Is Netflix Still Unreliable?

Netflix (NASDAQ:NFLX) has been trying out several innovative approaches to forget last year’s horror scenario when the stock price fell to unseen depths during a mass subscriber exodus. While shares have been healthier this year, high content prices and big foreign investments mean the company’s accounts are far from full fitness. And analysts remain wary, calling the company’s stock ‘risky.’

“The stock is likely to be extremely volatile because everything is based on perceptions of profitability several years down the line, which can change significantly,” said Andy Hargreaves, an analyst with Pacific Crest Securities, who owns the stock.

In its first-quarter earnings report, expected early next week, Netflix is expected to report a loss of 27 cents per share. While revenue is expected to grow to $869 million, heavy advertising spending and the costs associated with the content partnership with Starz are likely to pull earnings down. Liberty Media’s (NASDAQ:LMCA) Starz has licensing rights to many Disney (NYSE:DIS) movies, but Netflix was unable to agree on a new deal with the company, and ultimately lost access to that premium content.

However, subscribers have now begun returning after a sharp drop-off last year when Netflix increased prices for those who subscribed to both its DVD and online streaming options. The company also faced some major public embarrassment after announcing plans to separate its DVD business under the name Qwikster, and then quickly backtracking.

The company’s move into original content, which includes both freshly scripted series and new episodes of cancelled sitcoms such as Fox’s (NASDAQ:NWSA) Arrested Development, is also being viewed favorably by analysts. But competition keeps growing, including that from Hulu (NASDAQ:CMCSA) and Amazon (NASDAQ:AMZN), which are gaining major ground of their own.

“The company has staying power, but how much has Netflix bounced back from shooting their toes off in the U.S.?” analyst Steve Frankel asked. “And how aggressive will they be in going after the rest of the world?”

Frankel added that the real value of Netflix’s stock can only be gauged after the company’s plans for international marketing, on which it has been spending big, are revealed.

“I think Netflix is going to stay around the $100 a share range for the foreseeable future,” Sterne Agee analyst Arvind Bhatia said. “There is not a whole lot to more to get excited about just yet.”