Canaccord Gennuity announced this morning that they are bullish on Netflix, moreover, their price target is $120 which is more than 22% higher than current price. "With vast potential in the other 179 markets and the potential to move from a top-of-market skim product to more of a mass-market product internationally, we see a long runway for growth," Graham wrote in a note to clients. "In the U.S., competitive offerings will proliferate, but in a new un-bundled OTT world..., Netflix should move from being a substitute good to a complimentary good relative to cable, and this should foster continued growth domestically".Later on the news regarding Comcast and Netflix cooperation came up - I tried to figure out how Netflix could benefit from it in dollar terms. We've already discussed Netflix international expansion which is literally a fake, another opportunity to push the stock back to $130 levels. Netflix released their first quarter earnings on April 20, 2016. The only thing that I want to know first is efficiency. If the business is efficient, if the company's investors could get some profits from investing into the business (not the stock), then I'd better make my own due dil to identify growth opportunities and determine further upside potential. At the first glance, Netflix has a certain level of net income - $27M in Q1 2016. The fact that net income exists here is a positive sign. However, there is a small drop in net income margin from 1.5% in 2015 to 1.4% in 2016. In order to receive the real numbers and get some important business trends we need to check their unit-economics. In other words, we need to check how much money Netflix could make on each paying customer. According to Netflix financials, operating income dropped 47% this quarter so it couldn't be a positive sign:However, their unit economics looks different for domestic and international streaming services:Netflix increased the number of paying memberships for domestic streaming from 41.4k to almost 47k and which is more important increased domestic streaming Average Revenue Per Account from $23.78 to $24.72 (3.9% growth);The company increased the number of paying memberships for international streaming 20.9k to 34.5k, but they were not able to increase ARPA and it dropped from $19.9 to $18.9 representing a 5% fall;If we calculate the margin of both domestic streaming and international streaming departments, we'll see that the company was able to improve domestic streaming margins, but their international streaming margin is still way below 0. In terms of numbers, domestic streaming contributed $8.79 per each paying membership (revenue without cost of sales and marketing expenses), and Netflix spent around $3.02 of their investors' money on this international expansion. Another important thing is that the company spends around $3.83 per each paying membership (domestic, international and domestic DVD) for technology development and G&A expenses. And this number increased by 10.6% this year. Their domestic numbers look definitely good, but my main concern is their international expansion. Instead of concentrating on the local market, the company is wasting tonnes of money on "fake" international expansion. Basically speaking, they are just burning their cash on trying to get some international subscribers. Another important trick that the company is using in their financial report - they don't show their churn rate for domestic and international streaming services. The only number of cancelled membership we can find in domestic DVD part. Retention rate is one of the most important operating metrics for such streaming and other software companies. If the company isn't able to get their customers back - that's a problem in long-term. Netflix reported over 2.2k net additions this quarter, but are you sure that all these customers are going to stay with Netflix for the next couple of years? I have some doubts on that. This is a huge risk for long-term value investors. I will try to get those numbers from Netflix investor relations department. Amazon Prime is a name of a Netflix nightmare. Amazon won all the rewards on the most recent Golden Globe ceremony while Netflix didn't get anything. That shows the quality of content Netflix has. Why Amazon has an advantage here? Just because Amazon is a huge diversified business with their own Cloud Infrastructure solution, e-commerce section and other important businesses. Amazon has a huge advantage over Netflix. Summary. Netflix has a number of risks that you should take into consideration before making an investment decision:the company burns their cash on so called international expansion;Netflix doesn't report retention rate and churn numbers, hence we don't see the whole picture of their business;competition with Amazon Prime is tough, Amazon proved that the quality of their content could be better.This is a short summary, why I don't agree with Canaccord analysts. I think that their analysis includes just the domestic streaming services which is doing fine. But you are investing into a company, not a part of a business, you should be aware of all business processes that take place there. I'd better avoid Netflix for now, but keep it in my watch list for the next quarter earnings call.