Internet and Media Analysts Debate Netflix (NFLX) on CNBC

Laura Martin, Internet and media analyst with Needham & Co., and Mark Mahaney, Internet and media analyst at RBC Capital, discussed Netflix (NFLX) on CNBC's "Squawk on the Street."
By Giovanni Bruno ,

NEW YORK (TheStreet) --Shares of Netflix (NFLX) - Get Report are lower by 13.97% to $85.03 on Tuesday morning, in the wake of the company's disappointing earnings results, released yesterday, which missed several analysts estimates. The report also showed a lack in subscriber growth.

Much scrutiny and debate has since revolved around the online streaming giant, and two Internet analysts, with differing opinions, joined CNBC's "Squawk on the Street" to debate the stock.

Laura Martin, Internet and media analyst at Needham & Co., provided a cautious outlook on Netflix stock.

"I think it's optimistic to think that subscriber growth, off-shore at least, is going to end up being better next year than it was this year. I think for the U.S. they said that the peak-grandfathering, along with the Olympics will both hurt the third quarter. I do think it will get worse in the third quarter," Martin said.

Moreover, Martin also believes that that it is possible Netflix will never realize its projected subscriber target in the U.S., anywhere from 60 to 90 million domestically.

That being said Mark Mahaney, Internet and media analyst at RBC Capital, said that while the earnings report did surprise him, he remains optimistic on the future of the company.

"Are these problems temporary? It's really hard to know, these problems are somewhat fixable by the company in that the more they spend on content, $5 billion this year, $6 billion next year, the more compelling the service is because the market is clearly moving towards Internet video," Mahaney said.

Furthermore, Mahaney expressed confidence when explaining that even during this down time for Netflix they still have "a price point lower than any other competitor out there," leading him to believe it is still in an attractive market longer-term, and it has better pricing and content than rival Amazon (AMZN).

Martin argued that point to focus more on the company's inability to expand internationally, and now that China is "dead," she forecasts turbulent times abroad.

"Internationally it's possible they will run up against data caps for developing countries, and you're going to have the first world, which is 20% of their revenue, slowing. So I think international risks are even more in danger. It all feels more cautious to me than Mark's outlook would suggest," Martin concluded.

Separately, TheStreet Ratings rates Netflix as a "Hold" with a ratings score of "C+."  The primary factors that have impacted TheStreet Ratings rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks.

The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, TheStreet Ratings also finds weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow.

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. 

You can view the full analysis from the report here: NFLX

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