Oppenheimer Comments On Netflix Following Earnings Report

While 1Q results lacked "sizzle", Oppenheimer believes Netflix's NFLX outlook for International growth is better than expected, and as a result, raise the price target from $230 to $280 while maintaining an Outperform. As this implies 18% upside potential vs. the after-hours quote, Oppenheimer reiterates its Outperform rating. 1Q subs, revenue and EBIT modestly exceeded Street estimates; however, US SAC was higher than expected, while churn also ticked up. In addition, 2Q EBIT guidance was 14% below Street on higher Int'l investment. Lastly, NFLX did not give an update on the pending Starz deal or progression toward family plan pricing, but did discuss increased competitive threats from Blockbuster/Dish Networks. Subs and revenue guidance of 2% and 3% were above Street. However, EBIT and EPS guidance is 14% and 15% below, respectively. Oppenheimer believes this is driven by higher Int'l investments, resulting in losses of $10-14M in 2Q. FY11 domestic EBIT margin guidance of 14% unchanged. Management expects Canada to break even in 3Q, and could consider launching in two countries annually, as of 2012. This bullish stance appears to be driven by the amount of attractively priced content, and consumer research into these markets. NFLX closed Monday at $251.67