Netflix reported strong Q4 earnings that beat estimates, with revenue growing 31% year-over-year. Global subscriber additions totaled 8.8 million versus a forecast of 7.6 million. For Q1 2020, Netflix is guiding for revenue growth of 26.8% year-over-year and 7 million paid net subscriber additions. The company expects improvement in its operating margin and negative free cash flow. Analysts maintained a buy rating for Netflix due to its beat on expectations, strong subscriber guidance, and progress towards becoming free cash flow positive in the coming years.

1. 1
Netflix (NASDAQ: NFLX)
10/2/2020
FQ4 2019 Earnings Update
Kingsley Huang

2. 2
Netflix Q4 Beats Estimates
● A strong end in 2019, with Q4 Revenue growing 31% year over year

3. 3
Subscribers Net Add Forecast
● Q4 Global subscribers totaled 8.8m vs 7.6m forecast
● Raised Target Price to $393

4. 4
2020 Q1 Guidance
Netflix is providing the following guidance for its fiscal 2020 first quarter:
● Revenue $5,731 million (YoY 26.8% )
● Operating Margin 18% (increased)
● EPS $1.66
● Global Stream Paid Net Additions 7 million
⚫ only had 4 quarters in Netflix history where they have grown more than 7 million in paid
net adds

5. 5
Future plans and progress
Cash Flow
● Improvement from negative $3.3 billion this year to roughly negative $2.5 billion
next year
● on that path to cash flow positive over the coming years
Mobile only plans
● Mobile only plans in India, Indonesia, Malaysia
● Increase in retention and net revenue

6. 6
Valuation
● Maintained PEG and improved P/FCF

7. 7
Technical Analysis - Buy
• MA 50 is above
MA100 and
MA250
• Broke up previous
high $335.89
• Developing
uptrend
(3/2/2020)

8. 8
Technical Analysis - Buy
• MA 50 is above
MA100 and
MA250
• Filling previous
gap
• Testing resistance
$379
(9/2/2020)

9. 9
Call on Netflix - Buy
● Short term [Buy]
⚫ As shown in technical analysis
● Long term [Buy] Target Price $393
⚫ Beat expectation and strong next quarter guidance
⚫ Working good progress in free cash flow
⚫ Confident in its original content to keep providing good user experience