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Coatue Management Decreases Its Position in Netflix

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Coatue Management and Netflix

Coatue Management decreased its position in Netflix (NFLX) in 4Q14. The investment represents 5.81% of the hedge fund’s overall portfolio in 4Q14.

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Netflix beats its own estimates in terms of member growth and margins

In 1Q15, Netflix added 4.9 million new members globally. This beat its own forecast of 4.1 million. The company added 2.3 million new members in the US—compared to its own forecast of 1.8 million. It gained 2.6 million new members internationally—compared to its own expectations of 2.25 million.

Netflix credited this growth to the improving content, streaming, and user interface. The company also managed to beat its own estimates on margins. Netflix managed to achieve a US contribution margin of 31.7%—compared to its own estimate of 30.1%. Netflix credited this improvement to better-than-expected new member additions and lower-than-expected spending on procuring content.

Partnership with Disney is helping Netflix

During the earnings conference call for 1Q15, Netflix thanked its partnership with Disney (DIS). It’s helping Netflix acquire more content. Netflix entered into a multiyear deal with Disney in 2012 for the exclusive rights to show Disney movies. To counter this threat from Netflix, Amazon (AMZN) also entered into a multiyear deal with Time Warner’s (TWX) HBO in April 2014. The deal gives Amazon Prime members access to HBO content.

To gain portfolio exposure to Netflix, you could invest in the iShares S&P 500 Growth ETF (IVW). Netflix accounts for 0.34% of IVW’s portfolio.

About Netflix 

Netflix is a leading Internet television network. It has more than 53 million streaming members in nearly 50 countries. The members enjoy more than 2 billion hours of TV shows and movies each month—including original series like House of Cards and Orange Is the New Black. Netflix’s core strategy is to grow its streaming subscription business domestically and internationally.

In the next part of this series, we’ll discuss the fund’s position change in Adobe Systems.

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