Netflix cleans on subscriber losses, growth has yet to be seen by analysts

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(Reuters) – Wall Street brokers broke a positive outlook on Netflix Inc (NFLX.O(d) Thursday, betting that material slate would make for the rest of 2019 second quarter shock losses in U signatories.

Netflix shares fell by about 11% on concerns about their earnings report Wednesday which showed unprecedented global growth and signs of trouble in its origins.DIS.N) a highly anticipated competitive service was launched later this year.

Netflix has a valuable value, the price-to-earn ratio is the largest of the five major high-tech US companies, which constitute the so-called FAANG group, since 2015 but has decreased by $ 100 per year. the $ 100 share from 2018 highlights. Facebook Inc are the other FAANG companiesFB.O), Amazon.com Inc (AMZN.O), Apple Inc (AAPL.O) and Alphabet Inc (GOOGL.O).

Netflix in the United States tends to be seasonally weak in the period April to June, where the weather keeps warmer and longer days outdoors.

Cowen & Co Brokers said Netflix had missed expectations of second quarter subscribers three times over the past four years. This year, however, the company Los Gatos, California-based series set off aggressive price series, and lost US subscribers for the first time in eight years.

“They raised prices in the US about $ 2 a month on average, and most of the subscribers learned about its increase during Q2,” said Michael Pachter, Wedbush Securities analyst.

“I think this is a much larger driver than a matter of tear.”

STILL BUY

Ten Wall Wall brokers cut their share price targets to reflect Thursday's fall, but they did not downgrade the stock, which was still visible to a majority of Wall Street businesses as a high potential growth business and a clear “buy”.

The relatively small price drop in junk bonds $ 12.6 billion confirmed the company's view that results are the second quarter spent. While all Netflix debt was impaired on Thursday, the largest price movements were 2.5%, as on the 6.375% bond due in May 2029 worth $ 800 million, according to Refinitiv data.

“We're not worried. We are still keeping our forecast, ”said Neil Begley, Senior Vice President at Moody's Investor Service.

Credit market belief in Netflix allowed it to be borrowed at very cheap rates to fund the creation and purchase of materials. It is unlikely to change that based on the second quarter disappointment results, Begley said.

Netflix's bond prices have not fallen enough to attract market hunters. “I was looking for a 300 basis point spread in a new 10-year deal as fair value,” said John McClain, portfolio manager at Diamond Hill Capital Management. The spread of the 6.375% band due in 2029 is about 275, he noticed, “so I would have 325 points to get a sum.”

While competition will be in line with the upcoming Apple TV and Disney + launches, some analysts have said that Netflix's global reach is likely to be marginalized.

Netflix contributed only 2.83 million international paid subscribers, compared to 4.8 million street expectations, but now has 151.6 million worldwide, leaving its nearest Amazon Prime and HBO competitors.

“By 2025, based on Disney's projections, Netflix appears to be spending at least five times on content such as Disney +,” said Jeff Wlodarczak, a Pivotal Research Group analyst.

“I also think that Disney + is likely to help accelerate consumers from traditional Pay TV towards OTT (content over an internet connection) that should benefit Netflix.”

PHOTO FILE: The Netflix logo appears on their office in Hollywood, Los Angeles, California, U. 16 July, 2018. REUTERS / Lucy Nicholson / File Photo

The company raised prices in Britain, Switzerland, Greece and Western Europe in the quarter, testing the waters in some of its richest markets at a time when it spends much more than it earns. he the battle to win subjects.

Netflix began the third quarter with the release of the “Stranger Things”, set in the 1980s, and will continue with new seasons “Orange is the New Black” and “The Crown,” as well as the upcoming film Martin Scorsese. “The Irishman. ”

“We would notice that Netflix has strong outbreaks and, on these lines, we expect a strong 2H Netflix to re-grow,” Suisse Credit analysts wrote in a client note.

Reporting by Supantha Mukherjee and Akanksha Rana in Bengaluru, and Kate Duguid in New York; editing by Patrick Graham and Richard Chang

Our Standards:The principles of Thomson Reuters Trust.

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