Analyst: Here’s Why Netflix has Some Serious Growth Concerns

The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.

Netflix (NASDAQ:NFLX) delivered impressive subscriber growth and cost control to drive the Q4:12 beat.  Revenue was $945 million, compared with our estimate of $926 million, the consensus estimate of $934 million, and guidance of $919 – 943 million. The top-line beat was driven by better-than-expected subscriber numbers for all three operating segments. EPS was $0.13, compared with our estimate of $(0.10), the consensus estimate of $(0.13), and guidance of $(0.23) – 0.04. The EPS beat was driven primarily by lower-than-expected marketing spending, as well as the top-line beat.

Bullish Q1:13 domestic streaming subs guidance. Netflix (NASDAQ:NFLX) expects to add 1.35 – 2.05 million domestic streaming subs in Q1:13. The high-end of this range is equal to the net adds figure in Q4:12, while the midpoint of the range is in line with net adds from a year ago. Q1:13 guidance indicates that Netflix’s domestic business is not expected to slow significantly in the near-term, an important factor driving the strong after-market performance of Netflix shares.

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Raising our 2013 estimates to reflect lower marketing and content spending. Increasing our 2013 estimates for revenue to $4.38 billion from $4.03 billion and for EPS to $1.00 from $0.00 to reflect a stronger-than-expected Q4:12, better expense control, lower international losses and the assumption that Netflix will not expand further internationally in FY:13. Management  stated that the company will not launch in additional international markets in 1H:13…

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