Survey Suggests Weak Q1 U.S. Results For Netflix; Here's Why It May Not Matter

A recent Netflix, Inc. NFLX quarterly survey from Baird may suggest weak U.S. subscriber results. This may not matter to investors, however, because international subscriber figures not only remain the key focus for investors but could outweigh U.S. weakness.

The survey has left Baird cautious toward Netflix’s upcoming first-quarter results. Survey results imply Q1 U.S. net additions were below guidance and consensus estimates, with 51 percent of respondents claiming to subscribe to Netflix, showing flat growth sequentially.

In the past, the same survey saw double-digit growth from Q4 to Q1 on multiple occasions. Baird maintains a Neutral rating on Netflix with a $138 price target.

“[T]he quarter included several solid new shows, it seemed to lack a strong universal new hit, which may have contributed to the weaker survey results,” according to the report.

Survey Results Lead To Analyst Action

Due to the results, Baird is lowering Q1 U.S. net addition forecast from 1.5 million to 1.0 million, well below street estimates of 1.6 million. The real bright spot is international subscribers, where 3.7 million net adds are forecasted, although an international beat is widely expected among analysts.

Netflix has delivered a solid foundation of new original content, but the lack of a major hit that is likely driving the slowdown domestically.

“Although Netflix released far more original programming than the prior year, the lack of a blockbuster hit may have contributed to this quarter’s soft survey results,” Baird's note read.

Last year’s first quarter benefited from the launch of "Making a Murderer," new seasons of "House of Cards" and "Daredevil," and "Fuller House." Recent addition "Iron Fist" along with other new shows don't appear to deliver the same buzz. With competition in streaming continuing to accelerate, the need for original hits become paramount.

Netflix is expected to release Q1 results on April 17.

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