NFLX EPS preview

On Tuesday, Netflix, Inc.

will report its Q4 results. Analysts at Macquarie Research expect the discussion to "focus on the global launch" from last week. Macquarie Research reissued a Neutral rating with a PT of $113.00 for NFLX. "For Q4 we are modelling EPS of $0.01 on a base of 44.6m US and 26.2m international subs, both low end of guidance. US subs could be negatively affected by some elasticity of demand from its recent $1 price increase on new higher-tier subs, and on churn which Netflix said in Q3 was due to the introduction of chip-based credit and debit cards which led to involuntary drop-offs in automated payments; we have not heard this from other subscription services," the firm noted. "Management guides to "about break-even" 2016 net income, but consensus EPS is $0.27, so there could be downside to estimates," the firm commented. Macquarie sees the company's earnings and target price revision to have "no change" to estimates. The firm also noted in their research note Tuesday that Netflix is now available in ~190 countries. "International contribution margin is expected to remain at the 4Q 15E level of~$125m each Q given phasing of content purchases. The early-Jan launch should set Netflix up well for a 2H 16 sub ramp, to drive strong earnings growth in 2017," the firm commented. Macquarie sees Netflix as "competitively priced" and has "unique original content." "Netflix is priced higher than its competitors and we believe lacks enough localized content at its current stage to do well," the firm noted. Macquarie also believes that the company's broader success is dependent on offering lower pricing and downloads.