Hmm, there might be a buying opportunity coming soon in this stock.
And now, the bad news. Despite a 62% surge in subscriber growth, revenue rose just 46% to $239.4 million as new customers took to lower-priced plans that clearly didn't ding margins. The problem is that analysts were expecting the top line to clock in at $242.6 million.
Coming in a little light at the top will continue, with Netflix aiming for at least $980 million in revenue for all of 2006. Wall Street was perched just above the $1 billion mark.
It also costs Netflix more to rope in each new customer. They are now paying $43.95 when they were only paying $38.13 a year ago. That means their advertising budget is too high and could be slashed to bring prices down. It will hurt when you pay $43.95 to bring in a person that is only going to get the 2 movie plan for $11.99 a month.
I think the stock is getting fairly valued here in the $18 range. They are still the premier DVD rental name and have pretty clean financing and a large cash horde. However the only near term catalyst though will be announcing their plans for video on demand. If it sounds like something that would be able to grow their bottom line then the stock will probably rise. If it is something sad-assed that they cobble together to meet revenue numbers then you can say hello to single digits and a Blockbuster (BBI) style valuation. It should be an interesting watch list name in any case.
No comments:
Post a Comment