Netflix earnings could reveal pain of price hike

Wall Street is expecting another hit from Netflix when the streaming video leader releases its first quarter earnings late Monday.

The Los Gatos, Calif.-based internet TV provider is expected to deliver  25% revenue growth, as well as swelling subscriber numbers, fueled by the company's international expansion into 130 additional countries earlier this year.

However, analysts will be keenly interested in Netflix's forecasts for U.S. subscriber trends in the current April-June quarter as many members will see a $2 increase next month, upping their monthly bill to $9.99. That increase, announced two years ago, could affect more than 17 million, estimates UBS Investment Bank.

Subscriber churn — members who drop and might eventually return — could rise to as many as 10 million, says Wedbush equity research managing director Michael Pachter. Wedbush Securities says the number of Netflix subscribers affected by the price hike could reach 30 million.

Pachter expects Netflix to report revenue of $2.02 billion and earnings of 4 cents, higher than the consensus estimate of $1.97 billion and 3 cents a share in earnings from analysts polled by S&P Global Market Intelligence.

Netflix will likely beat its own growth forecast of 6.1 million net subscribers for the January-March 2016 time period by an additional 200,000, Pachter said in a note to investors earlier in the week. He expects the video provider added 1.8 million U.S. subscribers and 4.5 million internationally, bringing its total global paid subscribers to about 83.5 million.

Any earnings missteps are treacherous for shareholders given Netflix shares' extended rise over the last several years.

Netflix (NFLX) shares closed Friday up 1% to $111.51. Shares are up 40% over a year ago, but down 6% from three months ago.

Manhattan Venture Partners chief economist Max Wolff told CNBC Friday that Netflix's price-to-earnings ratio of nearly 400 "makes us very nervous. I like the company. I like the future. I don’t like the price."

The video company's growth in sales and subscribers, and corollary rise in spending to develop content to keep subscribers happy, has divided Wall Street analysts.

On the more bullish side, Stifel Financial Corp. technology analysts Scott Devitt and John Egbert have a "Buy" rating and $143 target price. "We expect Netflix to post impressive global subscriber additions," they said in a note to investors Wednesday.

Wedbush's Pachter, in contrast, remains  very skeptical on Netflix shares with an "Underperform" rating and 12-month price target of $45. "In our view, domestic subscriber growth will stall in the June and September quarters, and Netflix shares will likely pull back significantly as a result," he said.

Analysts with the best track record for Netflix earnings estimates expect revenue slightly above that of Wall Street, says Christine Short, senior vice president with crowdsourced financial service Estimize.

Netflix's move to add more original programming -- 600 hours, compared to 450 last year -- means the company will spend $6 billion on content this year to maintain its market position against competitors such as Amazon and Hulu, she said.

"One downside is that Netflix reported negative free cash flow in Q4 2015 and continues to invest heavily in content and international expansion, so we could see that again in Q1," Short said.

Among new and returning movies and series coming to Netflix: Special Correspondents, a new original film (premiering April 29) written and directed by Ricky Gervais and starring him and Eric Bana; Marseille (May 5), an eight-episode French-produced series starring Gérard Depardieu as the city mayor looking to get a casino in the city; season 4 of Orange is the New Black (June 17); and The Fundamentals of Caring (June 24), a film starring Paul Rudd and Selena Gomez.

Short noted that Netflix had the highest post-earnings 30-day move (7%) of all the companies reporting earnings next week, a sign that "Netflix is a stock you might want to own heading into earnings."

Follow Mike Snider on Twitter: @MikeSnider