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Netflix U.S. Subscriber Targets Are Too Aggressive, Analyst Says

Wall Street’s consensus estimate for Netflix ( NFLX ) domestic subscriber growth this year appears too aggressive, ITG Investment Research analyst Corey Barrett said in a report Monday. International subscriber growth estimates, on the other hand, look conservative, he said. “The net effect of slowing domestic churn improvements and gross addition velocity is likely to drive domestic streaming net subscriber additions below consensus in 2016,” he said. ITG is modeling Netflix to add 4.4 million U.S. subscribers this year, vs. the consensus estimate of 4.8 million. For 2017, ITG forecasts Netflix to add 3.8 million domestic subscribers, vs. consensus views of 4.5 million. Also, the percentage of Netflix domestic gross subscriber additions that have had the service before increased to 65% in Q4, up from 55% in Q4 2013. The pool of “Netflix-nevers,” people who have never been Netflix subscribers, is rapidly shrinking, he said. But Netflix’s international growth prospects are underappreciated, Barrett said. ITG predicts that Netflix will add 15.6 million net new international subscribers in 2016, above the consensus estimate of 14.4 million. For 2017, ITG expects Netflix to add 15.4 million international subscribers, vs. consensus views of 14.5 million. “We believe the company can leverage the scale advantage and apply the content expertise it has domestically to its international markets, creating a significant competitive advantage in international markets,” Barrett said. “We view Netflix as the future of global video distribution, but believe Netflix is more likely than not to fall short of investor expectations for 2016 subscriber growth.” Netflix ended 2015 with 74.76 million streaming video subscribers worldwide. Of those, 44.74 million, or 60%, are in the U.S. Netflix is having a big impact on the traditional TV business in the U.S. Last year, Netflix accounted for about half of the overall 3% decline in TV viewing time among U.S. audiences, according to a new study by Michael Nathanson of MoffettNathanson, Variety reported . RELATED: Surveys Show Netflix Winning In U.S., Slow Going In Japan .

Shopify, In Sweet Spot For E-Commerce Momentum, Gets Upgrade

Shopify ( SHOP ) was upgraded by Pacific Crest Securities on the confidence that strong momentum will continue at the e-commerce company. Pacific Crest analyst Brendan Barnicle upgraded Shopify to an overweight rating and set a price target of 35. Shopify stock was up 3.5%, near 26.75, during afternoon trading in the stock market today . The stock hit a low of 18.58 on Jan. 15 and is up 44% since then. “When we initiated coverage of Shopify we had three concerns: valuation, margins and competition,” Barnicle wrote in his research note. “During the past year, all three of those concerns have declined sufficiently to compel recommending Shopify at current levels.” Shopify provides a cloud-based e-commerce platform that businesses use to build websites and sell goods online and across multiple sales channels, including mobile and social media. The Canadian company raised $131 million on its May 20 initial pubic offering, pricing 7.7 million shares at 17. It reported better-than-expected fourth-quarter earnings on Feb. 17 and provided guidance above expectations. Shopify reported Q4 revenue of $70.2 million, up 99% year over year, and a smaller loss than expected. Revenue has grown at double- and triple-digit rates for the past three years, year over year. The consensus estimate for Q1 in a Thomson Reuters poll of analysts is revenue growth of 79% to $67 million, and a loss of 9 cents per share, minus items. “While competition remains, it seems to have stagnated,” Barnicle wrote. “Shopify is continuing to robustly add new customers to its platform.” He said larger e-commerce software providers servicing the high-end of the market, such as NetSuite ( N ) and Demandware ( DWRE ), are unlikely to move down-market and compete with Shopify in the small-to-midsize business market. He said e-commerce platforms from NetSuite and Demandware are often too expensive and require too many resources to be effective for smaller merchants. “However, Shopify Plus competes for enterprise customers and the company is interested in moving up-market,” Barnicle wrote. Shopify says it was among the first e-commerce providers to add the ability to sell over the leading social media platforms, including Facebook ( FB ) and Twitter ( TWTR ). More than 25% of Shopify merchants have enabled social media selling. In November, Shopify announced a partnership with Facebook that lets shoppers buy Shopify merchants’ products through their Facebook pages. In September, Amazon ( AMZN ) selected Shopify to be its preferred platform for helping small and midsize retailers build and manage online stores. The plan lets Shopify businesses use Amazon’s payment system and other services, part of a plan that Amazon announced a year ago to ultimately shut down its Amazon Webstore business, which provides a similar service. Shopify stock has moved up nine of the last 10 days, and is above its key 50-day line. It gets a not-high IBD Composite Rating of 57 out of a possible 99, factoring in the string of losses in its quarterly reports, and other metrics.

FireEye Curbs 2016 Loss Expectations, But Stock Still Tumbles

FireEye ( FEYE ) curbed its loss expectations for 2016 by a nickel at the midpoint of its guidance range as the cybersecurity firm slashed its capital expenditures view by $15 million, but its shares still fell. FireEye stock was down 2.5%, near 18, in afternoon trading on the stock market today , after shares had risen for nine straight trading days. Shares edged up last week during the cybersecurity RSA Conference in San Francisco. At the conference, FireEye announced a partnership with agent-less vendor ForeScout Technologies and unveiled an endpoint exploit-protection product. And its $275 million iSight Partners acquisition is already bearing fruit, FireEye executives told IBD. Tuesday, FireEye cut its 2016 capital expenditures view to $35 million vs. its earlier guidance for $50 million. FireEye sees $1.20 to $1.27 losses per share ex items, trimming earlier views for $1.25 to $1.32. FireEye reiterated sales guidance for $815 million to $845 million, which would be up 33% vs. 2015. FireEye retained its billings ex items guidance for $975 million to $1.055 billion. The consensus of 34 analysts polled by Thomson Reuters expected $829.9 million in sales and a per-share loss ex items of $1.30. Positive cash flow is still expected to come in at $70 million to $80 million, FireEye said. The updated guide comes as FireEye kicks off its 2016 analyst briefing. IBD’s 25-company Computer Software-Security industry group, which ranks a lowly No. 177 out of 197 groups, was down 1% Tuesday afternoon. FireEye stock has a low IBD Composite Rating of 17 out of a possible 99. Verisign ( VRSN ), Palo Alto Networks ( PANW ) and Check Point Software Technology ( CHKP ) stocks lead the group with CRs of 84, 79 and 73, respectively.