While most investors will be watching income and revenue numbers this earnings season, Netflix, Inc. (Nasdaq: NFLX) shareholders know better. Netflix’s long-term growth is all about subscriber count, and GBH Insights head of technology research Daniel Ives says Netflix will top subscriber growth expectations by more than 11 percent when it reports fourth-quarter earnings Jan. 22.
GBH’s latest survey work suggests Netflix will report a 7 million increase in net number subscribers in the fourth quarter, roughly 700,000 more subscribers that the 6.3 million consensus analyst estimate. If Ives is correct, Netflix will report a 23.9 percent year-over-year increase in subscribers in the fourth quarter, slightly below the 26 percent subscriber growth it reported in the third quarter.
Ives says a subscriber beat will be a strong indication that Netflix is executing its long-term growth plan and is on track for another big year in 2018.
“The underlying growth and franchise model at Netflix all revolves around original content build out fueling consumer engagement and subscriber growth,” Ives says.
He says the challenge for Netflix likely won’t come until Walt Disney Co. (DIS) launches its own streaming service in 2019. In the meantime, he says there’s nothing stopping Netflix.
“Our bullish thesis on Netflix is based on our belief that the company’s competitive moat, franchise appeal, ability to increase international streaming customers through 2020, and original content build out will translate into robust profitability and growth as the next phase of this story plays out over the coming year,” Ives says.
GBH isn’t the only firm bullish on Netflix this year. Barclays analyst Kannan Venkateshwar says Netflix and Disney will be the two biggest forces in the next era of media.
“Inertia tends to benefit early movers and market leaders and is likely to help pricing growth and costs to potentially drive margin expansion over time,” Venkateshwar says. “In our opinion, in the next three to five years Netflix is likely to become the second-biggest media company by revenue, ignoring studios and theme parks, next only to Disney.”
GBH has…
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