Good morning. Hope everyone had a long weekend. QQQs -1.25% as Japan/China push back slightly on the U.S. Tariff demands (articles below in “Macro” section)
2 Yr dn 2bps but 10 yr up 7bps. China +65bps… BTC +2.5%…
First week of earnings with SAP on Tuesday TXN IBM NOW CHKP on Wednesday and INTC + GOOGL on Thursday…We’ll be here covering it all….
We’ll hit NFLX first, then Tech News/Research, then some Macro…
Let’s get to it…
NFLX: Solid print with Q1 and Q2 guide coming inline with bogeys and above street, while Q2 rev guide implies acceleration on FXN basis.
Overall, call went well and mgmt sounded bullish on 1P ad platform and targeting, AI enabling smaller budget projects drive better quality films and less production, and also said they are seeing no impact from macro:
“We're paying close attention, clearly, to the consumer sentiment and where the broader economy is moving. But based on what we are seeing right now, there's nothing significant to note. Engagement remains strong and healthy”
The main nitpick is that FY Operating margin implies sharp 2H margin declines given increased content costs and higher S&M from good content slate in 2H.
A record $3.5B in buybacks in the q sends a good signal from mgmt.
Buyside likely goes up close to $32-33 for ‘26 and bulls will say China/tariff/recession safe-haven, defensive characteristics + market leader, ad platform / adjacencies like gaming ramping, strong content slate, strong pricing power means 35x, which is a $1,100-$1,150 stock price. Bears will say 35x is crazy to pay in this market, even for a co that will CAGR 25% EPS a year and that eventually a slowing macro will impact ads while paid sharing tailwind is ending. We tend to side with the bulls and think the print reinforces the recent market flows that have supported tariff/China safe havens.
Gets an upgrade at Phillips:
Phillip Securities upgraded Netflix to Neutral from Reduce with a price target of $950, up from $870, post the Q1 report. A "strong" content pipeline and the expansion of its advertising supported tier position will enable Netflix to navigate potential economic slowdowns, the analyst tells investors in a research note. The firm believes the stock's current valuation suggests limited near-term upside, but cites Netflix's ability to withstand a recession for the upgrade.
Third party Roundup:
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