Netflix will be the first Internet company to release its second quarter earnings report. The report is scheduled for July 18, and the company’s stock has plunged since its last report, underperforming the NASDAQ significantly. Subscriber trends are a major concern for Netflix right now, although the company has something to cheer about following Nielsen’s release of ratings for some of its programs.

Netflix "Most Controversial Large-Cap" Internet Stock: Analyst

The viewership data firm released its first set of data on streaming programming this week. One of the findings was that the fourth season of Orange is the New Black would be the second most-viewed cable drama if it were aired on traditional cable TV, according to The Wall Street Journal. Only HBO’s Game of Thrones did better, based on the number of people who watched the first episodes of the shows.

Netflix as a sentiment indicator

In a report dated June 30, MKM Partners analyst Rob Sanderson said that while Netflix isn’t a bellwether for the Internet sector, movements in its stock price around earnings do signal general sentiment. He also referred to the video streaming company as “the most controversial large-cap in the sector this quarter.” He explained that the controversy is focused on the disappointing second quarter guidance for international subscriber adds, which came along with what was a “blow-out” first quarter earnings report.

He said a lot of investors don’t think estimates for the company’s international subscriber ramp have been reduced enough. Consensus for international adds for the third quarter is 500,000 (on top of however many the company adds in the second quarter). This is flat with last year.

Sanderson adds that worries about the price increase and its result on the churn rate and net subscriber adds are another problem for Netflix. These concerns are particularly skewed toward the domestic segment because the company has a much higher penetration and a much larger proportion of the company’s domestic subscribers will see their price go up.

He also thinks that third-party data hasn’t been particularly encouraging and notes that investors generally perceive management as now sounding bullish during recent meetings throughout the second quarter. For example, while they at first dismissed any impact from the Olympics on subscriber growth, they later stated that the event will likely be a drag on the third quarter.

Not concerned about Netflix

However, the analyst isn’t very concerned about Netflix. He said usual seasonality last year was skewed by the launch in Australia and New Zealand in the second quarter, which he estimates added about 400,000 subscribers. Additionally, the third quarter is usually seasonally up as international paid subscribers usually grow by 30% to 55% quarter over quarter, excluding last year’s anomaly. He explained that this year there are about 270,000 more broadband homes, thus potentially providing a seasonal list.

Sanderson also said that Netflix management has been conservative in forecasting international net adds and has beaten their own guidance by an average of 12% over the last 13 quarters. If the company beats by 12% again, it would be an extra 260,000 subscribers in the second quarter.

He believes Netflix’s market capitalization could triple in four to five years. Recall that RBC analysts said recently that the company’s stock could double in three years. He likes the company’s long-term story and reiterated his Buy rating and $145 per share price target.

Shares of Netflix surged by as much as 3.52% to $94.70 in after-hours trading on Thursday.