Analyst Note| Neil Macker, CFA |
Netflix reported decent third-quarter results as subscriber growth beat the low guidance issued a quarter ago. While management expects to add 8.5 million net new customers during the fourth quarter, this mark would only be in line with last year’s fourth quarter and below the previous two years. We think the lower subscriber growth reflects not only saturation in its largest markets but strong competition in the regions with the most potential growth remaining, including Latin America and India. We are maintaining our narrow moat and raising our fair value estimate to $275 from $250 to account for slightly stronger margin expansion expectations due to lower marketing costs.