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Bearish Netflix rumors are only short-term worries, analyst says

Bullish case for Netflix: Analyst

Bearish rumors swirling ahead of Netflix's earnings report miss the long-term bullish prospects for the media giant, internet analyst Anthony DiClemente said Monday.

The streaming video company is set to report its third-quarter earnings after Monday's closing bell. It faces concerns from investors about slowing subscriber growth, rising costs and increased spending stemming from content development and increased competition.

In premarket trading Monday, the stock was down about 1 percent.

DiClemente told CNBC's "Squawk Box" that Netflix is worth looking at as a long-term investment for a number of reasons.

The Nomura analyst gives three things to consider.

"They don't have a legacy business to protect the way traditional media companies do," he said. That gives Netflix a "singular focus," setting it apart from its competitors, he added.

Next, with millions of subscribers worldwide, Netflix has the ability to spread its content costs across its scaled subscriber base, DiClemente said.

Finally, the analyst lauded the company's secular growth. "The world is shifting to internet video; this is the market leader," he said.

DiClemente attributed short-term headwinds mainly to several major moves the company made last year such as expanding its international business.

"You're factoring in the new investments that have yet to yield a return," he said.

He said other minor headwinds include raising prices on its service in the U.S. and slightly slowed subscriber growth.

Thomson Reuters' consensus estimate for the company's third-quarter revenue is $2.28 billion, with the company expected to post earnings of 6 cents per share. That's compared with 7 cents per share on $1.74 billion in revenue in the third quarter last year.

Netflix vs. cable

Tru Optik CEO Andre Swanston sees Netflix's situation as a bit less clear and a bit more competitive, though he conceded that much of the bearishness the company is seeing ahead of earnings is overplayed.

Swanston told "Squawk Box" he has three concerns.

First, Netflix has been too reliant on licensing content from other companies, and these companies are launching their own services or increasing the price. That forces Netflix to create original content.

Next, he said, the company has lost its technological edge over competitors.

And finally, he said, the company's international expansion will force it to produce more local, diversified content in different languages, which can also hike costs.

Despite such concerns, Swanston said the company is in a remarkable position relative to its competitors when it comes to the future of television streaming.

"Who wouldn't trade places with Netflix right now?" Swanston asked.

Pricing concerns tend to be overplayed, he said, especially considering the fact that similar services from HBO, Hulu, Sling TV and others are competitively priced.

And, as it expands into international territory and begins to increase its self-sufficiency, Swanston said, it will prove to be an even larger influence on its industry.

"I think what you're seeing is Netflix is becoming more and more like a Viacom or Disney, and all those companies are trying to become more and more like Netflix," Swanston said.

Expectations are low for Netflix earnings: Olson

Michael Olson, senior research analyst at Piper Jaffray, agreed that while the outlook for Netflix's next several quarters is fuzzy, the company's superior position relative to its competitors gives it an advantage.

In an interview on "Squawk Alley" on Monday, Olson told CNBC that although analyst reports suggest Netflix will not meet its expected 300,000 net domestic subscriber adds, the miss will not have a significant impact assuming Netflix's international business remains strong and growing.

"You're going to have these quarters where you have things like the ungrandfathering of the price increase or you have new competitors that enter the market … but generally, this is a growing market and they're the leader in the space," Olson said.

The "ungrandfathering" of subscribers, which ties to Netflix's recent price increase on its monthly subscription, ends partway through the fourth quarter, Olson said. Only then will the company be able to see its effects on subscriber additions and retentions, the analyst said.

Olson also spoke about Netflix reshaping and downsizing its content library.

"As far as the independent content that they're keeping, they're keeping quality content that's bringing in viewers and they're dropping off some of the lower-tier content in favor of originals," he said. "I think, ultimately, it's the right strategy. You want to have a unique offering and that's the way to do it."

Moving forward, Netflix will face growing interest in its content's ratings, as well as in specifics about how much the company spends on producing its content.