High Noon for Netflix

Another cloud that some see hanging over Netflix's head next year is the anticipated rise in postal rates, which is expected to require the company to pay another 6 cents every time one of its DVDs is mailed out and returned. The proposed postal hike is expected to take effect next summer.

Over at Cantor Fitzgerald, Derek Brown took encouragement from a little-noticed bill passed in Congress that could delay postal-rate increases beyond the one expected next summer. The measure, which shifts some retirement costs of postal workers to the Treasury's budget and could save the postal service $3 billion a year, must still be signed by President Bush.

Netflix's current guidance assumes the postal increase will occur, and Brown said he won't change his profit estimates until the proposed bill is passed. But Brown, who has a $39 price target for the stock, wrote that he is "very encouraged by this latest turn of events and [is] optimistic that guidance/forecasts could move higher in the not-too-distant future." Cantor Fitzgerald has no underwriting relationship with Netflix.

Others feel that the concerns about the potential for Netflix to increase its subscriber base are overblown. According to Youssef Squali, an analyst at Jeffries, Netflix added 493,000 new subscribers last quarter, bringing the total to 5.7 million, and topping Squali's own estimates by a good 60,000 subscribers.

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