Wedbush Sees Big Losses Ahead for Netflix (NFLX), Maintains Sell Rating Into Q4 Numbers
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Price: $78.16 -0.1%
Rating Summary:
57 Buy, 26 Hold, 2 Sell
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Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
57 Buy, 26 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Wedbush reiterated its Underperform rating and $45 price target on Netflix (NASDAQ: NFLX) ahead of Q4 results after market close on Wednesday, January 25.
The firm expects Q4 results to be in-line with their estimates for revenue of $869 million and EPS of $0.61, but above the consensus which is calling for revenue of $858 million and EPS of $0.55 They expect Q4 domestic streaming subs of 21.3 million (versus guidance of 20.0 – 21.5 million), domestic DVD subs of 11.15 million (10.3 – 11.3 million), and international subs of 1.8 million (1.6 – 2.0 million).
Wedbush estimates Netflix lost roughly 8 – 9 million DVD subs over 2H:11, with 2.63 – 3.63 million DVD subs expected to trade down or quit in Q4.
They expect a repeat of last quarter's earnings, with solid results for Q4 overshadowed by guidance for losses well below consensus in Q1. Specifically the firm expect Q1 guidance for losses of $0.62/share, compared to consensus estimates of $0.29 loss. They also expect consensus estimate revisions for 2012 to decline by at least $1.00/share, which will drive Netflix shares significantly lower.
Wedbush said investors have misplaced confidence in subscriber growth. While the company may increase subscribers in 2012, it is paying a steep price to do so they said.
"Investors should note that each hybrid customer who traded down to a singleservice plan requires a net subscriber addition to offset the foregone revenue," analyst Michael Pachter said. "This means that Netflix may grow subscribers without significantly growing revenue or generating incremental operating profit contribution. At the same time, we expect content costs to continue to rise materially, further pressuring margin and profits."
For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.
Shares of Netflix closed at $100.24 yesterday.
The firm expects Q4 results to be in-line with their estimates for revenue of $869 million and EPS of $0.61, but above the consensus which is calling for revenue of $858 million and EPS of $0.55 They expect Q4 domestic streaming subs of 21.3 million (versus guidance of 20.0 – 21.5 million), domestic DVD subs of 11.15 million (10.3 – 11.3 million), and international subs of 1.8 million (1.6 – 2.0 million).
Wedbush estimates Netflix lost roughly 8 – 9 million DVD subs over 2H:11, with 2.63 – 3.63 million DVD subs expected to trade down or quit in Q4.
They expect a repeat of last quarter's earnings, with solid results for Q4 overshadowed by guidance for losses well below consensus in Q1. Specifically the firm expect Q1 guidance for losses of $0.62/share, compared to consensus estimates of $0.29 loss. They also expect consensus estimate revisions for 2012 to decline by at least $1.00/share, which will drive Netflix shares significantly lower.
Wedbush said investors have misplaced confidence in subscriber growth. While the company may increase subscribers in 2012, it is paying a steep price to do so they said.
"Investors should note that each hybrid customer who traded down to a singleservice plan requires a net subscriber addition to offset the foregone revenue," analyst Michael Pachter said. "This means that Netflix may grow subscribers without significantly growing revenue or generating incremental operating profit contribution. At the same time, we expect content costs to continue to rise materially, further pressuring margin and profits."
For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.
Shares of Netflix closed at $100.24 yesterday.
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