The Netflix Inc. app is displayed for a photograph on a television in Tiskilwa, Illinois, U.S. (Photographer: Daniel Acker/Bloomberg)

Netflix Results Face Pressures With Higher Costs, New Rivals

(Bloomberg) -- The stakes have risen for Netflix Inc. since the last time the video-streaming pioneer reported earnings. With more than four new entrants to the Internet TV gauntlet, investors will look to Chief Executive Officer Reed Hastings during the conference call for reassurance.

Netflix is scheduled to release first-quarter results after markets close Tuesday, with Wall Street projecting subscriber additions of 1.61 million in the U.S. and 7.33 million internationally, according to data compiled by Bloomberg. That’s slightly higher than Netflix’s forecast of 1.6 million and 7.3 million, respectively.

Shares of the streaming service provider rose as much as 4.5 percent on Tuesday after Deutsche Bank upgraded the stock to a buy from hold and boosted its price target to $400. Analyst Bryan Kraft touted the company’s decreasing reliance on licensed content and said it looks “more and more like a platform every day, rather than just an application.”

But Wall Street is braced for a softer forecast as phasing of the effective price hikes is expected to mostly weigh on second quarter subscriber additions. Other factors, such as a lighter content slate and competition from Disney’s “Avengers” film and HBO’s final season of “Game of Thrones,” are also expected to contribute to a tepid view.

While Netflix may have taken a hit from the forthcoming Disney+ platform, losing about $7 billion in market value on Friday, analysts still consider Netflix to be the streaming leader. Moreover, many of the yet-to-be-launched services are seen as a value add for the streaming industry.

Netflix’s stock has risen more than 30 percent year to date despite expectations of a conservative second quarter.

What Bloomberg Intelligence Says :

 “Momentum should continue through the year, especially as the slate strengthens in midyear with the third season of ‘Stranger Things.’ The company may also be exploring international price hikes.”
-- Geetha Ranganathan, senior media analyst
-- Click here for the research

Netflix Results Face Pressures With Higher Costs, New Rivals

The Numbers

  • 1Q total paid streaming net subscriber additions est 8.94 million (avg. of 6)
    • Domestic est. 1.61 million
    • International est. 7.33 million
  • 1Q revenue est. $4.51 billion (range $4.44 billion to $4.57 billion)
  • 1Q GAAP EPS est. 58c (range 53c to 74c)
  • 2Q total paid streaming net additions est. 6.09 million (avg. of 4)
    • 2Q domestic est. 617k
    • 2Q international est. 5.47 million
  • 2Q revenue estimate $4.95 billion (range $4.72 billion to $5.18 billion)
  • 2Q GAAP EPS estimate 99c (range 55c to $1.40)

Data

  • 30 buys, 11 holds, 4 sells; avg. PT $391
  • Implied 1-day share move following earnings: 7.9%
  • Shares rose after 6 of prior 12 earnings announcements
  • GAAP EPS beat estimates in 9 of past 12 quarters

Timing

  • Earnings release expected 4 p.m. (New York time) April 16
  • Conference call website; also follow along on our live blog

©2019 Bloomberg L.P.