Credit Suisse (CS) has a $115 price target on NFLX, this report was from April 24th
Rating OUTPERFORM* [V]
Price (23 Apr 12, US$) 101.84
Target price (US$) (from 140.00) 115.00¹
52-week price range 298.73 - 63.87
Market cap. (US$ m) 5,653.71
E nterprise value (US$ m) 5,099.95
Solid 1Q12 Results, But 2Q12 U.S. Streaming
Sub Guide Light; Trimming Est and TP to $115
Event: NFLX’s 1Q12 results were solid, with several bright spots, but 2Q12
domestic streaming net add guidance was lower than expected. As a result,
NFLX shares should be under pressure today, due mainly to investor
concerns about NFLX’s ability to reach the 7M U.S. streaming net sub add
guidance given the large implied ramp in net adds in 2H12.
We trimmed our 2012 estimates to account for expected losses in 4Q12
given the entrance into the next int’l market in 4Q12, offset somewhat by
1Q12 upside. We cut our domestic streaming net sub adds to 6.4M from 7M
prior, to account for the lower 2Q12 sub guidance, but we boosted our int’l
sub estimate to 5.9M from 5.1M to account for 1Q12 upside and higher
2H12 net adds given entrance into the 4th int’l market in 4Q12.
For ‘12, we now expect revenue of $3.60B (vs. $3.61B prior), op income of
($17)M vs. ($10)M prior and adj EPS of $0.32 vs. $0.40 prior. For ‘13/’14 we
now expect adj EPS of $3.28 vs. $3.75 prior and adj EPS of $6.76 vs. $6.97.
Given the lowered expectations, our target price goes to $115 (vs $140).
Investment Case/Valuation: Maintain Outperform rating. While NFLX
remains in a transition period given continued, albeit easing backlash from
the pricing changes and int’l losses, the opportunity appears unchanged.
While we believe the competitive positioning is strong and 1Q12 was a solid
quarter across the board, given softer 2Q12 U.S. streaming sub guidance
than expected, the risk profile heading into 2H12 has increased.