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April 19, 2021, 7:43 a.m. EDT

Flush with new subscribers, how will Netflix make more money?

By Jon Swartz

What does Netflix Inc. do for an encore after blowing past 200 million paid subscribers in the first year of the COVID-19 pandemic?

The streaming leader is attempting to monetize a bonanza of new subscribers from a year ago while fending off a herd of competitors that are trying to pry them away, like Walt Disney Co.’s (NYS:DIS) Disney+, Apple Inc.’s (NAS:AAPL) AppleTV+, AT&T Inc.’s (NYS:T) HBO Max, Amazon.com Inc. (NAS:AMZN) , Comcast Corp.’s (NAS:CMCSA) Peacock, and ViacomCBS Inc.’s (NAS:VIAC) Paramount+. Netflix is scheduled to reveal how it fared in the first quarter against that competition with an earnings report Tuesday afternoon.

Read more: Your streaming subscriptions reshaped Disney and turbocharged Netflix — now comes making more money off you

Trying to keep subscribers while making more money from them is the delicate balancing act forced on Netflix, which is considering licensing its content to gin up more revenue and potentially cracking down on password-sharing. On top of all that, it has raised prices in the U.S. and Canada to boost revenue.

Realistically, Netflix can’t expect anything approaching the pandemic-fueled blockbuster quarter of a year ago, when it added a jaw-dropping 15.8 million new subscribers as the pandemic began. Analysts expect less than half that amount this quarter, while Netflix management has projected the addition of 6 million new paid subscribers.

One thing is undisputable, however: Consumers prefer Netflix’s content by wide margins over its competitors. A recent Morgan Stanley poll found 39% of respondents consider it the best original programming in streaming, compared with 12% for Amazon Prime and just 7% for Disney+. The average U.S. household now pays for 2.5 streaming-video services, up from 2.3 in 2020 and 1.8 in 2019, according to the Morgan Stanley survey .

What to expect

Earnings: Netflix on average is expected to post earnings of $2.97 a share, up from $2.07 a share expected at the beginning of the quarter, based on 37 analysts surveyed by FactSet. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, calls for earnings of $2.57 a share.

Revenue:  Wall Street expects revenue of $7.14 billion from Netflix, according to 34 analysts polled by FactSet. That’s up slightly from the $7 billion forecast at the beginning of the quarter. Estimize expects revenue of $7.17 billion. FactSet analysts expect 6.47 million global paid net additions, down slightly from 6.65 million at the beginning of the quarter.

Stock movement:  Netflix shares are flat so far this year, and up 27% over the past 12 months, through Wednesday’s close of market. By comparison, the broader S&P 500 index (S&P:SPX) has gained 10% and 48% in those periods, respectively.

What analysts are saying

With a third wave of COVID forcing lockdowns in key markets, analysts like Cowen’s John Blackledge expect Netflix’s engagement with consumers to remain high. He maintained an outperform rating and price target of $675 a share in an April 11 note to clients.

Netflix could also “add incremental subs” by aggressively tamping down on password sharing because as many as 45% of domestics users share passwords, according to Cowen’s survey of 2,500 U.S. consumers.

“We think Netflix’s recent efforts are likely a natural progression as the biz matures in key markets,” Blackledge wrote. “We also acknowledge that some sharing among respondents is likely occurring within the same family household.”

Stifel analyst Scott Devitt — who rates Netflix shares as a hold with a price target of $550 — is more conservative in his assessment. He forecast 6.1 million global paid net additions, and just 3.2 million in the second quarter (vs. 4.3 million expected by the Street) in an April 8 note.

Of the 37 analysts who cover Netflix, 27 have buy or overweight ratings, five have hold ratings, and five have sell or underweight ratings, with an average price target of $622.95.

Link to MarketWatch's Slice.