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Why Is Netflix (NFLX) Up 11.2% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Netflix, Inc. (NFLX - Free Report) . Shares have added about 11.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Netflix Q1 Earnings Beat, Revenues Miss Estimates
Netflix reported first-quarter 2017 earnings of $0.40 per share, easily beating the Zacks Consensus Estimate of $0.38. However, revenues of $2.637 billion missed the consensus estimate of $2.641 billion.
Nonetheless, earnings grew more than six times while revenues increased nearly 35% on a year-over-year basis.
Netflix’s focus on international expansion and original content has paid off, with 4.95 million net new additions in the quarter. However, this number was a bit lower than management’s guidance of 5.20 million. The company remains confident of adding more and more subscribers as the trend of binge viewing catches up fast.
On the revenue front, International Streaming revenues (39.7% of total revenue) soared 60.5% year over year to $1.046 billion, driven by an increase in paid members.
Meanwhile, Domestic Streaming revenues (55.7% of total revenue) improved 26.6% from the year-ago quarter to about $1.470 billion.
However, the DVD business continues to be in trouble with revenues (4.6% of total revenue) declining 16.8% year over year to $120.4 million.
Subscriber Base
At the end of the quarter, Netflix's total number of subscribers across the globe was approximately 98.75 million. Paid streaming members totaled 94.36 million, up from 77.71 million in the prior-year quarter.
In the Domestic Streaming segment, Netflix’s subscriber base totaled 50.85 million, up from 46.97 million in the year-ago quarter. Paid members increased to 49.38 million from 45.71 million in the same period.
In the International Streaming segment, the company recorded 47.89 million members compared with 34.53 million in the prior year quarter. Paid members were approximately 44.99 million, up from 31.99 million in the year-ago quarter.
Margins
Consolidated contribution profit margin (revenues minus the cost of revenues and marketing cost) was 26.9%, compared with 19.4% in the year-ago quarter.
Operating income grew more than five times year over year to $256.9 million. Operating margin increased 720 basis points to 9.7%.
Balance Sheet
Netflix had $1.341 billion in cash and cash equivalents (and short-term investments) as of Mar 31, 2017, compared with $1.734 billion as of Dec 31, 2016.
Cash used in operations in the quarter was $343.9 million, compared with $228.6 million in the prior-year quarter. The company reported free cash outflow of $423 million.
Outlook
For the second quarter of 2017, management forecasts earnings of $0.15 per share.
Domestic and international streaming revenues are expected to be $1.499 billion and $1.141 billion, respectively. Streaming revenues are expected to be $2.640 billion while total revenue including DVD business is expected to be $2.755 billion.
Management expects to add 0.60 million subscribers in the domestic streaming segment and 2.60 million subscribers in the international segment. Domestic streaming contribution profit is expected to be $552 million. International streaming segment is expected to report a loss of $28 million. Netflix estimates the U.S. contribution margin to be around 36.8% in the quarter.
The company forecasts operating income of $120 million for the quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to 13 lower. In the past month, the consensus estimate has shifted lower by 32.1% due to these changes.
At this time, Netflix's stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum front with an 'F'. Following the exact same course, the stock was allocated also a grade of 'F' on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Netflix (NFLX) Up 11.2% Since the Last Earnings Report?
A month has gone by since the last earnings report for Netflix, Inc. (NFLX - Free Report) . Shares have added about 11.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Netflix Q1 Earnings Beat, Revenues Miss Estimates
Netflix reported first-quarter 2017 earnings of $0.40 per share, easily beating the Zacks Consensus Estimate of $0.38. However, revenues of $2.637 billion missed the consensus estimate of $2.641 billion.
Nonetheless, earnings grew more than six times while revenues increased nearly 35% on a year-over-year basis.
Netflix’s focus on international expansion and original content has paid off, with 4.95 million net new additions in the quarter. However, this number was a bit lower than management’s guidance of 5.20 million. The company remains confident of adding more and more subscribers as the trend of binge viewing catches up fast.
On the revenue front, International Streaming revenues (39.7% of total revenue) soared 60.5% year over year to $1.046 billion, driven by an increase in paid members.
Meanwhile, Domestic Streaming revenues (55.7% of total revenue) improved 26.6% from the year-ago quarter to about $1.470 billion.
However, the DVD business continues to be in trouble with revenues (4.6% of total revenue) declining 16.8% year over year to $120.4 million.
Subscriber Base
At the end of the quarter, Netflix's total number of subscribers across the globe was approximately 98.75 million. Paid streaming members totaled 94.36 million, up from 77.71 million in the prior-year quarter.
In the Domestic Streaming segment, Netflix’s subscriber base totaled 50.85 million, up from 46.97 million in the year-ago quarter. Paid members increased to 49.38 million from 45.71 million in the same period.
In the International Streaming segment, the company recorded 47.89 million members compared with 34.53 million in the prior year quarter. Paid members were approximately 44.99 million, up from 31.99 million in the year-ago quarter.
Margins
Consolidated contribution profit margin (revenues minus the cost of revenues and marketing cost) was 26.9%, compared with 19.4% in the year-ago quarter.
Operating income grew more than five times year over year to $256.9 million. Operating margin increased 720 basis points to 9.7%.
Balance Sheet
Netflix had $1.341 billion in cash and cash equivalents (and short-term investments) as of Mar 31, 2017, compared with $1.734 billion as of Dec 31, 2016.
Cash used in operations in the quarter was $343.9 million, compared with $228.6 million in the prior-year quarter. The company reported free cash outflow of $423 million.
Outlook
For the second quarter of 2017, management forecasts earnings of $0.15 per share.
Domestic and international streaming revenues are expected to be $1.499 billion and $1.141 billion, respectively. Streaming revenues are expected to be $2.640 billion while total revenue including DVD business is expected to be $2.755 billion.
Management expects to add 0.60 million subscribers in the domestic streaming segment and 2.60 million subscribers in the international segment. Domestic streaming contribution profit is expected to be $552 million. International streaming segment is expected to report a loss of $28 million. Netflix estimates the U.S. contribution margin to be around 36.8% in the quarter.
The company forecasts operating income of $120 million for the quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to 13 lower. In the past month, the consensus estimate has shifted lower by 32.1% due to these changes.
Netflix, Inc. Price and Consensus
Netflix, Inc. Price and Consensus | Netflix, Inc. Quote
VGM Scores
At this time, Netflix's stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum front with an 'F'. Following the exact same course, the stock was allocated also a grade of 'F' on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.