While Netflix Shares Touch A New High, Bears Say Big Questions Go Unanswered

All eyes on Wall Street are on Netflix today following its startlingly strong Q4 earnings report last night. Shares are up about 17% in early trading — and touched an all-time high of $395.63 —  wiping out the 9.4% retreat so far in 2014 for last year’s highest appreciating stock. Netflix headquartersBut while company bulls high-five each other, I’m more interested in how bears deal with the upbeat news. One of the sharpest, Bernstein Research’s Carlos Kirjner (with an “underperform” rating on Netflix), observes this morning that the higher-than-expected growth in domestic streaming subscribers came at a cost: Netflix spent 34% more to market that business than it did in the same quarter last year.  “In other words, Netflix has had to pay significantly more per net add, either because it needed more gross adds to offset churn of a growing base, or because it had to spend more in advertising and promotions. Or both.” That could be worrisome because “the key question” for Netflix investors is whether it can boost revenues by raising its $7.99 monthly subscription price without driving customers away. “Our view is that the answer to this question is no,” which was reinforced by CEO Reed Hastings’ “cautious and noncommittal commentary” on pricing. Kirjner easily has the funniest line of the day (admittedly not a high bar for the analyst community) with a reference to Hastings’ jab at HBO chief Richard Plepler for saying in a recent interview that he’s indifferent if HBO GO users share their password. Kirjner liked that “better than Netflix’s discussion of the S-curve adoption of Netflix’s service, as the password discussion seemed to be more factual.” (more…)

This article was printed from https://deadline.com/2014/01/while-netflix-shares-touch-a-new-high-bears-say-big-questions-go-unanswered-669852/