Following up on our U.S. survey conducted in January, we conducted surveys in Mexico, Germany and Japan to determine the changes in Netflix’s international penetration and churn. Since our last international survey in November of 2017, churn in these countries has fallen from 41% to 36.5%. The net affects on Netflix churn is a decrease from 26.2% to 23.8%. Netflix’s increased investment in local language content appears to be paying off after not showing an improvement four months ago. With the improved Customer Lifetime Value (CLTV) / Customer Growth Costs (CGC) ratio, and ultimately leading to a higher valuation. Our […]
Ayesha Kapoor
19 posts
We have collected Google Trends search data for Netflix Originals up to the week ended 17th February 2018 and inputted it into our updated regression model to determine the current net subscriber additions and guide towards the quarter’s expected additions. Our model suggests Netflix would have added 4.34 million subscribers in the first half of the quarter. The current track suggests it is on pace to meet and slightly beat the company’s guidance of 6.3 million subscribers for the quarter. We are estimating net subscriber additions to be 6.6 million in Q1 2018. About our Regression Model – Our forecast […]
Following the release of Netflix’s Q4 results, we conducted our 3rd survey of online U.S. residents. The purpose of the survey was to determine Netflix’s churn rate, penetration rate and reasons for subscribers leaving. Results from the 500 respondents revealed significant changes in Netflix’s churn rate for the 2nd straight survey. U.S. subscriber churn continues to plummet at a steady rate – Our survey reveals that subscribers churned at 9.2% over the last year after excluding responses faster than 3 seconds. This compares to a churn rate of 13.3% in September of 2017 and 17% in May of 2017 using the same shorter than three second […]
Three Big Takeaways: 1) Net Subscriber Addition Growth – Netflix reported net subscriber guidance 32% better than their guidance and even surpassing our aggressive estimates by 3%. As we noted in our past two notes, we expected net subscriber additions to blow past the low guidance Netflix set for itself and that the stock would likely surpass all expectations for it. 2) U.S. Price Increases Combined with Strong Net Subscriber Add Guidance – In terms of guidance, U.S. revenue and total paid members imply that Netflix is expecting well over a 6% Q/Q increase in average revenue per subscriber in […]
We have updated our Netflix Q4 net subscriber additions to account for all original programming released up to December 30, 2017. Based on Google Trends historical search data of every Netflix Original relative to its most popular show, 13 Reasons Why, we now estimate that Netflix will add 8.1 million subscribers in Q4 2017 vs. management’s guidance of 6.3 million net subscriber additions. This will be the third straight quarter Netflix will beat its guidance, putting net subscriber additions for the end of 2017 at 23.6 million, up 24% from the end of Q4 2016. The following recaps the foundation of our proprietary multiple linear regression […]
We have updated our net subscriber addition regression model based on Q3 results. Our forecast model now has an adjusted r-squared of 0.99 for tracking net subscriber additions using 18 degrees of freedom. We have applied this model to Q4 programming using data for the week ended November 25, 2017. Based primarily on the performance of it’s original content, we believe Netflix will add anywhere between 7.7 million to 8.2 million subscribers in Q4. This estimate is up from our estimate of 7.4 million net additions at the end of Q3 and would be a strong beat against management’s guidance of 6.4 million net adds. The findings […]
This is our second set of surveys of international markets that we believe are representative of Netflix’s international subscriber base. Over the past quarter, international churn has remained constant at 41% while the US churn fell about a quarter from 17% to 13%. A stagnation in churn despite increased investment in local language content will prove harmful to the customer lifetime value (CLTV)/ customer growth costs (CGC) ratio- the SaaS metric on which Netflix trades. Our Surveys- We have used Mexico as a proxy for Spanish speaking markets, Germany for European markets and Japan for Asian markets. Through the surveys we were able […]
With this note we are updating our relative SaaS valuation on Netflix. Based on its prior trading history, we continue to believe Netflix should trade on a SaaS metrics basis. This involves metrics such as annual churn rate, customer lifetime value (CLTV) and customer growth costs (CGC) rather than on a traditional P/E or EV/EBITDA basis. Earlier this week we discussed Netflix’s Q3/17 results while updating our price target of $241. We also re-iterated our buy rating on the stock. Increasing Customer Lifetime Value – Q2 vs. Q3: We base our valuation on a CLTV / Trailing 12-month CGC. The CLTV is the gross margin the […]
