Netflix Seen Posting Lowest EPS In Over 3 Years Next Week
With Netflix ( NFLX ) investing heavily in its global expansion, Wall Street is expecting the Internet TV service to report its lowest earnings per share in over three years when it posts first-quarter results after the close Monday. Analysts polled by Thomson Reuters expect Netflix to earn 3 cents a share in Q1, down 40% from the year-earlier quarter. That would be the company’s lowest EPS total since the fourth quarter of 2012, when it reported 2 cents in earnings per share. Netflix sales are seen rising 25% to $1.965 billion in the March quarter when it completed its international expansion, excluding China. Analysts don’t see EPS growth returning at Netflix until the fourth quarter. For the next several quarters, the focus of investors will be on subscriber growth and whether Netflix can continue to add new customers at a quick pace. In the December quarter, Netflix added 5.59 million new streaming subscribers, bringing its total to 74.76 million subscribers worldwide. Netflix added 1.56 million U.S. streaming subscribers and 4.04 million international subscribers in Q4. For the March quarter, Netflix forecast 6.1 million new streaming subscribers for a global total of 80.86 million. The Los Gatos, Calif.-based company is targeting 1.75 million new U.S. streaming subscribers and 4.35 million new international subscribers. RBC Capital Markets analyst Mark Mahaney on Friday reiterated his outperform rating on Netflix stock with a price target of 140. Netflix stock was up nearly 1%, above 111, in afternoon trading on the stock market today . “Based on intra-quarter data points, our proprietary survey work, and our model sensitivity work, we believe Street revenue/EPS estimates for Q1 are reasonable,” Mahaney said in a research report. “For the Q2 guide, we believe the Street’s outlook for roughly 600,000 domestic subscriber adds may be slightly aggressive, given uncertainty over pending price increases. But we view the Street’s international subscriber adds outlook of 2.9 million for Q2 as realistic.” Some Analysts Skeptical Of Netflix’s Prospects Other analysts are more cautious ahead of Netflix’s Q1 earnings release. In a report Friday, Mizuho Securities analyst Neil Doshi maintained his neutral rating on Netflix with price target of 120. While expectations are generally positive ahead of Netflix’s Q1 report, Doshi is concerned about the company’s continued free cash flow losses and whether it can successfully scale local original content in new international markets. FBR analyst Barton Crockett maintained his market perform rating and price target of 100. Netflix’s Q1 report “is likely to feature healthy but decelerating subscriber growth in the U.S. and a record level of growth internationally, powered by new country launches and very robust growth in Latin America,” Crockett said in a report Friday. However, Netflix’s growth appears to be plateauing in developed markets where Netflix has been available for some time, such as the U.S., U.K. and Canada, he said. “We suspect that similar maturity will arrive over the next couple of years in other developed country markets,” Crockett said. “We also believe that some investors may be overly optimistic about the degree of flow-through in second-half 2016 from U.S. price hikes.” RELATED: Netflix Stock Surges Ahead Of Q1 Earnings Report Next Week Netflix Rate Hike To Be Key Test Of Its Pricing Power