JPMorgan sees risk to Q2 Netflix estimates from paid sharing

JPMorgan analyst Doug Anmuth remains positive on Netflix shares heading into the Q1 earnings report but believes there is near-term risk to Q2 estimates as paid sharing likely rolls out more broadly during the quarter. Just as there was initial subscriber pushback and "bumpiness" in recently launched markets such as Canada, similar friction should be expected across a larger set of markets, likely to include the U.S., Brazil, those in Western Europe, and many others, the analyst tells investors in a research note. As a result, the firm expects Netflix to walk back its expectation for greater paid net adds in Q2 than Q1 as the bulk of the paid sharing rollout will likely now come in Q2, a seasonally weak quarter with fewer gross additions "at the top of the funnel." It raised its Q1 net adds estimate from 1.5M to 3.25M and lowered its Q2 net adds outlook from 3.25M to 1.0M. JPMorgan keeps an Overweight rating on the shares with a $390 price target.