NEW YORK (
price targets are all over the place, ranging as low as $80 to over $300. But after the company reports its first-quarter results at the end of the month, where will the stock swing?
Heading into results, Wall Street has been a bit jittery, with shares off 4.4% from its recent high of $244.72 earlier in the month.
The biggest question for investors over the past several quarters is if Netflix can keep up its rapid growth pace. And once again the expectation is that the company will need to significantly surpass analysts' estimates, especially for subscriber growth, to really move the stock.
In its fourth quarter, Netflix's subscriber base topped 20 million for the first time, as the company added 3.1 million new users during the three-month period.
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Management foresees a subscribers growing to between 21.9 million and 22.8 million and for revenue to come in between $684 million and $704 million in the first quarter. The company has not provided income estimates.
Analysts expectations are a bit loftier, with Bank of America Merrill Lynch looking for subscribers to grow to more than 23 million in the first quarter.
Overall, Wall Street is calling for a profit of $1.03 a share on revenue of $703.6 million when the company reports on April 25.
Netflix spent much of the quarter striking new deals to grow its streaming subscription service. While a bigger portfolio of movies and televisions shows is necessary in order to attract new users to its $7.99 streaming-only service, the content costs the company is incurring as a result are raising a red flag among investors.
One of the biggest announcements of late was Netflix making its first foray into original content. The company inked a deal to receive exclusive first-run rights to the new television series
House of Cards
, starring Kevin Spacey and directed by David Fincher.
Netflix also recently announced a deal with
that will allow it to stream the first four seasons of the popular series
. Although Netflix is typically mum on how much its content deals actually cost, the
Wall Street Journal
reported that this agreement will cost $1 million an episode. The first four season of
have a total of 52 episodes.
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That announcement followed a recent partnership with
Twentieth Century Fox
for rights to
first season, as well as reruns of
The Wonder Years
Aside from what is expected to be a significant jump in content costs, in the past three months there have also been several new threats to Netflix's subscriber growth.
Jeffries analyst Peter Misek released a report earlier this week saying that he believes
is nearing the launch of a new video-focused cloud-based service, which he sees as an immediate threat to Netflix.
There have also been concerns over the merger between
, which analysts expect will hurt the company. Experts agree that the merger will lead to market consolidation, which could potentially give more pricing power to pass on to consumers.
The recent acquisition of
also ignited concern. While the satellite giant did not reveal exactly how it will use the flailing movie rental chain, analysts predict Dish could use Blockbuster to start its own streaming subscription service that would compete directly with Netflix.
is also in the middle of retooling YouTube, and is reportedly set to take on Netflix with online streaming content.
"While we believe many investors fear the competitive threat of new entrants into the unlimited streaming space, we continue to believe Netflix's subscriber base, content library and consumer electronics device penetration give the company a formidable lead over others," Merriman analyst Eric Wold wrote in a note.
Netflix is also looking to opportunities outside of the U.S. to offset any slowdown in growth. The company previously indicated that it will expand its international, streaming-only product to a second market in the second-half of the year. In September, Netflix entered Canada, which it is working to expand.
In light of all this, do you think Netflix's stock will pop or drop following its earnings report? Take our poll and see what TheStreet readers are saying....
--Written by Jeanine Poggi in New York.
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