Netflix Q4 Validates Long-Term Holders' Thesis

Credit Suisse said Netflix, Inc. NFLX’s strong fourth quarter results and solid guidance validates its long-term thesis on the stock, which surged more than 7 percent to set a new 52-week high.

Netflix reported fourth quarter revenue and EPS at $2.48 billion/$0.23 versus CS estimate of $2.5 billion/$0.17. Domestic paid streaming subscribers came in at 47.9 million, topping guidance of 47.6 million and domestic streaming revenue of $1.40 billion was in line with guidance.

The company added 7 million subscribers in the quarter and finished 2016 with 93.8 million users and generated $8.3 billion in global streaming revenue, good for 35 percent year-over-year growth.

For the first quarter, Netflix expects to add 1.50 million domestic streaming customers and 3.70 million International streaming customers. Total streaming revenue guidance calls for $2.516 billion.

“More importantly, for the longer term, Netflix will be looking to show a greater balance between growth and profitability – which to us validates the long-term investment thesis for its international and newer cohorts to follow along the margin expansion trajectory of the US,” analyst Stephen Ju wrote in a note.

As a result, Ju raised his FY 2017 revenue/EPS estimate to $11.54 billion/$1.54 from $11.45 billion/$1.13.

However, Ju maintained his Neutral rating on the stock citing balanced risk/reward. But, he raised the price target by $10 to $143.

Shares of Netflix closed Wednesday at $133.26.