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TheStreet Open House

Are Netflix Earnings a 'House of Cards'?

With all the attention being paid to net neutrality, and the company's continued advancements in streaming, analysts are largely positive going into the first-quarter report. Some are expecting to hear more about original content, particularly as it relates to House of Cards, whose second season was released during the quarter. Here's what a few of them had to say.

Cantor Fitzgerald analyst Youssef Squali (Hold, $405 PT)

"We expect Netflix to report one of its strongest quarters ever today after the close, with domestic streaming net adds of 2.3M and international net adds of 1.6M (Cantor ests.). In addition to subscriber and margin guidance, we expect drivers of the stock short term to include commentary on the changing competitive landscape and its potential impact on strategy, details for the upcoming European launch, and any incremental data points from original series (including House of Cards season 2)."

Pacific Crest Securities analyst Evan Wilson (Outperform, $500 PT)

"Netflix's scale, data, brand and technology platform provide competitive advantages of which it is just beginning to take advantage globally. We expect its international expansion to accelerate meaningfully over the next 18 months, which is likely to drive an inflection in international growth and could prompt substantial upside to our international subscriber and revenue estimates through 2016. Further, international margins appear to be progressing faster than in the United States on a country-by-country basis, which suggests international
profitability could match or exceed U.S. profitability over time."

BMO Capital Markets analyst Edward Williams (Market Perform, $370 PT)

"We expect Netflix to post strong subscriber net adds boosted by the return of House of Cards for its second season. For 1Q14, we model revenue and EPS of $1,266 million and $0.79, respectively (versus consensus of $1,266 million and $0.83). We estimate gross margins of 31.2% and op margins of 7.3%. We expect the company added approximately 2.6 million streaming subs in the US and 1.9 million streaming subs abroad during the quarter. While we believe the major European expansion planned for late 2014 will be in Germany and/or France, we do not expect any additional color on the upcoming launch(es) until 2H14."

Wedbush Securities analyst Michael Pachter (Underperform, $175 PT)

"Our estimates are for revenue of $1.273 billion, vs. consensus of $1.266 billion (no guidance), and EPS of $0.82, in line with consensus, and guidance of $0.78. We modeled domestic streaming subscriber net adds of 2.25 million, in line with guidance, but our bias is that our estimate may be too low based upon a high sign-up rate for season two of House of Cards, which debuted on February 14, and low Q1 advertising spending."

JPMorgan analyst Doug Anmuth (Overweight, $500 PT)

"We expect Netflix to report strong 1Q results with US streaming subs the primary focus. We are modeling 1Q14 US streaming subs of 35.7M (2.31M net adds) vs. guidance of 35.67M subs (2.25M net adds). Our 2.31M projected net adds are 14% higher than in 1Q13, and compare to 4Q13 net adds growth of 13.8% Y/Y. We believe the company should benefit from the launch and awareness around season 2 of House of Cards and continued improvements in content, as well as positive seasonality driven by more Internet-connected devices and colder weather. Netflix currently trades at 18.6x 2015E EBITDA and 3.5x 2014E revenue."

Piper Jaffray analyst Michael Olson (Neutral)

"Expect in-line Q1 sub adds, with slight EPS upside potential as the company continues to expand op margins, but focus shifting to LT (next 2-3 years) earnings potential; depending on level of intl & new content spend and pricing."

-- Written by Chris Ciaccia in New York

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