Takeaway: Below are our most recent thoughts on the names we were digging into last week. No changes to our Position Monitor.

 Position Monitor | TWTR, PCLN, NFLX - I M Position Monitor


TWTR

We presented our Black Book on TWTR last week (click here for deck & replay).  We view the series of events that ultimately led TWTR to restructure as the result of self-inflicted wounds on the part of an unsustainable monetization strategy (i.e. excessive ad load). We believe mgmt's pivot to de-emphasizing legacy CPC ads in favor of Autoplay video ads is a more sustainable long-term growth strategy.  Further, we don’t think it will take much to return to double-digit ad revenue growth in 2018, possibly as soon as 1H18, as the Olympics, World Cup, and mid-term elections are all positive catalysts for ad spend.

Position Monitor | TWTR, PCLN, NFLX - TWTR   Long Deck slide 21

PCLN 

Finally seems to be catching a wind, but we think we may have to sit this one out for one more quarter.  As we discussed in the first section our OTA deck (click here for deck & replay), the noise around structural headwinds is really just the street grasping for a narrative around why PCLN fell short of expectations last year.  We attribute that weakness to a hangover from share shift following the OWW acquisition and lazy forward-quarter consensus room-night estimates.  Estimates have finally come in, but 1Q18 still seems a bit high given that the aforementioned OWW impact is still in the comps.  Our tracker suggests room-night growth 1Q18 to-date is tracking below consensus estimates.

Position Monitor | TWTR, PCLN, NFLX - OTA deck   slide 8

NFLX 

NFLX has been shot out of a cannon to start the year, largely on the heels of renewed take-out speculation, which is at best a sell-side bedtime story.  Despite the price action, we don't think it's worth revisiting the short yet.  NFLX is still all about the sub game, and while our tracker suggests that 4Q sub adds will come in light across the board, it also suggests 1Q is off to a better start.  If that dynamic holds, we suspect mgmt could easily talk around 4Q as transitory weakness following the subscription price increases, especially considering that this mgmt team is the best horse whisperer on the street.  That said, we believe there could be a better short catalyst later this year given what we're seeing in the current trajectory of consensus estimates. 

Let us know if you have any questions or would like to discuss in more detail.

Hesham Shaaban, CFA
Managing Director


@HedgeyeInternet