Q1 Preview: Netflix (NFLX) Investors Will Look to Sub Adds for Loss Relief

April 23, 2012 2:35 PM EDT
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Price: $138.41 +3.86%

Rating Summary:
    33 Buy, 23 Hold, 9 Sell

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    Up: 23 | Down: 34 | New: 34
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Shares of Netflix (Nasdaq: NFLX) are lower on the session heading into the Company's first-quarter earnings report, expected out after the market closes Monday.

The Street expects Netflix to report a loss of 27 cents per share on revenue of $868.1 million. The loss would be a swing from profit of $1.11 per share on revs of $706 million reported last year and from EPS of 73 cents Netflix reported last quarter. Netflix also guided for a loss of 16 cents to 49 cents per share with a revenue range of $842 million to $877 million.

Netflix gained about 66 percent through the quarter to $115.04 at the end of March. Shares are 11 percent lower since the end of March. The move comes as Netflix shed just over 60 percent through 2011.

Streaming subs are expected to grow from somewhere between 1.13 million to 1.93 million as losses in DVD-by-mail subs continue to mount. This is, of course, the direction Netflix wants its subs base to grow, as indicated by the attempted split of its DVD business last year.

Data from Bloomberg shows seven analysts currently rate Netflix at Buy, 19 are at Hold, and nine maintain a Sell-equivalent call. The Street's price target is $97.50, which ranges from $45 to $140. Netflix shares have traded between $62.37 and $304.79 over the last year. Notably, the price target average is suggesting some downside for Netflix over the next several months.

  • Heading into numbers, Wedbush said it's looking for a loss of 16 cents per share with revs of $874 million. The firm says net sub adds likely exceeded expectations due to "heavy advertising spending in the second half of the quarter (which negatively impacted EPS) and the availability of Starz content for the majority of the quarter (though the end of February)..."

    Looking ahead, Wedbush sees Netflix management maintaining its outlook. With investors focus resting on subs growth, the firm sees Netflix stopping at nothing to grow that metric...including spending more on advertising.

  • Janney Capital is cautious into the quarter and sees a loss of 23 cents per share and recently cut its US streaming sub estimate from 24.4 million to 23.2 million and DVD sub number from 10.3 million to 9.7 million.

    The firm said recent Internet tracking data has deteriorated, NFLX has modified its acquisition philosophies, and CSTR has posted better DVD results. Taken this data together they are negative into the print.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Netflix's past performance at Streetinsider's Netflix''s Income Statement.

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