On The Fly: What to watch in Netflix earnings report
Netflix (NFLX) is scheduled to report results of its first fiscal quarter after market close on April 16, with a conference call scheduled for 6:00 pm ET. What to watch: 1. SUBSCRIBERS: Netflix's subscriber numbers are a closely-watched measure of the company's growth trajectory. Last quarter, the company reported streaming net additions of 8.3M members, including fourth quarter U.S. additions of 2.0M and international additions of over 6.3M members. For Q1, Netflix has forecast streaming net additions of 1.45M in the U.S. and international streaming net additions of 4.9M for an expected total of 6.35M. Piper Jaffray analyst Michael Olson recently told investors that his analysis of Netflix search trends pointed to in-line domestic and international subscriber growth in Q1. Meanwhile, UBS analyst Eric Sheridan believes Netflix could report upside to its Q1 subscription guidance, as he said his analysis points to broad-based growth trends across regions into 2018 with older markets continuing to mature but while sustaining solid levels. A number of other Wall Street firms - including Goldman Sachs, Morgan Stanley, Wells Fargo, Raymond James and Cowen - have recently raised their price targets on Netflix heading into the company's report. 2. DEUTSCHE SAYS BUY: On Friday, Deutsche Bank analyst Bryan Kraft upgraded Netflix to Buy from Hold and raised his price target for the shares to $350 from $240. Netflix has changed the industry in a "profound way" and in doing so has given itself a "significant" lead, making it very difficult for the traditional media companies, or even other big tech companies, to catch up, Kraft told investors. He believes Netflix continues to capitalize on this lead by reinvesting in content, marketing, and the user experience. The analyst admitted that he underestimated the market's willingness to underwrite several years of negative free cash flow to drive growth. Further, the company's Q1 guidance looks conservative by up to 1M subscribers worldwide, Kraft contended. 3. COMCAST BUNDLES: Also on Friday, Netflix announced an expansion of a partnership that will provide Comcast (CMCSA, CMCSK) the ability to include a Netflix subscription in new and existing Xfinity packages. In the release regarding the change in their partnership, Comcast said: "Netflix has quickly become one of the most popular voice searches and highly-viewed services on the platform; and among households watching Netflix on X1, X1 has quickly become the most used platform for Netflix viewing."