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.

Equity Bottom-Up

<ul><li>Netflix Inc.'s Q1 2024 earnings highlighted a number of impactful developments and strategic shifts that investors should consider.</li><li>The company's management team made it clear that while they'll no longer be reporting quarterly membership in ARM data starting in 2025, they will continue to provide updates on key metrics including revenue, OI, OI margin, net income, EPS, and free cash flow.</li><li>Baptista Research looks to evaluate the different factors that could influence the company's price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.</li></ul>

Netflix Inc.'s Q1 2024 earnings highlighted a number of impactful developments and strategic shifts that investors should consider.The company's management team made it clear that while they'll no longer be reporting quarterly membership in ARM data starting in 2025, they will continue to provide updates on key metrics including revenue, OI, OI margin, net income, EPS, and free cash flow.Baptista Research looks to evaluate the different factors that could influence the company's price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Netflix Inc.: A Shift In Reporting Focus from Subscriptions to Revenue and Engagement - But What Lies Ahead? - Major Drivers

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.

<div><p>We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that appears now set to breakeven on FCF in 2021. Over the course of the past year we have gone from being short Netflix to long Netflix beginning this past summer, which has played out...and now we return to the sidelines (but not interested in reshorting Netflix), as we think to get more bullish on Netflix from here requires greater clarity on future revenue optionality around gaming and consumer products. The increasingly saturated streaming space means Netflix will only be growing subs ~10% for the forseeable future, with most of that growth from lower priced regions, while it will be investing with a vengeance to drive more content, likely capping expectations for continued margin expansion and FCF.</p></div><div><div><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  </p></div></div></div>

We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that appears now set to breakeven on FCF in 2021. Over the course of the past year we have gone from being short Netflix to long Netflix beginning this past summer, which has played out...and now we return to the sidelines (but not interested in reshorting Netflix), as we think to get more bullish on Netflix from here requires greater clarity on future revenue optionality around gaming and consumer products. The increasingly saturated streaming space means Netflix will only be growing subs ~10% for the forseeable future, with most of that growth from lower priced regions, while it will be investing with a vengeance to drive more content, likely capping expectations for continued margin expansion and FCF.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  

<ul><li>Netflix, in their recent Q4 2023 earnings call, highlighted key developments that signal both progress and future challenges for the company.</li><li>The firm elaborated on its partnership with WWE, where Netflix airs live WWE events.</li><li>As per co-CEO Theodore Sarandos, fans of WWE have lauded this move, many of whom Netflix assumes were underserved previously.</li></ul>

Netflix, in their recent Q4 2023 earnings call, highlighted key developments that signal both progress and future challenges for the company.The firm elaborated on its partnership with WWE, where Netflix airs live WWE events.As per co-CEO Theodore Sarandos, fans of WWE have lauded this move, many of whom Netflix assumes were underserved previously.

Netflix Inc: Will Its Foray Into Live Entertainment Result In Phenomenal Subscriber Growth? - Major Drivers

Meta Platforms (Facebook) / Equity Bottom-Up

<ul>
<li>TikTok's business model advantage: short form video creates greater signal for algorithmic addiction is forcing rivals to react (where possible).</li>
<li>META is best positioned to copy TikTok, and is trading at a valuation approximating cable networks during cord cutting.</li>
<li>Netflix is worst positioned... as YouTube, Instagram, and Snap incorporate TikTok's short form video, more attention will be drawn away from the streaming services. Tough spot to be in.</li>
</ul>


TikTok's business model advantage: short form video creates greater signal for algorithmic addiction is forcing rivals to react (where possible).
META is best positioned to copy TikTok, and is trading at a valuation approximating cable networks during cord cutting.
Netflix is worst positioned... as YouTube, Instagram, and Snap incorporate TikTok's short form video, more attention will be drawn away from the streaming services. Tough spot to be in.


<ul>
<li>Shockingly poor 1Q subscriber guidance implies 9M net adds for 2022, well below the ~25M level investors are accustomed to, implying saturation, competition, or both. (We think both)</li>
<li>Operating Margin guidance cut blamed on FX, we think more likely the demand for heightened content spend due to competition.</li>
<li>Netflix valuation always built on a long term DCF...very sensitive to downward revisions in subscribers and ARPU...we think Netflix settles around $400 until it can disprove bear thesis.</li>
</ul>


Shockingly poor 1Q subscriber guidance implies 9M net adds for 2022, well below the ~25M level investors are accustomed to, implying saturation, competition, or both. (We think both)
Operating Margin guidance cut blamed on FX, we think more likely the demand for heightened content spend due to competition.
Netflix valuation always built on a long term DCF...very sensitive to downward revisions in subscribers and ARPU...we think Netflix settles around $400 until it can disprove bear thesis.


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)

Netflix Inc.: A Shift In Reporting Focus from Subscriptions to Revenue and Engagement - But What Lies Ahead? - Major Drivers

Netflix Inc.'s Q1 2024 earnings highlighted a number of impactful developments and strategic shifts that investors should consider. The company's...

Baptista Research

Netflix 3Q21: Saved By Squid Game

Over the course of the past year we have gone from being short Netflix to long Netflix...and now we return to the sidelines. We need greater...

Aaron Gabin

Netflix Inc: Will Its Foray Into Live Entertainment Result In Phenomenal Subscriber Growth? - Major Drivers

Netflix, in their recent Q4 2023 earnings call, highlighted key developments that signal both progress and future challenges for the company. The...

Baptista Research

TMT Pre-2Q Earnings: The TikTok Impact

TikTok is wreaking havoc on the advertising and streaming ecosystems by stealing attention. META is best positioned to respond, NFLX is least well...

Aaron Gabin

Netflix 4Q21: Don’t Look Down

Netflix's poor 1Q subscriber guidance implies 9M net adds for 2022, well below the ~25M level investors are accustomed to, implying saturation,...

Aaron Gabin

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