Netflix Subscriber Growth Impressive, Says Analyst, but 'Clouds on the Horizon'

Despite sailing past Q3 subscriber expectations (see 1810160066), Netflix faces “clouds on the horizon,” Wedbush Securities' Michael Pachter wrote investors Wednesday. “Impressive subscriber growth” of 1.1 million in the U.S. and 5.87 million internationally topped guidance and the analyst’s estimate of 650,000 domestic subscription adds and 4.35 million overseas -- but it faces potential slowing subscriber growth as Disney and Fox likely migrate content licensed to Netflix to a “Disney-sponsored standalone service" next year, he said. Pachter rated Netflix “underperform” on content acquisition costs that cause “substantial cash burn.” A “silver lining” of Disney's service is that “Netflix will have less content available to it, resulting in more stable cash burn,” he said. Netflix subscriber growth could lag if its original programs “fail to achieve the quality and quantity of the lost content,” he wrote. The shares closed up 5.3 percent to $364.70.