Netflix, Inc. (NASDAQ:NFLX) is set to release its next earnings report on Monday after closing bell, and the bulls are as bullish as ever, while the bears continue to beat the drum of competition. The “un-grandfathering” theme continued into the third quarter, so most analysts expect mixed results, but even Netflix, Inc. (NASDAQ:NFLX)’s biggest bear expects it to beat its guidance.

Netflix, Inc. (NFLX) Earnings Preview: Bulls Versus Bears

NFLX earnings preview: “choppy results” expected

Cantor Fitzgerald analyst Youssef Squali has a Buy rating and $120 price target on Netflix, Inc. (NASDAQ:NFLX), and he expects “generally choppy” results for the third quarter as the un-grandfathering of the $7.99 plan continues. He’s looking for $2.3 billion in revenue, $126.6 million in EBITDA, and 15 cents per share in non-GAAP earnings. He also believes subscriber adds remained “muted” during the third quarter as he pegs the number at 2.052 million international net adds and 308,000 domestic net adds. Those numbers are about in line with guidance.

The analyst believes churn peaked in the third quarter in the wake of the un-grandfathering of the old pricing plan, as most of the subscribers who still hadn’t seen their price increase in the second quarter will have done so by November. He adds that Google Trends data suggests that churn may already have normalized around the un-grandfathering.

He believes the company’s originals slate is still getting stronger and that subscriber growth will resume in the fourth quarter and next year. He expects U.S. subscriber growth to be in the single digits from now on as the user base matures and international growth to continue being “robust.”

Subscriber growth in focus

Morgan Stanley analyst Benjamin Swinburne also believes the un-grandfathering peaked in the third quarter, but he warns that this could mean that Netflix, Inc. (NASDAQ:NFLX) will miss guidance for subscriber adds. He remains bullish on the video streaming company in the long term, however, and reiterates his Overweight rating and $110 price target going into Monday’s earnings report. He believes the market may already be expecting the company to come up short in domestic ads anyway.

He adds that Netflix, Inc. (NASDAQ:NFLX) continues to benefit from strong content, adding that he expects content supply to keep routing to the highest bidder, especially if that bidder has the global distribution that Netflix, Inc. (NASDAQ:NFLX) has. In terms of competition, he notes that Amazon clearly poses a threat in the way of content acquisition and minutes spent viewing the service. However, he adds that smaller local players continue to struggle against Netflix, Inc. (NASDAQ:NFLX) and Amazon, seeming to contradict what others have found in some international markets.

Netflix versus Amazon

Wedbush analyst Michael Pachter may just be Netflix, Inc. (NASDAQ:NFLX)’s biggest bear, as he maintains his Underperform rating and price target of $50 per share. However, he expects the company to exceed guidance for the third quarter, coming in at $2.3 billion in revenue and 7 cents per share in earnings, against the consensus of $2.28 billion and 6 cents per share. The company guided for earnings of 5 cents per share.

Like Squali, he expects Netflix, Inc. (NASDAQ:NFLX)’s net ads to be in line with guidance, and he expects fourth quarter guidance of 4.75 million net adds. He believes that the series premiers of Stranger Things, season two of Narcos and Luke Cage in the third quarter probably limited the churn rate and offset some of the negative impact from the un-grandfathering.

He also spoke to the competition with Amazon and said he doesn’t feel Netflix, Inc. (NASDAQ:NFLX)’s share price adequately reflects that competition. Further, he expects the video streaming provider to bleed cash for quite some time yet. He believes content costs will continue to soar but that the quality could suffer because of the sheer volume of upcoming original content from Netflix, Inc. (NASDAQ:NFLX).

The company expects to add another $1 billion or more in content spending next year, and Pachter warns that Amazon could drive costs for other content higher as it competes with Netflix, Inc. (NASDAQ:NFLX) to acquire it. He pegs Netflix, Inc. (NASDAQ:NFLX)’s cash burn at more than $1 billion, and he doesn’t expect positive free cash flow any time this decade. One thing he doesn’t mention is the fact that the company’s original content library is growing so quickly that one day it may not need to spend so much on third-party content.

Shares of Netflix, Inc. (NASDAQ:NFLX) edged higher by as much as 0.98% to $100.48 during regular trading hours on Thursday.