Analyst: International Netflix Subscriptions Expected To Impress In Q3, Beyond

Analysts at Cantor Fitzgerald expect Netflix, Inc. (NASDAQ: NFLX) to report "solid" third quarter results on Monday aided by continued momentum in the international segment and a strong slate of original content. The firm's Kip Paulson maintains an Overweight rating on Netflix's stock with an unchanged $205 price target.

Netflix is expected to earn $0.31 per share in the third quarter on revenue of $2.951 billion and report an EBITDA of 268.1 million (9.1 percent margins), Paulson said in a Thursday note. The earnings report is also expected to show the addition of 3.665 million international net subscribers (to 55.686 million) and 750,000 domestic net adds (to $52.67 million), in line with the company's own guidance. (See Paulson's track record here.) 

While Netflix's subscriber gains are expected to be in line with the company's own expectations, the longer-term outlook remains encouraging, the analyst said.

The domestic business is expected to show a mid-single digit growth rate over the coming years, but the international runway implies a mid-to-high teens compounded annual growth rate, according to the Cantor note. 

Netflix's "aggressive" investments in its original content are expected to continue for the foreseeable future and this will likely be confirmed in management's guidance forthe  2018 content budget, Paulson said. Nevertheless, given expectations for a 25 percent revenue growth rate in 2018 — which is above an expected 20 percent content spend increase — Netflix should still see "modest" operating margin expansion next year, the analyst said. 

Investors should "remain constructive on the streaming powerhouse" heading into the earnings report and beyond, Paulson said. 

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