TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Equity Bottom-Up

<ul>
<li>Activist Dan Loeb recently backed down from his request that Disney spin out ESPN...something we thought was foolish, and glad is off the table. </li>
<li>Disney is still trapped by the "rock and the hard place" choice of trading higher margin cable subscribers for lower margin (higher churning) streaming subs.</li>
<li>Bob Chapek is a poor choice for Disney CEO...not alot of good options. This company is strategically boxed in. Parks's overearning will dissipate, will be a good short next year. </li>
</ul>


Activist Dan Loeb recently backed down from his request that Disney spin out ESPN...something we thought was foolish, and glad is off the table. 
Disney is still trapped by the "rock and the hard place" choice of trading higher margin cable subscribers for lower margin (higher churning) streaming subs.
Bob Chapek is a poor choice for Disney CEO...not alot of good options. This company is strategically boxed in. Parks's overearning will dissipate, will be a good short next year. 


Loeb Backed Down Quickly…But Is Disney Really in Good Shape?

<ul>
<li>Palo Alto Networks produced an impressive FY4Q22 earnings, blowing out billings growth and showing an impressive display of "platformization"...only trades 8x forward revenues for 25-30% revenue and FCF growth.</li>
<li>Farfetch finally acquired Yoox Net a Porter, after over a year of speculation. Deal is excellent for FTCH, gives them a monopolistic position in lux ecommerce.</li>
<li>Netflix's Gray Man yet another example of the company's inability to create compelling big budget movies.</li>
</ul>


Palo Alto Networks produced an impressive FY4Q22 earnings, blowing out billings growth and showing an impressive display of "platformization"...only trades 8x forward revenues for 25-30% revenue and FCF growth.
Farfetch finally acquired Yoox Net a Porter, after over a year of speculation. Deal is excellent for FTCH, gives them a monopolistic position in lux ecommerce.
Netflix's Gray Man yet another example of the company's inability to create compelling big budget movies.


TMT Quick Hits: Palo Alto Networks, Farfetch, Netflix

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>Netflix has had a bad 2022 so far.</li><li>The company continued with its trajectory of subscriber losses in the most recent quarter and lost another million subscribers.</li><li>Given the current uncertainty levels, we give Netflix a ‘Hold’ rating with a revised target price.</li></ul>

Netflix has had a bad 2022 so far.The company continued with its trajectory of subscriber losses in the most recent quarter and lost another million subscribers.Given the current uncertainty levels, we give Netflix a ‘Hold’ rating with a revised target price.

Netflix Inc.: Ad-Supported Subscription To Counter Subscriber Losses & Other Developments

<ul>
<li>Netflix's quarter was modestly better than reset bearish expectations...but not by much. 1M subscriber gains projected for 3Q below consensus 1.7M.</li>
<li>Timeline for reaccelerating subscriber growth from advertising and password sharing still seems shockingly long. </li>
<li>Netflix remains a top funding short for the forseeable future, we think $210 is the high end of the range, $170 the low end, but could justify $150.</li>
</ul>


Netflix's quarter was modestly better than reset bearish expectations...but not by much. 1M subscriber gains projected for 3Q below consensus 1.7M.
Timeline for reaccelerating subscriber growth from advertising and password sharing still seems shockingly long. 
Netflix remains a top funding short for the forseeable future, we think $210 is the high end of the range, $170 the low end, but could justify $150.


Netflix 2Q22: Low Growth, Low FCF, Low (Management) Conviction

<ul>
<li>Netflix net add bogey appears to be for 2Q losses in the -2-3M range (guide was -2M), if it hits this number is irrelevant, the 3Q/2H22 guide is more important.</li>
<li>BBG was bullish on NFLX's quarter recently, but we think misses the forest from the trees regarding ever ramping competition. </li>
<li>Ad-Based Netflix subs *might* hit by end of 2022, but won't move the needle for 18 months.</li>
</ul>


Netflix net add bogey appears to be for 2Q losses in the -2-3M range (guide was -2M), if it hits this number is irrelevant, the 3Q/2H22 guide is more important.
BBG was bullish on NFLX's quarter recently, but we think misses the forest from the trees regarding ever ramping competition. 
Ad-Based Netflix subs *might* hit by end of 2022, but won't move the needle for 18 months.


Tactical TMT 2Q Earnings Trading Idea: Short NFLX

United States

Netflix Inc. is an Internet subscription service for watching tv shows and movies. Subscribers can instantly watch unlimited TV shows and movies streamed over the Internet to their TVs, computers and mobile devices and in the United States, subscribers can receive standard definition DVDs and Blu-ray Discs delivered to their homes.

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Netflix Inc (NFLX US)

Loeb Backed Down Quickly…But Is Disney Really in Good Shape?

We think Disney is stuck. DTC streaming service is the future of media, a fundamentally less attractive business model. Disney remains an excellent...

Aaron Gabin

TMT Quick Hits: Palo Alto Networks, Farfetch, Netflix

Palo Alto Networks produced an impressive FY4Q22 earnings, blowing out billings growth and showing an impressive display of...

Aaron Gabin

Netflix Inc.: Ad-Supported Subscription To Counter Subscriber Losses & Other Developments

Netflix has had a bad 2022 so far. The company continued with its trajectory of subscriber losses in the most recent quarter and lost another...

Baptista Research

Netflix 2Q22: Low Growth, Low FCF, Low (Management) Conviction

Netflix has become a legacy cable network - little pricing power, little volume growth, and massive competition. Oh yeah, minimal FCF a management...

Aaron Gabin

Tactical TMT 2Q Earnings Trading Idea: Short NFLX

Recent commentary that Netflix subscriber figures may be better than expected will prove irrelevant. Unrelenting competitive intensity will trigger...

Aaron Gabin

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