Will Netflix’s Domestic Streaming Memberships Continue to Rise?

Baird downgrades Netflix

Netflix (NFLX) is expected to announce its 4Q15 and fiscal 2015 results on January 19, 2016. On January 4, 2016, Business Insider reported that the research company Baird had downgraded Netflix to “neutral” from “buy,” stating that the company’s US streaming subscribers may have hit a “plateau.”

In 2015, Netflix was a top performer in the S&P 500 and was a part of the FANG group of stocks. FANG is an acronym for Facebook (FB), Amazon (AMZN), Netflix, and Alphabet (GOOG). Netflix’s stock price rose by 135% in 2015. The FANG stocks collectively drove the S&P 500 in 2015.

However, by January 14, 2016, Netflix’s stock price had fallen by 6.4%. In this series, we’ll discuss whether Netflix will able to meet investors’ expectations with its fiscal 2015 results. First, we’ll take a look at how Netflix’s domestic streaming business is expected to fare in 4Q15.

Will Netflix’s Domestic Streaming Memberships Continue to Rise?

What to expect from Netflix in 4Q15?

As the above chart indicates, according to Netflix’s internal estimates, Netflix expects total memberships to reach 44.8 million in 4Q15, and total net additions of 1.7 million members. Historically, for Netflix, the fourth and first quarters show a strong seasonal pattern when it comes to Netflix’s rate of increase in domestic memberships.

It remains to be seen whether Netflix’s 4Q15 results will exhibit the same pattern, or whether Netflix’s streaming memberships will be impacted by the price increase of Netflix’s “standard” plan, which Netflix announced in October last year. We’ll discuss these points in detail further in this series.

Netflix makes up 0.97% of the PowerShares QQQ Trust Series 1 ETF (QQQ). For an investor interested in exposure to the television and radio sector, QQQ has an exposure of 4.5% to the sector.