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Netflix Seen Posting Worst Earnings In Over 3 Years

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. “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.” Netflix stock tumbled to as low as 106.02 on the stock market today , briefly undercutting its 200-day moving average . Ahead of the closing bell shares were down more than 2% near 109. On Sunday, Amazon ( AMZN ) began offering Amazon Prime Video as a standalone service, for $8.99 a month, a dollar less than Netflix’s basic streaming offering. Amazon stock rose 1.5%, extending its recent breakout. 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

Intel Layoff Rumors Circle Amid PC Slump, Data Center Grapple

No. 1 chipmaker Intel ( INTC ) may cut thousands of jobs to buffer its bottom line amid continued PC malaise, according to a report from Oregon Live . The report came as a second analyst in a week cut his price target on Intel stock Sunday in reaction to industry reports of Q1 PC shipment declines and a “dreadful” January for Taiwanese ODMs. Intel is slated to announce its Q1 results late Tuesday. In afternoon trading on the stock market today , Intel stock was up a fraction, trading near 32. Shares dipped severely in January but began to recover by mid-February. As of Friday’s close, Intel stock was down 9% for the year. Summit Research analyst Srini Sundararajan cut his price target on Intel stock to 37 from 38 but reiterated a buy rating. He cited recent reports from industry trackers IDC and Gartner which projected 9.5% and 11.5% year-over-year declines in Q1 PC shipments, respectively. Taiwanese PC makers noted respective 15% and 30% declines in notebook/desktop and motherboard shipments in Q1, Sundararajan wrote in a research report. “We think there will be some effect on Intel in Q1 and Q2 possibly,” he wrote. Pre-announcements from Super Micro Computer ( SMCI ) and Seagate Technology ( STX ) — slated to report earnings April 28 and 29, respectively — show soft demand for the data center and hard disk drive businesses, he wrote. Hard disk drives declined 18% sequentially, Seagate said. That softness will affect Intel, which hangs 60% of its revenue on PC sales. And the data center struggles are particularly concerning. Intel is pushing big into the data center and cloud spaces to diversify from its weakening PC unit. Super Micro Computer guided to $530 million to $533 million in fiscal Q3 sales, well below the midpoint of earlier views for $530 million to $580 million. “Given that a tight correlation exists between Intel’s DCG (data center group) revenues and Super Micro Computer revenues, if we do not see any effect in Q1, we should expect some effect in Q2,” Sundararajan wrote. Intel will likely guide 2016 sales and capital expenditures down, he wrote. Three months ago, Intel modeled mid- to high-single-digit growth for 2016. Sundararajan cut his estimate to $57.1 billion in sales and $2.30 earnings per share, up 3% and down 1%. The consensus models $58.2 billion and $2.36 a share. So far, Intel hasn’t officially announced layoffs internally, according to the Oregon Live report that cited inside sources. The cutbacks could reduce employment in some units by double-digit percentages.

Amazon Goes Head-To-Head With Netflix In Streaming Video

After amassing a portfolio of critically acclaimed original TV series, Amazon.com ( AMZN ) has decided the time is right for its subscription streaming video service to go head-to-head with industry leader Netflix ( NFLX ). The Seattle-based e-commerce giant late Sunday revealed that it will offer its Amazon Prime Video as a stand-alone service for $8.99 a month, a dollar less than Netflix’s standard streaming plan. Amazon Prime Video was launched five years ago as an extra for subscribers of Amazon Prime, a program that offers free two-day shipping on millions of items. Amazon Prime costs $99 a year. In addition to the stand-alone video service, Amazon also is offering full Prime membership on a monthly basis. Customers can pay $10.99 a month with no annual commitment or save 25% by paying for the full-year plan. Like Netflix, Amazon has been investing in original content as well as signing exclusive licensing deals for cable and broadcast shows. Amazon original series include “Transparent,” “Mozart in the Jungle,” “Catastrophe,” “Bosch,” “The Man in the High Castle” and “Red Oaks.” Other competitors in the Internet video sector include Hulu and Time Warner ‘s ( TWX ) HBO. Hulu is co-owned by Comcast ( CMCSA ), Disney ( DIS ) and Fox ( FOXA ). Amazon’s move comes as many long-time Netflix customers will see the price of their service jump from $7.99 to $9.99 a month starting next month. Netflix boosted its pricing starting two years ago, but it provided grace periods for existing customers. Netflix stock was down about 3% to near 108 in afternoon trading on the stock market today . The Los Gatos, Calif.-based company is scheduled to report first-quarter earnings after the market close today. Amazon stock was up almost 1% to about 631. Amazon gets an IBD Composite Rating of 84 out of a possible 99, and Netflix a 51. For when to buy, hold or sell off Amazon and other top stocks, sign up for a free trial of IBD Leaderboard Amazon is offering the stand-alone video service only in the U.S. for now, but it is likely to take it to international markets soon, CCS Insight analyst Paolo Pescatore said in a research note Monday. Amazon’s new video offer will limit Netflix’s ability to grow its domestic subscriber base, Wedbush analyst Michael Pachter said in a research note Sunday. “The monthly video offering reflects Amazon’s determination to capture an increased share of Netflix’s addressable market,” he said. “While we don’t expect a significant number of current Netflix customers to defect to Amazon Instant Video, it is likely that Amazon and Netflix will divide the remaining uncommitted market on a roughly equal basis, severely impacting Netflix’s continued domestic growth.” Subscriber Fees Hiked Pachter believes Amazon timed the offer to take advantage of the impending price increase at Netflix. An estimated 30 million domestic Netflix subscribers will see their monthly subscription fees go up starting May 9, he said. Pachter rates Amazon stock as outperform with a price target of 700 and Netflix as underperform with a price target of 45. RBC Capital Markets analyst Mark Mahaney said Monday that the Amazon offer “creates a negative headwind for Netflix.” However, Mahaney reiterated his outperform rating on Netflix with a price target of 140. “We view this move by Amazon as a significant negative development for Netflix,” he said in a report. “Amazon certainly has the brand name, the customer relationships and the focus on high-quality consumer experiences to impact the growth in Netflix’s U.S. subscriber base, and perhaps eventually its global subscriber base.” Netflix is facing growth challenges in the U.S. market. In the fourth quarter last year, it missed its own target for new domestic subscribers. But its international growth easily beat expectations and offset U.S. weakness. Netflix Original Shows Rank Tops In a survey released last week, consumers ranked Netflix as No. 1 for original programming. It topped HBO for the first time in the six years that Morgan Stanley has tracked consumer preferences in premium video services. Some 29% of survey respondents said Netflix was best in original programming, up from 23% last year, while HBO came in second place at 18% (compared with 31% last year), Morgan Stanley said. Amazon.com, Hulu and CBS (CBS)-owned Showtime were each near 5%. Netflix original shows include “House of Cards,” “Orange Is the New Black,” “Unbreakable Kimmy Schmidt,” “Narcos” and Marvel comic-book hero shows “Daredevil” and “Jessica Jones.”