Netflix (NFLX): Subscriber Churn Stabilizing – Piper Jaffray

Piper Jaffray is out with some interesting comments on Netflix (NASDAQ:NFLX) this morning noting their 2nd Subscriber Survey shows churn stabilizing in late Sept.

– As a follow-up to their 350 subscriber survey in mid-August, they firm recently surveyed 250 Netflix subs to gauge subscriber behavior. The outcome of the survey, conducted on 9/19 (after the apology email from CEO Reed Hastings to subscribers announcing the Qwikster spin-off), was similar to the mid-Aug survey; however, the number of subs that expect to quit the service is now down to 10% from 15% previously.Piper believes their survey shows that subscriber cancellations are stabilizing after being higher than expected for the majority of Q3. While they continue to expect elevated churn over the next few quarters, the risk of a mass exodus appears to be moderating following their mid-Sept. survey.

Firm reiterates Overweight & $300 PT.

Here’s the gist of it:

Couple of points:

1) People planning to quit Netflix is down to 10%.

2) People planning to move to Redbox is down from 56% to 42%.


Notablecalls: Why this is important? I hate to say it but if you look at Olson’s mid-August survey closely enough, you will know why. The survey rather cleraly highlighted people’s discontent towards the price hikes. It showed people planning to leave NFLX and join CSTR.

I remember arguing about it with a guy sitting next to me at the desk. We both knew the info was material but we didn’t have the guts to go against the tape and short the name. What happened was NFLX went down and CSTR went up big. We looked (and felt!) like two putzes. That was August 17 and NFLX was trading around $240+.

Now we have the stock down $100+ pts and Olsen is saying monthly churn won’t be as bad as the initial read suggested.

Will it be enough to produce a bounce in NFLX?

I don’t know. The chart looks bad & AMZN is about to reveal their streaming service today @ 10:00 AM ET.

Gotta play this one by ear today. Could see $10+ upside, if people really pick it up.

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2 Comments on Netflix (NFLX): Subscriber Churn Stabilizing – Piper Jaffray

  1. It is way to early to say that Netflix has turned the corner. Clients of Netflix could easily take until next summer before they decide that they no longer want this service or wish to down grade. For me the decision was to scale back Netflix to 1 BlueRay at a time plus Streaming but it is my plan to shortly change the plan to only streaming with that service up for evaluation come March 2012. So it is probably silly to expect that the churn rate is going back to stabilize until next summer at the earliest.

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