Wall Street analysts express their views on video streaming service Netflix, Inc. (NASDAQ:NFLX) and professional network giant LinkedIn Corp (NYSE:LNKD) regarding Q1 earnings from both. While each analyst gives a different rating, both decrease their price targets to reflect uncertain growth expectations.

Netflix, Inc.

UBS analyst Douglas Mitchelson commented on Netflix after the company released Q1 earnings at last week. The analyst specifically highlights important factors in the company’s 10-Q, released after earnings, which includes a 10-20% increase in ARPU levels by 4Q16; higher seasonality in membership in 1Q and 4Q; and 40% U.S. margin guidance by 2020.

Mitchelson highlights several key topics for investors following 1Q earnings. First, the company guided lower than expected international net adds for Q2. The analyst questions the “underlying drivers” for such low guidance of 2 million and wonders if this is a reflection of “a slowing in pre-2015 markets.” Second, the analyst wonders if the flat y/y US margin guidance implies a “cost issue” and threatens the company’s 2020 goal. Third, Mitchelson ponders the cause of the $2.4 billion increase in content liabilities, and what it suggests for “growth, margins, and competitive intensity.” Fourth, the analyst questions the likelihood of international subscriber growth “given the low-hanging fruit has been picked.” Finally, Mitchelson wonders what impact the new virtual MBPD bundles will have on the company, and questions overall valuation.

Despite investor debates on various issues, the analyst believes “expectations for growth have been reset and catalysts rebuilding for Netflix, after a negative catalyst period” resulting from seasonality. Mitchelson highlights 5 catalysts for the stock. The first one includes the conversion of top skim markets to full markets. Second, Mitchelson notes the high likelihood that 2Q results and 3Q guidance will display stronger international growth “as seasonality reverses and proves out price elasticity if un-grandfathering (price increases) goes as well as mgmt believes.” Third, Mitchelson indicates that margins in the second half of 2016 should “ramp aggressively.” Fourth, the company should release more original content. Finally, the analyst highlights new U.S. Disney movie releases that should have a favorable impact on the company in 2017.

The analyst reiterates a Buy rating on the company but lowers his price target to $141 to $147 to reflect “recalibrating opex.” According to TipRanks, Douglas Mitchelson has a 66% success rate recommending stocks with an average return of 14.2% per recommendation.

Out of all the analysts who have rated the company in the past 3 months, 64% are bullish, 7% are bearish, and 29% remain on the sidelines. The average 12-month price target for the stock is $120.11, marking a 28% upside from where shares last closed.


LinkedIn Corp  

Analyst Michael Pachter of Wedbush weighed in on LinkedIn prior to its Q1 earnings release, set for this Thursday after market close. The analyst forecasts revenues of $830 million for the quarter and non-GAAP EPS of $0.62, in-line with consensus revenue estimates of $830 million but slightly above non-GAAP EPS consensus estimates of $0.60. His estimates also surpass the company’s revenue and EPS guidance of $820 million and $0.55, respectively.

For Q1, Pachter does not believe management will significantly raise FY2016 guidance “given that it is still early in the year.” While “a significant increase to the guided EBITDA contribution margin of 22 – 25% also appears unlikely” for this quarter, the analyst predicts a 30% increase by year’s end. He also notes investor expectations of improved operating leverage in 2016, “although management appears content to invest in growth opportunities for the time being.”

Pachter expresses confidence in LinkedIn’s growth compared to peers. He states, “We continue to believe that LinkedIn has the potential to grow faster than its Internet and Social Media peers, particularly if its sees reacceleration of its Marketing Solutions business.” However, he is unsure about “how long the company can sustain its superior growth,” and will be closely watching earnings over the next few quarters. Still, the analyst expresses confidence regarding the company’s overall business. Pachter states, “We continue to believe that the company has a differentiated value proposition, a first mover advantage, and a dominant market position that is likely to allow it to thrive for the foreseeable future.”

The analyst maintains his Neutral rating on the company and lowers his price target to $130 from $200.

Out of all the analysts who have rated LNKD in the past 3 months, 53% are bullish while 47% remain on the sidelines. The average 12-month price target for the stock is $167.25, marking a 39% from where shares last closed.

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