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.

Equity Bottom-Up

<ul>
<li>Netflix has had a slew of upgrades recently on bullish estimates for its coming advertising supported tier...with the upgrades buying into Netflix's exorbitant CPM demands.</li>
<li>We think advertising supported is revenue accretive for the US and Canada, but question how this works out internationally.</li>
<li>Disney is far better positioned for AVOD. It has a developed ad infrastructure, owns all its content, and has better brands to sell advertising against.</li>
</ul>


Netflix has had a slew of upgrades recently on bullish estimates for its coming advertising supported tier...with the upgrades buying into Netflix's exorbitant CPM demands.
We think advertising supported is revenue accretive for the US and Canada, but question how this works out internationally.
Disney is far better positioned for AVOD. It has a developed ad infrastructure, owns all its content, and has better brands to sell advertising against.


Ad-Based Streaming: Are We Sure This Is Netflix's Panacea (Or Disney?)

<ul>
<li>Netflix's quarter was modestly better than reset bearish expectations...but not by much. 1M subscriber gains projected for 3Q below consensus 1.7M.</li>
<li>Timeline for reaccelerating subscriber growth from advertising and password sharing still seems shockingly long. </li>
<li>Netflix remains a top funding short for the forseeable future, we think $210 is the high end of the range, $170 the low end, but could justify $150.</li>
</ul>


Netflix's quarter was modestly better than reset bearish expectations...but not by much. 1M subscriber gains projected for 3Q below consensus 1.7M.
Timeline for reaccelerating subscriber growth from advertising and password sharing still seems shockingly long. 
Netflix remains a top funding short for the forseeable future, we think $210 is the high end of the range, $170 the low end, but could justify $150.


Netflix 2Q22: Low Growth, Low FCF, Low (Management) Conviction

<ul>
<li>Netflix net add bogey appears to be for 2Q losses in the -2-3M range (guide was -2M), if it hits this number is irrelevant, the 3Q/2H22 guide is more important.</li>
<li>BBG was bullish on NFLX's quarter recently, but we think misses the forest from the trees regarding ever ramping competition. </li>
<li>Ad-Based Netflix subs *might* hit by end of 2022, but won't move the needle for 18 months.</li>
</ul>


Netflix net add bogey appears to be for 2Q losses in the -2-3M range (guide was -2M), if it hits this number is irrelevant, the 3Q/2H22 guide is more important.
BBG was bullish on NFLX's quarter recently, but we think misses the forest from the trees regarding ever ramping competition. 
Ad-Based Netflix subs *might* hit by end of 2022, but won't move the needle for 18 months.


Tactical TMT 2Q Earnings Trading Idea: Short NFLX

<ul>
<li>Indian Premiere League cricket auction has brought in $6.6B thus far, up 3x from the 2018-2022 package, though the per game increase is closer to 2.3x.</li>
<li>Disney was smart to relinquish the digital rights, saving itself $3.6B in cash (~$2/share) rather than spending to drive worthless Hotstar+ subs (~$0.26/share).</li>
<li>Google may open up YouTube advertising to 3rd party platforms to settle EU antitrust...a potential boon for The Trade Desk.</li>
</ul>


Indian Premiere League cricket auction has brought in $6.6B thus far, up 3x from the 2018-2022 package, though the per game increase is closer to 2.3x.
Disney was smart to relinquish the digital rights, saving itself $3.6B in cash (~$2/share) rather than spending to drive worthless Hotstar+ subs (~$0.26/share).
Google may open up YouTube advertising to 3rd party platforms to settle EU antitrust...a potential boon for The Trade Desk.


TMT Quick Hits: DIS/Cricket Rights, GOOGL/TTD/EU

<ul>
<li>Intel warned that conditions outlined in 1Q22 have worsened, key to see what AMD says tomorrow.</li>
<li>Netflix - Roku rumor doesn't make much sense, we think its more likely Roku cut off insider selling because it is looking to acquire Starz.</li>
<li>Netflix churn is rising among longtime customers - going to ad-supported Peacock and Paramount. We think another guide down is coming in 2Q22.</li>
</ul>


Intel warned that conditions outlined in 1Q22 have worsened, key to see what AMD says tomorrow.
Netflix - Roku rumor doesn't make much sense, we think its more likely Roku cut off insider selling because it is looking to acquire Starz.
Netflix churn is rising among longtime customers - going to ad-supported Peacock and Paramount. We think another guide down is coming in 2Q22.


United States

Paramount Global operates as a media company. The Company produces and distributes entertainment content through studios, networks, streaming services, live events, and merchandise. Paramount Global serves customers worldwide.

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Ad-Based Streaming: Are We Sure This Is Netflix's Panacea (Or Disney?)

Aince last quarter’s earnings Netflix is up 18%, outperforming the S&P by nearly 23%. 4 recent upgrades share the thesis that ads will stimulate...

Aaron Gabin

Netflix 2Q22: Low Growth, Low FCF, Low (Management) Conviction

Netflix has become a legacy cable network - little pricing power, little volume growth, and massive competition. Oh yeah, minimal FCF a management...

Aaron Gabin

Tactical TMT 2Q Earnings Trading Idea: Short NFLX

Recent commentary that Netflix subscriber figures may be better than expected will prove irrelevant. Unrelenting competitive intensity will trigger...

Aaron Gabin

TMT Quick Hits: DIS/Cricket Rights, GOOGL/TTD/EU

Disney was smart to relinquish IPL digital rights, the $3.6B in cash is worth more than the value of low ARPU Hotstar+ subs. Google opening up...

Aaron Gabin

TMT Quick Hits: INTC/AMD, NFLX/ROKU

Intel's overly bullish 2H guidance from last quarter is already getting talked down. Netflix-Roku rumor is unlikely...and only thing that could...

Aaron Gabin

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