Netflix, Inc. (NASDAQ:NFLX) shares struggled today in the wake of HBO’s deal with Amazon.com, Inc. (NASDAQ:AMZN). The cable TV network snubbed Netflix and opted to give video streaming rights of its programming to Amazon for its Prime Service, although shows won’t appear there until about three years after they aired.

netflix Inc. (NFLX)

Netflix ‘s international profitability rises

In a report dated April 22, 2014, FBN analyst Shebly Seyrafi reiterated the firm’s Outperform rating on Netflix, Inc. (NASDAQ:NFLX) and raised their price target from $475 to $500 per share. The analyst cited the company’s earnings per share and revenue beat and higher than expected guidance.

In Seyrafi’s view, the most important part of Netflix, Inc. (NASDAQ:NFLX)’s report was the increase in international profitability. The analyst notes that international gross margins climbed from 1.2% to 8.2% quarter over quarter. International streaming contribution profits rose from -25.9% to -13.1%. Also Netflix management said they expect their current international segment to become profitable before the end of the year.

The FBN analyst says this is important to understand because they believe Netflix will end up posting losses internationally, but only because it is in the process of entering new markets like Germany and France. The result will be higher marketing and content costs.

Netflix raises prices

Netflix, Inc. (NASDAQ:NFLX) also said it expects to raise its monthly prices by $1 or $2, depending on the market. In Ireland, the company did raise its price from €6.99 to €7.99. The company did grandfather existing users in at the previous price of €6.99 per month for the next two years. Netflix expects to do the same in the U.S. for about one to two years. As a result, FBN analysts raised their pricing assumptions, which resulted in higher revenue projections.

Review of Netflix’s earnings

Netflix, Inc. (NASDAQ:NFLX) posted $1.27 billion in revenue, which is right in line with consensus. The company also posted non-GAAP earnings of 86 cents per share, which beat consensus estimates at 81 cents per share because the company spent less on marketing than analysts were projecting. Domestic subscribers reached 35.7 million, while international subscribers hit 12.7 million. International revenue made up 25% of total streaming revenue.

For the second fiscal quarter, Netflix, Inc. (NASDAQ:NFLX) guided for $835 million in domestic streaming revenue, which is higher than consensus estimates of $829 million.  The company guided for $304 million in international streaming revenue, which is higher than estimates of $296 million, and non-GAAP earnings of $1.12 per share, which again is head of consensus at $1 a share. Netflix projects .5 million domestic net adds and .94 million international streaming net adds. The FBN team notes that the second quarter is typically weaker in terms of subscriber growth compared to other quarters.