Analyst: Netflix to Continue to Be Affected by State of Net Neutrality

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The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities. 

Netflix (NASDAQ:NLFX) will report first-quarter results after market close on April 21 and host a live video discussion at 2 p.m. Pacific (webcast: YouTube.com/NetflixIR). The discussion will again be moderated by two sell-side analysts.

Q1 results will likely meet or exceed the Street’s expectations, driven by House of Cards and cost control. Our estimates are for revenue of $1.273 billion versus consensus of $1.266 billion (no guidance), and earnings per share of 82 cents, in line with consensus, and guidance of 78 cents. We modeled domestic streaming subscriber net adds of 2.25 million, in line with guidance, but our bias is that our estimate may be too low based upon a high sign-up rate for season two of House of Cards, which debuted on February 14, and low Q1 advertising spending.

Q2 domestic streaming subscriber net adds guidance will likely be at or below last year’s 0.63 million versus our estimate of 0.5 million. Although management will likely attribute the decline primarily to seasonality, with less compelling exclusive content contributing to a slowdown, as Arrested Development debuted last May. We expect Q2 EPS guidance at or above consensus of $1, assuming that European expansion occurs in the second half of the year.

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