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Brian Hamilton

Netflix Records Another Earnings Beat

NFLX

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Movie streaming giant Netflix (NFLX) announced earnings just after the bell, EPS of $0.31, surpassing Zacks consensus estimate of $0.18.  Revenues were in line with estimates at $1.02 billion.

The street expected an earnings beat before the bell (Zacks consensus’s were trending upwards for the past 60 days, and NFLX had four straight quarters with an average positive earnings surprise of 153.69%), and once the Q1 numbers were released, the stock surged 21% in afterhours trading.

As we approached the earnings announcement, NFLX rose over 6% in anticipation of a strong earnings beat, but there were a few concerns by covering analysts.  First, new subscriptions needed to come in line with analysts’ expectations of 1.84 million; Netflix brought in 3.04 million new subscribers (worldwide total of just over 36 million) on the back of the new hit series House of Cards (not to mention the anticipated release of Arrested Development on May 26th).  Secondly, increased competition by Verizon (Redbox Instant), Amazon Instant, and Kindle Fire HD tablet.  With the very strong earnings numbers, it is evident that NFLX remains the industry leader, and that the new comers have a long way to go to catch up to Netflix.

Moving into the second quarter, NFLX announced that it forecasting earnings of $0.23 to $0.48 per share; Zacks consensus estimate is currently at $0.27, but will most likely rise over the next 30 days.  On a negative point, NFLX rolled out their two most high profile exclusives in the first half of 2013, and analysts are weary of a lack of future drivers (new exclusive content) to entice new subscribers.  

Tomorrow, Zacks will have a detailed earnings report covering subscriptions, ad revenue, and international expansion plans.

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