Wedbush Securities Gives Earnings Preview On Netflix: Maintains Underperform, $80 PT

Wedbush Securities expects Netflix NFLX Q1 results in-line with its estimates for revenue of $715 million, ending subs of 23.7 million, and EPS of $1.13, compared with consensus for revenue of $704 million and EPS of $1.07. Q1 guidance is for revenue of $694 – 717 million, ending subs of 22.65 – 23.7 million, and EPS of $0.90 – 1.13. Wedbush believes Netflix will offset declining ARPU through its very popular $7.99/month streaming-only plans, and increasing penetration of video game consoles and CE devices. Netflix should also benefit from Blockbuster's proposed sale to Dish Network. Dish is expected to liquidate Blockbuster's assets, with customers moving to Redbox and Netflix, particularly Blockbuster's ~1 million By Mail customers. Netflix's reticence to provide detailed guidance reflects its unwillingness to provide visibility into the cost of new content deals. Wedbush thinks that the cost of these deals is rising rapidly, far outpacing postage and DVD savings, and think earnings growth, while impressive, will be far slower than the current share price implies. Wedbush has an $80 PT and Underperform rating on NFLX NFLX closed Friday at $235.52