We're not going to recount results here, but all key metrics all moved in the right direction: aside from 24% Y/Y revenue growth for 4Q09, margins were higher and net subscriber additions were up nicely Y/Y while churn and customer acquisition costs were both down Q/Q and Y/Y.
We still prefer that companies allow excess cash to pile up on the balance sheet rather than repurchase shares at elevated P/E multiples. However, in light of Netflix's operating leverage and continued growth, the prior buyback appears more sensible than we acknowledged. That said, if the company continues to repurchase at current levels, the forward P/E (GAAP) would be in the mid-20s, which is less compelling. On a trailing free cash flow basis (non-GAAP, as reported by Netflix, after acquisitions of content library and other items), shares of Netflix are currently trading with an implied yield of only 3%.
Disclosure: long JCOM.
© 2010 Jeffrey Walkenhorst
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