Netflix Subscribers Should Be Solid This Quarter

In a new report, Baird analyst William Power takes a look at the results of the firm’s Q1 Netflix, Inc.NFLX subscriber survey. According to the survey, Netflix investors should be looking for some strong numbers in Q1.

“Our Q1 U.S. subscriber survey suggests solid U.S. results, likely driven by recent original successes, with the January global launch likely to benefit the international segment,” Power explains.

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However, he cautions that price increases could also serve as headwinds to subscriber growth this year. In addition, rising content costs and extremely high international expectations could also limit the stock’s upside from current levels.

In Baird’s most recent subscriber survey, Netflix surpassed 50 percent U.S. penetration, up from the 46-47 percent range in the past couple of quarters. Baird is calling for Q1 net domestic additions of 1.75 million and paid net additions of 2.0 million, both down from 2.3 million and 2.6 million, respectively, in Q1 of 2015.

Power credits the successful recent launch of Netflix originals Making a Murderer, House of Cards and Daredevil for the strong Q1 subscriber numbers.

Looking ahead to Q2, he sees increased churn risk and potential downside to subscriber growth due to pressure from previously-announced pricing increases.

Baird maintains its Neutral rating on Netflix and its $115 price target.

Disclosure: the author holds no position in the stocks mentioned.