Netflix is rallying ahead of earnings

Netflix is up about 2.2% at $US146 a share on Monday as it prepares to release its first quarter results after the closing bell.

Wall Street estimates earnings of $US0.38 per share on revenue of $US2.64, estimates provided by Reuters show.

The company is projected to add 5.3 million subscribers for the first quarter.

Last quarter, Netflix gained 7.1 million new users. However, Credit Suisse believes the company has been facing the reality of a more saturated US streaming market and is now pivoting more towards the rest of the world. Credit Suisse notes:

As the subscriber churn and acquisition gyrations following the price hikes more distant in the rear view mirror, we expect the narrative around NFLX shares to now settle down to a more iterative blocking and tackling of increasing the value proposition for its global subscriber base with a greater amount of local language content as well as the ongoing decrease to transactional/payment/sign-up friction for international.

Credit Suisse is raising their price target from $US143 to $US144. However, the bank is more cautious on Netflix than they have been in the past, maintaining a “Neutral” rating on the stock and noting several headwinds including:

  • Slower-than-expected rate of consumer adoption in any of the launched regions
  • Faster-than-expected adoption of competitive offerings
  • As Netflix becomes more global in its reach, the strengthening of the USD versus major currencies can also exert a headwind.

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