Netflix Starts 2017 on Mixed Note, Shares Still Pricey

U.S. paid subscribers continued to grow at a slower pace than we previously projected, with trailing 12-month paid net adds at 3.7 million in the quarter, down 32% from 5.4 million at the end of first-quarter 2016, which was down 9% versus 2015. While we project net subscriber growth to slow, the current results were surprising in light of the strong 1.93 million total net adds in the U.S. in the previous quarter. We currently model a 17% average annual decline in total U.S. net adds from 2017 to 2021 with a 21% decrease in 2017, but our projections (and consensus) may prove optimistic and problematic for the firm. Since management has attributed net add outperformance to excitement around original content, Netflix will need to continue ramping up its investment in original content at the expense of acquired content, possibly increasing pressure on margins.

Management spent time discussing the increasing competition in Internet TV, including the news that

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