Netflix just wowed Wall Street with its growth story.
The streaming service topped third-quarter earnings estimates, posted a double-digit increase in sales, and smashed subscriber targets.
Here's what five experts have to say about its earnings report:
- Barton Crockett of B. Riley FBR says while the overall report looked solid, he sees some weakness in the details. "At risk of tugging on Superman's cape, their margin outlook for the quarter really takes a dive from what they did in the third quarter and their revenue per subscriber, their ARPU growth, slows in the fourth quarter from what we saw for the past few quarters," said Crockett.
- Kevin Landis of Firsthand Capital Management says high valuations are not a knock against Netflix. "Wall Street just loves to worry about expensive stocks but the strongest stories end up being those most expensive stocks and this is case in point," said Landis. "These folks are very scientific about what they do, and in essence they're pretty darn aggressive about what they do as well and that's why people complain so much about how much they spend."
- Sylvia Jablonski of Direxion says Netflix's expansion plans give her confidence in the stock's trajectory. "I think it's been an awesome growth story and it will continue to be an awesome global growth story as they expand into Asia, India and some of the international markets," said Jablonski.
- Michael Morris of Guggenheim Securities says investors need to stay focused on the big picture. "This is a company that's disrupting a $400 billion global television industry and they currently have roughly $16 billion in revenue," said Morris. "We think that the revenue opportunity with the company is vastly underappreciated."
- Mark Mahaney of RBC Capital says the streaming service has an enviable profile for a tech company. "You've got accelerating sub adds, pricing power and expanding margins. I don't know another place in tech where you can get that package right now," said Mahaney. "That's why the stock works near-term."
Bottom line: Netflix's high-growth potential justifies ballooning expenses and an expensive valuation. Keep focused on the big picture growth story.