Netflix reported better than consensus net subscriber additions that were generally anticipated by the market with the run-up in NFLX prior to the Q3/17 report. Netflix remains in a class with NVIDIA as the only large ‘tech’ companies able to raise prices and still see increasing demand of its products. Q3/17 results were in-line with our expectations. In particular, net subscriber additions were 5.3 million versus our forecast of 5.2 million and in comparison to the guidance of 4.4 million. Q4 guidance for net subscriber additions was 6.3 million versus our estimate of 7.4 million, but as we talked about in our preview, we […]
We have updated our Netlfix Q3 net subscriber additions to account for end of month demand. Using Google Trends historical search data of every Netflix Original relative to its most popular show of all-time, 13 Reasons Why, we now estimate Netflix will add 5.15 million subscribers in Q3 2017 versus our previous estimate of 5.3 million subscribers. Prior to the T-Mobile announcement partnership announcement we had expected Q3 Netflix net subscriber additions to be 4 million, short of its Q3 guidance of 4.4 million net subscriber additions. The following recaps the foundation of our proprietary multiple linear regression forecast model: Systematically categorizing and […]
From September 22nd to September 24th we conducted another online U.S. survey with 400 respondents about their Netflix’s (NFLX: NASDAQ) usage. The most notable difference from our previous survey in June was that domestic annual customer churn has moved substantially lower, dropping from 17.3% to 13.3%. This move has caused our estimate of the value of a U.S. subscriber (U.S. CLTV) to increase from our previous from $330 to $429. In terms of the company wide impact, our company-wide Q3 annual churn rate moves from 28.6% to 26.6%. Netflix’s overall CLTV moves from our previous estimate of $139 to $150. EXHIBIT […]
On September 6th just after 11 a.m, T-Mobile (TMUS:NYSE) posted on their blog that they will begin offering T-Mobile ONE family accounts a free standard Netflix subscription. The offer begins tomorrow (September 12th). No end date to this offer was provided. These plans typically cost $9.99 per month. Post the announcement, Netflix’s stock closed at $179.25, 2.3% above its opening price. Netflix Made this Move Because they were on Pace to Miss Q3 Guidance – According to our forecast model, Q3 2017 was pacing towards missing Q3 net subscriber addition guidance. Recall Ozark did not gain material traction despite Netflix’s […]
A volatile few months – The first half of Q3 2017 has been volatile for Netflix’s (NFLX:NASDAQ) stock price. Starting in July with our initiation at $146, NFLX jumped to $189 following a stronger than expected Q2 net subscriber additions before settling around $168 today. Also driven by news of Disney, Facebook and Apple entering the over-the-top (OTT) content market, Q3’s annualized volatility of 46% compares to a 29.5% annual volatility that Netflix has seen year-to-date. Netflix might fall short of the guided 4.4 million net adds – After updating our regression model for Q2 data, we estimate that a […]
Facts: On Tuesday, August 8th after the market close, Disney (DIS-NYSE) announced on their fiscal Q3 conference call that: ► They will end their distribution agreement with Netflix (NFLX-NASDAQ) for subscription streaming of new releases from Disney and Pixar, beginning with the 2019 calendar-year theatrical slate ►The biggest named productions set for release in 2019 include a live-action Lion King, Frozen 2, and Toy Story 4 ►Disney is still undecided on whether to pull Lucasfilm (Star Wars) and Marvel (DareDevil and more) content ► Netflix did not have global rights to our Disney movies. They bought opportunistically in certain markets. The original deal, which […]
Our ultimate goal with this survey is getting an up to date International churn rate for Netflix’s users, which can be used to determine their customer lifetime value (CLTV). This is the key unreported metric in their SaaS valuation, which appears to be how NFLX trades. CLTV along with the company’s total market opportunity are the key outstanding questions investors appear to have concerning the future stock price. More specifically the surveys are determining: a Penetration rate – The percentage of users who have or have had a Netflix subscription over the last 12 months. The market potential is best […]