Netflix Earnings Preview: Goldman Sachs Bull vs. Barclays Bear (Updated)

Source: courtesy of Netflix

This story has been updated to signal whisper numbers and secondly to refer to the formal earnings report.

Netflix Inc. (NASDAQ: NFLX) is supposed to report earnings on Monday after the close. The report likely will have to represent solid subscriber numbers and a solid earnings and revenue results to keep most investors happy. In the weeks before Netflix earnings there were two opposite calls: Goldman Sachs was very bullish and Barclays was very cautious.

First let’s look in the middle for consensus estimates. The Thomson Reuters consensus estimates for the second quarter are $1.16 earnings per share (EPS) (versus $0.49 a year ago) on close to a 25% revenue gain to $1.33 billion. Estimates next quarter are $1.06 EPS and $1.38 billion in revenues.

Update After Earnings (5PM): Shares were up 1.3% after what was not really a serious earnings surprise – Reed Hastings is being given the benefit of the doubt.

UPDATE at 2:05 p.m. Eastern Time: WhisperNumber.com sent us their ‘earnings whisper number’ as the unofficial estimate that investors are really looking for. The report said the whisper number is $1.15 EPS, in-line with the analysts’ estimate and showing neutral confidence from investors. Its whisper numbers were shown to be in a range of as low as $1.10 EPS to a high of $1.20 EPS. They also said that Netflix has a 70% positive surprise history, beating the whisper number in 14 of the 20 earnings reports it has tracked.

For 2014, Thomson Reuters has the estimates as $4.13 EPS (versus $1.85 in 2013) and a 24.4% rise in revenues to $5.44 billion. For 2015, those consensus estimates are $6.85 EPS and $6.68 billion.

Because Netflix is a controversial stock and is considered a high-flyer, we are featuring the cautious research call first.

When Barclays covered the stock on June 26, it issued an Underweight rating and assigned a $420 price target. This Underweight translates to “Sell” for most investors. The price ahead of that call was $444.21, and shares were trading just under $450 in mid-Monday trading ahead of earnings. What worried Barclays was the company’s valuation and what it called a slowdown in its international profits.

When Goldman Sachs upgraded Netflix to Buy from Neutral on July 1, the price target was set all the way up at $590. This was the new street-high that was above all other analyst target prices. The report cited future outperformance of earnings expectations, because of growth in the international markets, potentially growing to 62 million international subscribers by 2017.

Well, it looks like this is a tug-of-war for analysts. Neither analyst is looking solely at this second quarter as the long-term opportunity, but it is interesting when you see two analysts looking at the exact same data with such different long-term views.

Netflix shares were close to $448 shortly ahead of the formal report. The consensus price target was down at $432.76 at the same time. Netflix has traded in a 52-week range of $239.91 to $475.87, and its market cap is $26.9 billion.

ALSO READ: How Analysts Value Apple Ahead of Earnings

As a reminder, we continue to believe that Apple or another player should consider acquiring Netflix — although perhaps only if the stock gets knocked back down to earth.