Jefferies Not Willing To Give Netflix The Crown, Remains At Underperform

Strong International Subscriber Growth

Analyst John Janedis noted that the company's subscriber growth of 7.05 million was way ahead of his estimates, with international markets boosting the number. Janedis pointed to the management commentary that the success of key original programming, including "The Crown," "Black Mirror" and "Gilmore Girls," likely pulled forward subscriber growth from early 2017, leading to higher than expected subscriber growth.

Look ahead into the first quarter of 2017, the analyst expects the mix shift in programming to more original launches would drive sequential slowdown in subscriber growth. The analyst indicated that domestic subscriber growth in the fourth quarter and expectations for the first quarter were in line.

International Business To Continue To Bleed In 2017

Jefferies believes the international segment's first quarter of positive contribution expected for the first quarter of 2017 could be due to the timing. However, given building content costs for the remainder of 2017, the firm expects the international segment to report a loss of $107 million, although narrower than $309 million in 2016.

Cash Burn Worrisome

The firm believes the international subscriber growth will drive the stock higher. However, the firm is concerned about the higher than expected cash burn expected by the company for 2017 and the elusive fixed cost leverage. The increase in cash burn is traced back to an notable increase in original programming hours, which is expected to be 65 percent more in 2017. Jefferies expect the company to issue debt in the second quarter to finance its investment in content.

Jefferies maintains its Underperform rating on the shares of Netflix but raised the price target to $95 from $80.

At the time of writing, Netflix shares were up 6 percent at $141.25.