Netflix, Inc. Q1 Earnings: What To Expect?

Netflix, Inc. Q1 Earnings: What To Expect?
NFLX Photo by Matt Perreault

Netflix will be reporting its earnings for the first quarter on Monday, and there are two prime concerns for the company at the moment. The first is whether it will be able to see continuous growth in its U.S. subscriber base, and the second is if it can boost its stock price as was seen after its blockbuster growth in 2015.

All eyes on subscriber growth

In the fourth quarter of 2014, Netflix added nearly 2 million net subscribers, but subscriber growth has been slow since then. The company recently acknowledged that adding members has become a lot more difficult than it ever was before, though a company spokesperson said growth possibilities exist in international markets.

Netflix added 44.7 million U.S. customers at the end of the fourth quarter and expects that number to grow to 46.5 million this quarter. However, analysts have concerns that in the U.S., the company’s growth has already peaked. This has given rise to questions about if the company’s international growth will be able to propel it forward, ahead of forecasts.

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Analysts expect Netflix to report per-share earnings of 3 cents for the quarter, down from 38 cents reported a year earlier. In nine out of the last 11 earnings reports, Netflix has met or exceeded expectations. FactSet expects the streaming firm to report revenue of $1.965 billion in comparison with $1.57 billion in the first quarter of 2015. For the last five consecutive quarters, Netflix has either met or closely missed revenue expectations.

Rising competition a concern for Netflix

Netflix is facing intense competition in the online video space, which is getting increasingly crowded. For this reason, in recent years, the company has seen its subscriber growth slow down significantly. Rivals such as Amazon, HBO and Hulu all have plans of increasing original content by 50% in 2016.

Netflix shares started to decline in December, but early February showed signs of upward movement. A rise of 3.95% has been seen in the company’s shares in the last three months in comparison with the 8.48% rise in the S&P 500 index. The stock added 134% in 2015.

According to FactSet, the company’s stock has received an average analyst rating of Overweight with a price target of $126.08. On Thursday, Netflix shares closed up 0.7% at $110.42. Year to date, the stock is down by over 5%, while in the last month, it is up by almost 13%. The stock has a 52-week high of $133.27 and a 52-week low of $75.71.

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