Wedbush Previews Netflix Prior to Q3 Earnings

In a note released earlier Friday morning, Wedbush analyst, Michael Pachter provided insight into Netflix's

third quarter performance. Pachter is expecting upside to the company's guidance due to additions in domestic streaming subscriptions and the timing of European expansion. However, he noted the European expansion was in the later part of the quarter and thus expects it to have a larger impact in the fourth quarter. in terms of EPS, Pachter is predicting $0.93 for the quarter, which is in-line with consensus but above guidance of $0.89. Looking to the fourth quarter, he noted his current $1.20 EPS estimate is likely too bullish. Pachter commented, "We think the biggest issue that investors have overlooked regarding Netflix is the gap between free cash flow and net income, which totals $277 million." He added, "This gap must ultimately be amortized through Netflix's income statement, pressuring future earnings." Wedbush currently rates Netflix at Underperform with a $245 price target.