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Netflix results face pressures with higher costs, new rivals

Wall Street is projecting subscriber additions of 1.61m in the US and 7.33m internationally, when Netflix releases its results later on Tuesday.

The stakes have risen for Netflix since the last time the video-streaming pioneer reported earnings. With more than four new entrants to the Internet TV gauntlet, investors will look to chief executive officer Reed Hastings during the conference call for reassurance.

Netflix is scheduled to release first-quarter results after markets close Tuesday, with Wall Street projecting subscriber additions of 1.61 million in the US and 7.33 million internationally, according to data compiled by Bloomberg. That’s slightly higher than Netflix’s forecast of 1.6 million and 7.3 million, respectively.

Shares of the streaming service provider rose 1.5% in pre-market trading after Deutsche Bank upgraded the stock to a buy from hold and boosted its price target to $400. Analyst Bryan Kraft touted the company’s decreasing reliance on licensed content and said it looks “more and more like a platform every day, rather than just an application.”

But Wall Street is braced for a softer forecast as phasing of the effective price hikes is expected to mostly weigh on second quarter subscriber additions. Other factors, such as a lighter content slate and competition from Disney’s “Avengers” film and HBO’s final season of “Game of Thrones,” are also expected to contribute to a tepid view.

While Netflix may have taken a hit from the forthcoming Disney+ platform, losing $8 billion in market value since last week, analysts still consider Netflix to be the streaming leader. Moreover, many of the yet-to-be-launched services are seen as a value add for the streaming industry.

Netflix’s stock has risen more than 30% year to date despite expectations of a conservative second quarter.

What Bloomberg intelligence says :

 “Momentum should continue through the year, especially as the slate strengthens in midyear with the third season of ‘Stranger Things.’ The company may also be exploring international price hikes.”– Geetha Ranganathan, senior media analyst. 

© 2019 Bloomberg L.P

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