 years.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.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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