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Shares of Netflix Inc. (NFLX - Analyst Report) reached a new 52-week high of $259.85 on Monday, Jul 15, 2013. The bullish run reflects Netflix’s strong near-term outlook, expanding content portfolio, new partnerships and potential growth opportunities from international expansions.
The closing price of Netflix on May 15 was $257.98, representing a strong one-year return of about 210.9% and a year-to-date return of about 180.4%. The S&P 500 jumped 24.3% and 15.0%, respectively during the same period. Average volume of shares traded over the last three months stands at approximately 3656.9K.
Netflix delivered a positive average earnings surprise of 153.9% over the past four quarters. This Zacks Rank #3 (Hold) stock has a market cap of $14.44 billion and a long-term expected earnings growth rate of 17.9%.
Impressive First Quarter, Positive Outlook
Netflix posted strong first quarter earnings of 31 cents, which comfortably surpassed the Zacks Consensus Estimate of 18 cents. Revenues increased 17.7% year over year to $1.02 billion and were marginally ahead of the Zacks Consensus Estimate.
Notably, Netflix’s paid streaming subscriber base (both domestic and international) increased 40.2% on a year-over-year basis to 34.2 million. Total streaming subscriber base increased 37.2% to 36.3 million.
The strong results helped Netflix to provide a positive outlook for the second quarter. Earnings are expected to be in the range of 23 to 48 cents per share, much better than 11 cents reported in the year-ago quarter. The Zacks Consensus Estimate for the second quarter moved up 15 cents (57.7%) to 41 cents over the past 90 days.
Key Growth Catalysts
We believe that Netflix’s expanding content portfolio is the primary growth catalyst going forward. The company continues to forge partnerships with leading studios, publishers and production companies such as CBS Corp (CBS - Analyst Report) and DreamWorks Animation (DWA - Snapshot Report). These deals have not only boosted its content library but also helped it to venture into different genres like comedy, political thrillers, autobiographies and horror.
Although higher costs owing to international ventures and licensing fees remain a major concern in the near term, we believe that significant increase in paid streaming subscriber base is a major positive. Additionally, international expansions are expected to drive top-line growth going forward.
The Zacks Consensus Estimate for 2013 surged 48 cents (41.0%) to $1.65 per share over the past 90 days. For fiscal 2014, the earnings estimate jumped 65 cents (24.2%) to $3.34 per share over the same period.
Other Stocks to Consider
Another stock, which provides streaming services and is worth considering is Amazon.com (AMZN - Analyst Report) with a Zacks Rank #2 (Buy).