Netflix Will Beat U.S. Subscriber Expectations In Second Half, Cowen Predicts

Cowen’s John Blackledge mentioned that the February 2016 survey of 2,500 people in the U.S. increased confidence regarding the 2Q16 and FY16 U.S. paid subscriber estimates for Netflix, Inc. (NASDAQ: NFLX), despite an impending price hike.

The analyst maintained an Outperform rating on the company, with a price target of $155.

U.S. Subscriber Estimates

Blackledge estimates U.S. net adds for 2Q16 at 630,000, representing a 30 percent year over year decline, with the consensus expectation at 500,000-600,000+.

“Given the seasonality and pricing increase, there is some concern NFLX could guide to a US net sub loss or a modest US net sub adds (100-200K) in 2Q16,” the analyst stated.

Cowen’s survey data also indicates that overall U.S. gross adds for 2016 would be marginally higher than the 2015 levels, implying a year on year increase.

2Q16 Churn

Blackledge expects only a marginal increase in churn in 2Q16, given that subscriber tenure is more than two years for those who would face a price increase. This was likely to lower the potential for churn.

In addition, the analyst pointed out that subscribers on the Standard Plan for more than two years viewed an average of 11 hours per week, as compared to the 10 hour average revealed by the survey.

Blackledge also noted that 58 percent of the subscriber said that the reason for their subscription was primarily the original content offered by Netflix, a significant increase from the numbers seen over the last couple of years.