CNBC Stock Blog

Netflix's New Pricing Plan Could Increase Earnings Estimates: Citi Analyst

As Netflix prepares to release its second-quarter earnings after the bell on Monday, one analyst told CNBC the company's Latin American expansionand subscription price hikes could boost its earnings outlook.

Mark Mahaney, Citigroup Investment Research's U.S. Internet Analyst & Research Director, outlined two key issues that he expects Netflix to clarify in its guidance today.

The company's stock, which is up about 167 percent in the last year, has been inching toward Mahaney's $300 price target; Citi has a "buy" rating on the stock.

One issue Mahaney discussed is how the company's recent price increase will affect domestic operating margins. He said it was "very hard to tell" how this change would affect the company's outlook.

Netflix Earnings Preview

"What they're doing is getting more and more people to move to streaming," he said. "They were already moving there anyway, but you move to streaming and it's a higher-margin business for Netflix. My guess is that it will lead earnings estimates to go up."

Netflix's expansion to Latin America could also affect the company's earnings outlook. The continent currently has about 35 million to 45 million broadband subscribers, Mahaney said.

He expects the company to have 50 percent year-over-year revenue growth this quarter, with streaming acounting for much of this growth.

"This is the fastest growth rate they've seen in five years," Mahaney said. "No particular reason why video streaming wouldn't be just as interesting a market, just as large, just as fast-paced in Latin America or in Europe as it is here."

He added that he views Apple and Amazon as Netflix's two biggest long-term competitors.

Not all analysts have been as optimistic as Mahaney regarding the future growth of Netflix's stock. Tony Wilbe, an analyst at Janney Montgomery Scott, recently said he has a "sell" rating and a $170 price target on the company.Wilbe told CNBC he was concerned that the company might not be able to attract enough new customers to cover its off-balance-sheet obligations.

WATCH:Mahaney discusses Netflix jacking up subscriber prices.


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Mahaney's firm has a stock ownership in Netflix of more than 1 percent.