Netflix Shares Fall on Weak Subscriber Growth: What Wall Street’s Saying – TheStreet.com

Shares of Netflix (NFLX) were lower on Tuesday, the day after the streaming company reported lighter-than-expected net subscriber additions for the 2017 first quarter and downbeat guidance for second quarter earnings.

On Tuesday afternoon, shares were down 3.3% to $142.37.

After Monday's close, Netflix reportedfirst quarter earnings of 40 cents per share on revenue of $2.64 billion, vs. analysts' expectations of earnings of 37 cents per share, on revenue of $2.64 billion. For the second quarter, Netflix forecast earnings of 15 cents per share, considerably lower than consensus expectations for 24 cents per share.

In addition, the company reported it had added 4.95 million new subscribers, lower than its own expectations for 5.2 million subscriber additions and consensus expectations of 5.3 million net added subscribers. However, Netflix did provide upbeat guidance for second quarter subscriber additions at 3.2 million, well above the 2.54 million subscribers analysts were expecting.

Netflix explained that subscriber additions came in below expectations in the firstquarter because the timing of new original content. Notably, Netflix moved the release of season 5 of "House of Cards" to the second quarter, instead of the usualfirst quarter release. New seasons of popular shows have traditionally helped Netflix add more subscribers than new licensed content, Cantor Fitzgerald pointed out in a note on Tuesday morning.

The positive outlook for second quarter subscriber additions was enough to warrant at least three price target increases on Wall Street on Tuesday morning. Keep reading to find out what analysts are saying about the company's latest financial report.

Jefferies, John Janedis (Hold, price target raised to $141 from $135)

"Though net sub adds in 1Q were ~250K lighter than expected (+4.95M vs. guide of +5.2M), the focus is on the strong outlook for 2Q, which will benefit from new / returning originals (i.e. 13 Reasons Why, HOC, OITNB). All in, our 1H17 net add ests are largely unchanged (8.35M vs. prior +8.18M). Net adds QTD suggest the outlook for 2Q could be conservative, though it's also possible net adds were pulled forward."

Canaccord, Michael Graham (Buy, price target raised to $165 from $160)

"Netflix reported solid Q1 results, with revenue in line with consensus as higher ASPs offset slightly light paid subscriber adds. Key show releases being pushed into Q2 is the likely cause of the subscriber miss, as new seasons of top shows historically have had larger impacts on net adds than new shows. With the valuation becoming fuller (NFLX is up ~19% vs. S&P up ~5% YTD), the trend in rising long-term profitability is important given the upfront cash spend on content. We realize it will likely take a substantial sub beat to move the stock in the short-term, but the release slate in Q2 and Netflix'ssuccess with originals give us reason enough to remain buyers of the stock."

Cantor Fitzgerald (Overweight, price target raised to $165 from $160)

"We're maintaining our Overweight rating on Netflix and raising our PT to $165 from $160, reflecting a stronger-than-expected 2Q subscriber outlook (+750K), partially offset by a slight miss in 1Q net adds (-230K) and virtually in-line financial results. Although quarterly net adds can be quite volatile, record 4Q net adds and the strong 2Q guide show healthy subscriber trends over longer periods, and a heavy slate of recurring originals should sustain growth for the rest of the year. We maintain our positive stance on the stock given 1) substantial long-term growth potential, particularly in international markets; 2) a strong secular tailwind as linear TV shifts to internet TV viewing; 3) the company's leadership position with $6B+ of P&L content spend; and 4) the recent inflection/path to gradually higher operating/EBITDA margins."

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Netflix Shares Fall on Weak Subscriber Growth: What Wall Street's Saying - TheStreet.com