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Netflix, Inc. (NFLX) Likely to Witness Strong Domestic Subscriber Growth

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Netflix, Inc. (NASDAQ:NFLX) will report its first quarter results after the close of trading on Wednesday. The company recorded strong subscriber growth in the last quarter after a surprise miss in Q3 2014. The Street expects overall customer base to continue to grow in the current quarter.

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However, as the market slowly approaches saturation, the rate of growth is likely to come down compared to the year ago period. In addition, the sustained push to expand services is likely to put stress on international margins. Here’s what to look for in Q1 2015 numbers:

EARNINGS

Netflix, Inc. (NASDAQ:NFLX) had projected earnings of 60 cents a share in January. The consensus of analysts polled by Thomson Reuters is for per-share profit of 69 cents a share. In the same period last year, the company reported earnings of 86 cents a share.

REVENUE

The average analysts’ estimate is for Netflix to clock revenue of $1.57 billion, up 24 percent from a year ago.

INTERNATIONAL EXPANSION

Netflix, Inc. (NASDAQ:NFLX) is going all out to replicate its domestic success in overseas markets. The company has set a target of completing its world-wide expansion by the end of 2016. However the expansion into new territories will put severe stress on margins. Large marketing expense and lack of operating leverage in new markets may cause volatility. So, instead of focussing on the current quarter figures, investors should follow the medium-term trend line.

COMPETITION IS HOTTING UP

As more and more players enter into the market, Netflix, Inc. (NASDAQ:NFLX) is bound to face stiffer competition. Netflix Inc. ruled the entire streaming-TV industry for a good seven years. But January saw the launch of Dish Network Corp.’s bundle-busting over-the-top service Sling TV. This was followed by HBO’s own stand-alone service. Netflix was quick to react, aggressively investing in new content. Its current average price of 14 cents per hour of consumption provides good value for consumers.

NEW CONTENT

The first quarter saw the launch of several original series, including the third season of the Emmy-nominated “House of Cards” and the Tina Fey-created comedy “Unbreakable Kimmy Schmidt.” Several analysts have pointed to the link between the launch of new big titles and the pace of Netflix, Inc. (NASDAQ:NFLX)’s subscriber growth. The company doesn’t share viewership data related to its original shows, so gauging the success of an offering entails a lot of guesswork.

STOCK PRICE

Netflix’s shares have soared 40 percent year-to-date, and closed Tuesday at $478.71. For the corresponding period, the S&P 500 is up a mere 1.7 percent. Analysts surveyed by Thomson Reuters have a median price target of $485 per share.

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