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Netflix, Inc. Wows Investors With Stellar Q4 Performance; Shares Surge 10%

support@smarteranalyst.com (Ben Mahaney)

Netflix, Inc. (NASDAQ:NFLX) shares are climbing 10% in Monday's after-hours session, after the streaming service reported fourth-quarter earnings that beat Wall Street’s expectations in terms of revenue and subscriber growth.

Netflix posted 4Q results that included $3.3 billion in revenue (up nearly 40% from the same period last year) along with an EPS of $0.41. Both came in slightly ahead of the Street. More importantly, Netflix beat the net subs on both domestic and international subs: Domestic streaming net adds of 1.98 million beat consensus estimates of 1.28 million. International net sub adds of 6.36 million, topped consensus estimates of 5.10 million. Overall, Netflix reported 24 million net subscriber additions to bring the company’s total number of streaming members to over 120 million.

For Q1, the company project global net adds of 6.35 million, compared to 5.0 million in the year ago quarter, with 1.45 million in the US and 4.90 million internationally. With respect to operating margin, the company is targeting a full year 2018 target of 10%, up about 300 basis points year over year, as in the prior year.

The fact that Netflix beat Wall Street’s expectations for its fourth-quarter revenue and subscriber growth is a positive sign for investors who may be wary of a potential backlash to the company’s latest price hike.

Once again, Netflix saw most of its subscriber growth overseas, as has been the case for more than a year, going back to the company’s rollout to more than 130 new countries in January 2016. In the most recent quarter, Netflix added a net total of 6.36 million international members, a 24% increase year-over-year, compared to 2 million new subscribers in the U.S.

Netflix has now reported several straight quarters of exceptional subscriber growth, the number Wall Street most often seems to use as the metric for judging the company’s success. But, as Netflix also continues to operate with negative cash flow (-$524 million in the fourth quarter, compared to -$639 million in the same period last year), the company’s high-spending ways will remain under scrutiny.

On the ratings front, Netflix stock  has been the subject of a number of recent research reports. In a report released today, Canaccord analyst Michael Graham reiterated a Buy rating on NFLX, with a price target of $225, which represents a slight downside potential from current levels. On January 19, Cowen's John Blackledge reiterated a Buy rating on the stock and has a price target of $240.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Michael Graham and John Blackledge have a yearly average return of 14.8% and 16.4% respectively. Graham has a success rate of 61% and is ranked #183 out of 4749 analysts, while Blackledge has a success rate of 71% and is ranked #257.

Overall, one research analyst has rated the stock with a Sell, 4 have assigned a Hold rating and 17 analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $239.53 which is 5% above where the stock closed today.


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