The article was written by Jacob Saphir, a Financial Analyst at I Know First.

Netflix Stock Prediction

Summary:

Netflix reports better than expected 2016 third quarter report

I Know First accurately predicted an increase in stock price since its September 15, 2016 forecast.

I Know First continues its bullish forecast

October 18, 2016

Accurate Forecast:

Netflix, Inc. (NFLX), is the largest internet television network provider offering online streaming of films, documentaries, television programs, and original programs, such as the hit series Narcos, by Netflix. Netflix has been posting earnings per share exceeding expectations for the past 3 quarters. Given the company’s positive revenue return, strong potential international growth, and change in consumer demand, we predicted the stock would continue its trend of reporting quarterly earnings growth. On October 17, 2016, the company reported its third quarterly earnings surpassing expectations. As a result, the stock increased by approx. 19% by the end of the trading day in October 18, 2016. Since writing I Know First’s bullish forecast article on September 15, 2016, our prediction was accurate that Netflix’s stock would increase.

Continued Positive Revenue Return:

Our previous article demonstrated Netflix’s fundamental strength in consistently reporting revenue and net income growth. As a result of the company’s third quarter results continuing its trend, revenue grew to $2.29 billion from its previous quarter report of $2.015 billion, an increase of approx. 14%. Since the start of the year, revenue has increased by approx. 26%. Much like its encouraging revenue growth, the third quarter also report an increase in net income. Net income surpassed its estimate of $22 million by almost double to $52 million. Earnings per share as well exceeded its estimate of $0.06 to $0.12, thus continuing its trend. A reason for this trend can be attributed to its increase in market share abroad.

International Growth:

Netflix has been focusing its future by expanding abroad. Since 2010, after expanding to Canada, Netflix has aggressively been marketing elsewhere. Earlier this year, on January 6, Netflix made an astonishing announcement that it was now launching into 130 new countries. As indicated in our previous article, growth rates during the beginning business cycle is higher than when the market reaches maturity and growth slows, as we may be seeing in the US market. Despite the domestic market reaching maturity, Netflix exceeded expectations by adding an additional 400,000 subscribers compared to 300,000 forecasted. In addition, international subscribers increased by 3.2 million compared to 2 million expected, that is over 50% increase. Netflix CEO, Reed Hastings, visions the company to launch in every country by the end of this year. The sky is the limit for Netflix to achieve in the hopes of reaching over 6 billion people in the world.

Conclusion:

We are pleased to see an example of the accuracy of our bullish forecast for the stock. With a consistent increase in revenue, strong potential international growth, favorable change in consumer demand, and I Know First’s algorithm forecast; Netflix can be considered a long term investment.

Past I Know First Forecast Successes with NFLX:

In such as the one dated on April 17, 2015, the algorithm accurately forecast a signal for Netflix. In a one year time span, the stock rose impressively by 71.71%, beating the S&P 500 negative return of 1.08%. The market premium calculates to an astounding 72.79%.

Below is the latest forecast I Know First algorithm released as of today on September 15, 2016. If we were to compare the forecast back in April 17, 2015, we can see both forecasts rate Netflix as a buy. The confidence level is even higher in our most recent forecast. If the previous forecast last April accurately predicted the stock would increase and it did by over 70%, the higher confidence level registered in the latest forecast below could indicate another high rate of return.

The forecast is color-coded, where green indicates a bullish signal while red indicates a bearish signal. Brighter greens signify that the algorithm is very bullish as it does at the top of this forecast. The signal is the number flush right in the middle of the box and the predicted direction (not a specific number or target price) for that asset, while the predictability is the historical correlation between the prediction and the actual market movements. Thus, the signal represents the forecasted strength of the prediction, while the predictability represents the level of confidence.