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Heading into Netflix, Inc. (NASDAQ: NFLX)'s first-quarter report Monday, one bear analyst is sticking to his thesis that the streaming video provider will continue to burn cash for "many years."

The Analyst

Wedbush's Michael Pachter maintains an Underperform rating on Netflix's stock with an unchanged $110 price target.

The Thesis

Netflix is modeled to earn 65 cents per share in the first quarter on revenue of $3.7 billion, Pachter said in a Thursday report. The company is likely to report that it ended the quarter with 1.5 million more domestic subscribers and 5.25 million more international subscribers, the analyst said.

During the quarter, Netflix oversaw a "steady stream" of new content that helped mitigate churn from higher pricing on standard and premium plans, according to Wedbush. Netflix introduced a "significant amount" of non-English content in the quarter, including new programming in French, Japanese, Hindi, Spanish and Portuguese, Pachter said.

Despite expectations for encouraging subscriber growth in the next few quarters, Netflix's financial and competitive risks remain equally "concerning" as they have in the past, Pachter said. Walt Disney Co (NYSE: DIS) is pulling back its content on Netflix and a "steady migration" of content creators are moving toward exclusive deals with Hulu, which could result in lower subscriber satisfaction for Netflix users over time, he said.

Netflix's free cash flow is likely to remain in the negative $3 billion to $4 billion range for at least the "foreseeable future," the analyst said. This poses a risk in the event that Netflix's creditors insist the company start generating sufficient positive free cash flow to pay back its debt in five years. As a result, the streaming platform could be forced to "significantly" raise the monthly cost to customers to satisfy creditors, Pachter said.

Netflix's domestic business continues to approach an "inevitable ceiling," and significant marketing and content spend over the coming years would be necessary to maintain its current pace of subscriber growth, the analyst said.  Netflix's valuation is "unwarranted," he said.

Price Action

Shares of Netflix were trading higher by nearly 2 percent at the time of publication Thursday.

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Photo courtesy of Netflix.

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