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Netflix Growth Slows Due To Content Delays

21 April 2017

Stifel Nicolaus raised their target price on shares of Netflix from $155.00 to $170.00 and gave the stock a "buy" rating in a research report on Tuesday.

USA paid subscribers continued to grow at a slower pace than we previously projected, with trailing 12-month paid net adds at 3.7 million in the quarter, down 32% from 5.4 million at the end of first-quarter 2016, which was down 9% versus 2015.

Netflix expects to add 2.6 million subscribers internationally next quarter - it launched in 130 additional countries past year - and 600,000 subscribers in the USA, both which exceed analyst estimates.

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Dwelling on the subscriber guidance, the analyst said the company's domestic subscriber guidance of 0.6 million was ahead of his estimate of 0.21 million and the consensus estimate of 0.19 million.

Its shares dropped as much as 3 per cent in after-hours trading before rebounding to gain 1.3 per cent.

Despite the growth, subscription numbers fell short of expectations - the company previously predicted 1.5 million in the USA and 3.7 million internationally.

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"We have come to see these quarterly variances as mostly noise in the long-term growth trend and adoption of internet TV", the company said in a statement (PDF). Well-marketed original series ventures can produce returns in excess of money spent and can also be less expensive to create than licensing fees would be for a film or television series.

"With a growing member base spread across the world, we seek to please diverse tastes with a wide breadth of content", Netflix said. Viking Global Investors LP increased its stake in Netflix by 145.5% in the fourth quarter.

That would be a shift for Wall Street, which has focused on subscriber numbers, said Needham & Co analyst Laura Martin. Netflix burned $422.5 million of cash in Q1, and expects to issue additional debt in Q2 to help fund future losses. "So it's a risky business".

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Based in Los Gatos, California, Netflix now has a market value of approximately $63 billion. It also expects to earn $.15 per share vs. $.09 a year earlier, on sales of $2.76 billion, up 31%, for the second quarter. HBO has 134 million subscribers worldwide, including viewers paying for an internet-only version of the channel that was inspired by Netflix's success.

Netflix Growth Slows Due To Content Delays