KeyBanc Takes A Look At Netflix Ahead Of Q1 Earnings

Netflix, Inc. NFLX is scheduled to report its first quarter results on April 16 and the company is likely to post upside to subscriber estimates, according to KeyBanc.

The Analyst

KeyBanc Capital Markets' Andy Hargreaves maintains an Overweight rating on Netflix with an unchanged (but under review) $300 price target.

The Thesis

Netflix is expected to earn 63 cents per share in the first quarter on revenue of $3.6871 billion, both of which are largely in-line with consensus estimates, Hargreaves said in a note. But Netflix's own guidance for 6.35 million net subscriber additions in the U.S. and international is beatable with a figure between 7 and 7.3 million subscribers more likely to be reported.

In fact, Netflix has beaten its own guidance of global net additions in 10 of the past 12 quarters with an average variance versus guidance of around 0.85 million net additions.

Netflix is likely to add a net 22.9 million subscribers to its platform in 2018 and 19.8 million in 2019, which implies a "significant deterioration" in the efficiency of marketing and content spending, Hargreaves wrote. If Netflix maintains a stable efficiency in driving subscriber growth, however, it could boost its net subscriber adds to 30 million in 2018 and 27.1 million in 2019.

Price Action

Shares of Netflix were trading higher by nearly 2 percent Thursday morning. On Wednesday afternoon, Moody's upgraded the company's debt rating from B1 to Ba3 with a stable outlook.

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