Netflix's Q2 Subscriber Guidance Was Well Ahead Of Analyst Expectations

Loop Capital Markets highlighted in a note, the above-consensus second-quarter subscriber guidance Netflix, Inc. NFLX issued along with its first-quarter earnings announcement.

Above-Par Q2 Subscriber Guidance

Discussing the Q2 guidance, analyst David Miller said the company's earnings per share guidance of $0.15 was short of his estimate as well as the consensus estimate of $0.24. The analyst also said he estimates revenues of $2.76 billion and EBIT of $217.4 million.

The potential earnings shortfall, according to Miller, is due to substantially higher marketing spend the management is estimating to support an array of original series set to hit the platform in the current quarter, highlighted by Season 5 of "House of Cards."

Dwelling on the subscriber guidance, the analyst said the company's domestic subscriber guidance of 0.6 million was ahead of his estimate of 0.21 million and the consensus estimate of 0.19 million. International subscriber number was guided to 2.60 million, also ahead of his estimate and the consensus of 1.50 million and 1.48 million, respectively.

Q1: A Mixed Bag

Reviewing the Q1 results, Loop Capital Markets looked at the following metrics:

• Revenues: $2.64 billion, slightly below the firm's estimate of $2.65 billion, but in line with the consensus.
• EBIT: $256.9 million, short of its estimate of $269.1 million (secondary cost items such as marketing, technology/development and SG&A were blamed for the shortfall).
• SG&A: materially higher than projected.
• GAAP EPS: $0.40 vs. the firm's estimate of $0.39 and the consensus estimate of $0.37 (The reported net income included a $13.6 million prop on a forex reversal, as well as a cash tax rate.)
• Aggregate global streaming subscriber base: 98.8 million, below the firm's estimate of 99.1 million (Domestic vs. International break-up at 50.9 million vs. 47.9 million).
• U.S. streaming net additions: 1.42 million vs. the firm's estimate of 1.52 million.
• International streaming net additions: 3.53 million vs. firm's estimate of 3.74 million.

Investors Can Still Chase The Stock Despite The Run Up

"We're happy with the 41.3 percent lift in NFLX since last October, but continue to believe it's not too late for large-cap growth PMs to take new positions in what remains one of the only true large-cap growth stories in Media," the firm said.

Loop Capital Markets has a Buy rating on the shares Netflix, while it lifted its price target for the shares to $172 from $162.

At the time of writing, Netflix shares were down 2.34 percent at $143.75.

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