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Netflix Earnings Preview: Streaming Giant Looks to Build on Record Subscriber Growth

After adding more than 8 million streamers to close 2017, Wall Street has its eye on new international customers

As usual, with Netflix reporting its first quarter earnings after the bell on Monday afternoon, investors will have their eyes darting to one key metric: subscribers.

For a company built on monthly payments from customers, it’s easy to see why. The streaming heavyweight boasts about 118 million subscribers heading into Monday’s report, after adding a company-record 8.33 million new users during the fourth quarter of 2017.

Analysts expect Netflix to keep its momentum rolling, with a focus on international markets in 2018 and beyond.

“In particular, we see potential upside in India,” said Morgan Stanley analyst Ben Swinburne in an investor note shared with TheWrap, where “strong secular tailwinds on broadband and media consumption could help further unlock the sizable population in the country.”

Consensus estimates predict Netflix will have scooped up 5 million international subscribers during the first quarter, along with another 1.5 million domestic customers — coming in slightly ahead of Netflix’s own call of 6.4 million new streamers. Goldman Sachs analyst Heath Terry is more optimistic, predicting the company will add 7.3 million subs altogether, backed by the company’s aggressive marketing spend in 2018. (Netflix execs said on the company’s Q1 earnings call it had upped its marketing budget from $1.3 billion to $2 billion for the year.)

Netflix’s international growth since 2012 (per Morgan Stanley)

“Follow-through” from high-profile productions like “Bright”and “The Crown,” which came at the end of the fourth quarter, should help drive Netflix on Monday, said Terry in his note to clients. Goldman anticipates Netflix bumping up its average revenue per user — always a critical measure for tech companies — based on the company’s price increases last fall. The firm projects $0.63 earnings per share and $3.7 billion in revenue for the quarter, which is in-line with analyst estimates.

An earnings beat, or major leap beyond subscriber expectations, could send Netflix’s stock running like it did earlier this year. The company has seen its shares increase more than 50 percent since the start of 2018, trading at about $307 per share on Monday morning.

Shares of NFLX have doubled in the last year (per Google)

Still, to keep adding new users, Netflix has to spend big, both on marketing and on content. The Goldman and Morgan Stanley analysts both note the threat of ballooning costs for the company.  And outside competition from Amazon and Hulu, as well as Facebook’s Watch and the upcoming Disney streaming service, remain obstacles.

But if Netflix can pull in another big quarter for subscriber growth, investors won’t be worrying much about its adversaries.